Today, in my Special Report: 8 steps to Protect Your Portfolio from the Globlal Debt Bomb on my JubakAM.Com subscription site, I advised raising some cash my selling two utility stocks, Duke Energy (DUK) and NiSource (NI) out of my Dividend Portfolio.
Here’s what I wrote:
Raise some cash–nowish–by selling the interest-rate sensitive positions in your portfolio. What to sell ahead of a projected, and therefore uncertain event (I believe strongly that the debt bomb will go off but it’s not guaranteed), is always tricky. For more near-term selling I’d look to stocks that are yield and interest rate sensitive–that is if rates go up, these stocks are likely to fall–because whatever the odds are of the debt bomb exploding, the odds are even higher that yields and interest rates will continue to climb through the end of 2023 and into 2024 whatever the Federal Reserve does or doesn’t do on its policy benchmark rate. So selling your positions in interest rate sensitive stocks has a better risk/reward profile than selling stocks that will fall if the global economy tumbles. One place to look for these sells is in your holdings of dividend stocks. I’d take a strong look at selling utility stocks, which have certainly underperformed this year (the Utilities Select Sector SPDR ETF (XLU) is down 12.9% in the last 3 months as of October 24) as yields on Treasuries and CDs have climbed. (Treasuries and CDs compete with utility stocks for dollars from investors interested in income.) In my Dividend Portfolio, for example, I’d sell my positions in Duke Energy (DUK) down 3.5% from my buy on November 20, 2020. The stock’s 4.63% dividend yield is attractive but in a world where I can get 5.4% on as relatively short-term Treasury or 5.3% on a 10-month CD, that yield is not all that attractive. Second, I’d also look to sell utility NiSource (NI) out of this portfolio. Th position is down 7.1% since my buy on November 29, 2022. The 3.96% dividend yield is not as attractive as it once was. (I would hold these shares until the first week of November–say around November 5 to be safe–since the ex-date is October 30. Which means that to collect the dividend you need to have been a shareholder of record on the record date, which is 2 days after the ex-dividend date.) These won’t be my last sells as the debt bomb scenario unfolds–these are illustrative of the way I think you should be evaluating stocks in your portfolio now. I’ll have more selling recommendations as the debt bomb scenario develops.