Sometimes investors buy an investment when it looks good, and all of the due diligence says the investment is solid. However, you can’t always predict what a company’s management is doing or will be doing in the future. Such is the case with Industrial Logistics Properties Trust (ILPT). You may recall that I have cautioned my readers not to buy a stock or any investment based on dividend yield alone. In fact, if the yield is greater than 3.0%, you should be at least a bit suspicious.
While I really like Seeking Alpha and the SA QUANT ratings, sometimes that rating can quickly change from a very green “BUY” to a very red “STRONG SELL.” If something is a “STRONG SELL” it means you should not buy it.
The Problem with ILPT
Any time a company’s management and board of directors reduces or suspends a dividend, be very suspicious. In fact 99 times out of 100 it is best to sell the investment. That is exactly what I did with our ILPT shares.
Bear in mind, however, that some companies and ETFs have variable dividends. So don’t sell before you understand the type of dividend behavior of an investment. For example, Canadian Bank The Toronto-Dominion Bank (TD) has a variable dividend. However, the overall trend of the dividend is upward.
I used to own shares of ILPT. During the time I owned the shares, we received $964 in dividends, and I made $264 selling covered call options on the shares. However, this was a very poor investment, and I am disappointed in the company management of this REIT. I paid $16,859 for our shares and I sold them for $6,404 after the dividend was reduced. Thankfully, this was not one of our major REIT investments, but you need to know that sometimes I buy when the news is good only to discover later that the news was bad. This stock had a very strong QUANT rating when I bought the shares and then things fell apart. Lesson to learn: Don’t hang on to a poor investment. Admit your mistake and move on.