I have held RPM for several years, have a nice profit, think the market in general is kind of "toppy", with recent gains my portfolio is overweighted in equities compared to fixed income, generally invest in index funds rather than individual stocks, am generally a lousy stock-picker(RPM is an exception), most financial advisors in the media say large caps will outperform small caps, so I'm selling RPM now that it is near its 52-week high. Anyone have a compelling reason to convince me the upside in continuing to hold RPM outweighs the risk compared to the 5.4% 18 month CD I'm thinking of replacing RPM with. I still believe RPM is a good company and would certainly consider reinvesting if it dropped below 20. - Rinke
I share the same gut feel that you do, but thought the same way back at around $20. I ended up not selling then and probably won't now either. As far as moving to a 5.4% CD, it's a pretty safe move.
For me with a family started and my wife working significantly less, we are now firmly entrenched in the 15% tax bracket. This means qualified dividends are taxed at 5% for me. I have been trying to invest in stable companies with decent growth and a track record of increasing their dividends. RPM, ORI, WMT, PFE, INTC, and of course, the S&P500 index. I like the idea of getting a higher level of income every year from these dividend-payers. That's something you won't get from fixed-income.
That said, I do keep about 6 months of income in an EmigrantDirect savings account earning 5.05%.
Thanks for your thoughts. I thought it ironical that you mentioned some stocks that led to my comment about my being a lousy stock picker. I'm not saying you should or should not buy them, but my experience is a follows:
INTC - bought at $40 thinking it was cheap after seeing it at $80 at the top. Ending up selling at about $25 for a tax loss.
PFE - bought at $44, sold at $25 last year for the tax loss.
WMT - bought at about $50, still have it, about breaking even with dividends
I tend to do much better with index mutual funds long term. - Rinke
I can agree with much of what you have written; however, I would add to my RPM if it drops below 20 once again. In addition, I look for a split sometime this year, perhaps a three for two ratio. You really don't get much of a gain with the c/d's you mentioned if the stock goes up another 5% this next year.
The best reason I know of is this quote from the company's website... "RPM's track record of 33 consecutive annual cash dividend increases..."
Your 18 month CD alternative will never increase its yield above your entry point.
Based on PE and dividend yield, I think RPM is still undervalued here relative to the market - even after the nice run-up over the last month or so. There is also good potential to recapture some $$ from settlements with their insurance company lawsuits, worst case outcome there looks like the status quo.
That said, no one ever went broke by taking taking some profits.