Sunday 22 September 2013

Ahead of My Time - Portfolio Sale: Morgan Sindall (LSE:MGNS)

Sometimes I do try to be a bit analytical about markets. For example, at the end of 2011, given the Government's desire to stimulate the economy and the low rate of construction of new houses, I thought that there might be a bit of a boom in this sector, particularly in the social housing side.

But my timing was wrong - I was a bit too early.

I bought Morgan Sindall (MGNS) in December 2011, expecting that boom, which just didn't happen. MGNS is in the UK construction sector, specialising in infrastructure, affordable housing, 'fit out' (for offices and shops), urban regeneration and property investments.

Since then the company has had a pretty bumpy ride, struggling in a very competitive market. The company cut the dividend (by 20%) in February 2013.

When my 'sell' indicator started flashing (indicating that my capital gain was worth 5 years of current dividends) I decided to review the future of this holding.  Given the fact that the yield has dropped to under 4%, and that the news for the current year is no better,  I sold for a capital gain of 25%.

So what is the moral of this story?
  • First; I'm not clever enough to forecast the future
  • Second; the DIY Income Investor approach to buying dividend shares include a basic financial health check which should help to weed out unsustainable businesses
  • Third; given that the company will most likely survive, the dividend income provides a kind of 'safety net' to allow me the time to wait for the share price to recover
  • Finally: having a 'sell' rule stops me selling too early (although this can clearly backfire on occasions)

[Sale price £7.22] 

Update: The price has continued to rise but I've had my modest bite of the cherry. founder and CEO John Morgan sold 500,000 shares at a price of 665p each back in August 2013 (but he still has 4 million left!)

I am not a financial adviser and the information provided does not constitute financial advice. You should always do your own research on top of what you learn here to ensure that it's right for your specific circumstances.

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