I am interested in your opinion on SPB.
I like the monthly dividend. I am a senior and have no pension income and therefore I have to generate my own.
Do you know of other companies paying high dividends?
This will be the fifth time that I have run the charts on Superior Plus Corp. since September of 2010. The last post was on Feb. 23, 2011 for Rod. At the time the shares were trading at $11.10 as investors suffered through a cut in the dividend. The last seven months have been trying to say the least, as selling pressure has continued to shred value. Related contentIn February I advised that holding a falling stock to earn a dividend is a self-defeating strategy.
A review of the charts will shed some light on the risks and opportunities surrounding SPB.
The three-year chart illustrates the downtrend the stock has suffered since the board cut the dividend in February. Management is using the cash that would have gone to shareholders in the form of dividends to reduce its debt load. The selling pressure accelerated with the market panic of August and took another hit on Sept. 12, 2011 when Dominion Bond Rating Service cut the debt rating on wholly owned subsidiary Superior Plus LP.
The six-month chart depicts the bounce the shares caught off a double bottom that formed in September at $8.25. What you need to focus on is that there is a sustained downtrend in place and a death cross that surfaced in late August.
The move off $8.25 on volume of 846,176 was ahead of the average daily volume of 237, 341 over the last three months. However, keep in mind that the advance only reflects one day of trading. I’d like to see a sustained buying trend to overcome the selling pressure that has plagued SPB.
I understand that investors are attracted to high dividend yields. But you have to recognize that you never get a high payout without taking on additional risk. As a senior you need to generate income from your assets but can you afford to lose assets to generate high risk returns? The current dividend yield on SPB is 14 per cent but it's not a risk-free return. I don’t honestly believe that SPB is suitable for a senior looking for income. The object lesson is that in the last year the company had to cut its dividend to shore up its balance sheet.
There are lots of companies offering high dividends. The only question is can you afford the risk that goes with the higher payout.
Make it a profitable day and happy capitalism!
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