When to sell our dividend stocks?

The idea behind dividend investment is that we don't care about what the market is doing. We have 2 protections for that: 1. we always keep cash to buy more, 2. we follow a money market algorithm to decide how much we buy each time depending on the market behavior. However, we do care about some particular shares we might have bought and that could go bust. To get some kind of defense for this possibility, we have set up 2 firewalls: 1. we have a small percentage of each share in our portfolio, so that in case 2an Enron bankruptcy" happens we could resist (diversification), 2. we follow a fundamental approach to sell some of our stocks when they don´t meet the minimum criterion. But, what criterion?

Piotroski was a professor from the University of Chicago who created a very easy score to see if the companies were doing better or not. 9 is the maximum grade, 0 is the worst. Our second protection against bailing out is to sell the shares that score less than 3 in the Piotroski scale. But, where can we find a tool to do it automatically? There are some webs like Graham Investor, Value Investing, Old School Value... where you can get some screeners, but our favorite is Uncle Stock.

Apart from Piotroski, Altman was another professor, this time from the New York University, who used another approach, what he called the Altman Z-score, trying to forecast bankruptcy before it happens (quite successful 2 years in advance). The risk area is found below 1.1.

Go to our portfolio in Dividend Harvest (dividendharvest.com).