Thursday, May 12, 2016

Sold HCP for VZ

Before going forward, I rarely sell. My philosophy is to buy a company and hold onto it for its cash generating abilities forever. However I am open to selling when it's appropriate. Usually I sell during spin offs or acquisitions, dividend cuts, or fundamental degradation. Today I exited my HCP from my IRA account and swapped the funds for Verizon. Verizon has dipped off its peak recently and provides a healthy yield of 4.4%, HCP has a higher yield at the moment at 6.70% due to the high risk nature of HCR Manorcare. I added VZ instead of T because T has not pulled back yet and I have more T than VZ.

I have exited HCP because of the announcements of their spinoff of their troubled unit. I personally feel this company is the lowest quality company I own and that spinning off its cancer will not be too favorable for me since I do not want to hold that spinoff with a ten foot pole.

In terms of quality rankings here is a comparison of HCP and VZ:

S&P Financial Rating: BBB+
Value Line Financial Strength: B++
Value Line Safety: 3

S&P Financial Rating: BBB+
Value Line Financial Strength: A++   (A++ is the highest)
Value Line Safety: 1   (1 is the best)

The majority of the companies I own have a safety of 1 and financial strength above A or BBB+ so HCP has been a yield-chase purchase from my earlier days when I was chasing yield over quality.


  1. I can understand you wanting to leave HCP. Seems like nothing but bad news has been coming out of that name for the last year or so. I still plan to hold my HCP long term. We'll see how things shake out after the spin off. For now, it's a very small part of my overall portfolio and I feel comfortable hanging on. Thanks for sharing.

  2. From what I read, your HCP shares won't be affected and you would have just gotten the spinoff shares extra. In my opinion this makes HCP stronger as it will not have the negative aspect to deal with any longer. I agree though that I don't see any value for DGIers to keep the spinoff shares so I will probably just sell. I understand you not wanting to risk the spinoff though.


  3. I like this trade. VZ is a good stock to hold and collect dividends.