A reader asks about USB – specifically why so volatile all of a sudden? I looked and can only say – dividend fever. The company increased its dividend by 21% and the world said – oh wowie – free money and piled on. I can think of worse reasons to buy a stock, can’t you?
Let’s face it folks - the traders out here are nuts – a couple of weeks ago they ran a road-kill removal company (PNTR) up 2000% based on 20 cents of earnings so why not run a respected business up a buck and a half on good news. I suspect there was a lot of fund interest in the dividend and after the x-date (December 29th) they will probably sell-off some of their holdings. The stock should go down a bit towards its 21-period EMA and then resume its upward, boring trajectory in no time at all.
Anyway I got the idea that the reader who’s been holding this stock for awhile is thinking about letting it go – well certainly after the dividend check is in your pocket – that’s number 1. And number 2 – maybe hold it long enough to get the capital gains tax break. Sometimes making money is boring. You buy a stock - it begins to go up and there just isn’t any convenient exit. It becomes a matter of opportunity cost and utility and that varies with the individual.
For the day and swing traders out there – USB is a clinic – it began heating up at noon last Tuesday with a big drop followed by a crisp climb through the rest of the afternoon. All of this was based on the dividend announcement. Tuesday’s closing volume was almost twice the average. That was a good clue to put this stock on a watch list for Wednesday and maybe catch some of the up. (I didn’t – but I’m sure a lot of others did).
(Speaking of PNTR they had a news release regarding their guidance forward yesterday and some of the bag-holders started doubling up. – This stock will probably go up to 4 or 500 bucks before it’s all over and the laugh will be on me – just watch. – and I mean that seriously - just watch. And if you want to see something funny looking – go look at a one month daily chart of this beast).
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2 comments:
Thanks for taking a look at USB. Your analysis is very helpful, as always.
I think you are right. Cramer mentioned a few high dividend stocks recently, I seem to remember, and USB was one of them. He mentioned its 4.4% dividend and a 35 year history of increasing it.
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