Yes ! I finally sold off bulk of my Starhub stock and I am heart broken.
Starhub has been one of my favourite stock that I have kept close to my heart for more than 10 years (since 2005 where I first started my investment journey). Total gains from Starhub todate is $ 383,340 (+95%). (Dividends : $272,666; Capital gain : $97,658; Unrealised Profit : $13,016 ).
When the management announced that Starhub was going to cut dividend Q1 2017 this year, I decided to trim a significant % of the stock.
Why did I fall in love with Starhub
- Solid history of paying and increasing dividends.
- Yearly dividend distribution commitment and forecast by management.
- Loved their Hubbing Strategy.
- Telecom sectors are typically deemed defensive sectors during market corrections.
The Art of Selling
Looking at the chart, if I had sold at it’s peak at $4.73 in year 2013, I would be looking at a profit of 581,767 (+144 % Capital Gain : $454,133 Dividend : $127,634). Although I was aware of these signs of trouble, I only decided to take action when the dividend cut was confirmed as I was hoping that the management will still try to keep it’s 20 cents dividend commitment for 2017. Even if there was a dividend cut, I wasn’t expecting the price to fluctuate so badly. The share buyback and CEO Tan Tong Hai acquisition of 100K stocks at $2.795 in Nov 2016 also gave me the false assumptions that maybe the dividend cut wouldn’t happen.
Signs of Trouble
Uprising of Over-The-Top Players resulting in declines in value-added services revenues and lack of transformation strategy.
- Year 2008 – Launch of iPhone with Appstore.
- Year 2013 – Facebook mobile growth.
- Year 2016 – Netflix launch in Singapore.
2. Dividend-to-Free-Cash-Flow Ratio > 100%
If a company has a dividend-to-free-cash-flow-ratio over 100% then that means that the company is paying out more to its shareholders than it’s free cash flow. This is typically not a good recipe for the company’s financial health; it can be a sign that the dividend payment will be cut in the future. Sure enough, Starhub experienced dividend-to-free-cash-flow-ratio > 100% in 2013. It managed to hang on to 5 years before it eventually surrenders and cut it’s dividend in 2017.
- MioTV launch in 2012 (https://sg.finance.yahoo.com/news/starhub-ltd-management-reply-stop-080000081.html )
- Netflix launch in 2016
- TPG awarded 4th telco license in 2016
- Hubbing strategy didn’t managed to keep them from losing customers to competition.
4. Shareholder Exit & Sell Off – Q4 2016
17 Aug 2016 Robert JaySachs dispose 100K at $3.90.
30 Dec 2016 Robert JaySachs Resigns
5. Dividend Cut – Q1 2017
Moving forward, I probably need to set some rules to protect capital gains in my dividend stocks. Thinking back, if I had sold it off at it’s peak, would I have picked it up later at a higher price and is now suffering from a capital loss ?
Do you have an exit strategy / checklist for your dividend stocks or similar experience to share? I would love to hear from you !