I fell asleep at the wheel by owning a financial stock, American Capital Strategies (ACAS), simply for its large dividend (currently yielding over 20%!). I've heard and read pundits say over and over to stay away from stocks with large dividend yields, since they are most likely troubled companies looking to attract investors by other methods other than, say, ongoing business execution. Meanwhile I've had fairly good luck with large-dividend stocks, both in being able to fund and raise their dividend, and in capital gains for the stock.
However, it hit me today that all of my successful dividend stock choices have underlying assets of the "heavy stuff" variety. Oil. Natural gas. Aluminum. Copper. Coal. Nitrogen. Automobiles. Shipping tankers. American Capital Strategies' underlying assets are pieces of paper. These days, you can't trust pieces of paper to be worth anything. So the dividend yield becomes irrelevant.
So I sold at $17 per share at market open, at a 48% loss from where I bought in January. Unfortunately, the stock closed today north of $20. Oops. I'm just going to hope that was a dead-cat bounce.
I took my loser's money and threw it at another loser. I bought more Tesoro (TSO) since it has real assets and a real business in refining crude. I still believe it to be one of the most oversold stocks in the market - now oil just has to continue its correction.
