When dividend investing goes badly wrong!

Over 36 years, I have honed investment strategies to hunt for stocks and dividend income. Sometimes, dividend investing goes horribly wrong, leading to stock ownership. Here’s my story about the three dividend dogs (in AZ order) and my reasons for continuing to buy dividend stocks.

Dividend howler #1: Direct Line

Last July, my husband bought shares in Direct Line Insurance Group (LSE: DLG, paid 200.3p per share. In early 2022, the insurer’s shares are up 16%. So far, so good.

On January 11, the group announced an extra £90 million in bad weather claims after a cold spell in December. Also, Direct Line canceled its cash dividend, causing shares to drop by nearly a quarter (-23.5%) that day. On January 27, CEO Penny James resigned.

Today, the shares are trading at 178.6p, down 40.5% over the past 12 months. This has sliced ​​the market value down to £2.3bn. That is far from the day as a FTSE 100 member.

Now, this former dividend dynamo is not delivering any cash yield — the worst yield for dividend investing. But we will hold on to this slumped stock for potential recovery and continue cash payments.

Dividend blunder #2: IDS

International Distribution Services (LSE: IDS), formerly Royal Mail, dates back to 1516 and King Henry VIII. But the stock is experiencing a roller coaster ride in 2022, due to industry action.

Since last summer, members of the IDS union have been on strike for 18 days. Postal workers demanded better pay and working conditions, but their employers refused.

So far, strike action has cut £200m from the company’s profits, but both sides are a long way from a settlement. My husband bought this stock at 273.2p last June. They are now trading at 231.7p, down 15.2% from their purchase price and 40.6% lower over the past 12 months. This values ​​the group at £2.2bn.

While Royal Mail is struggling, GLS Group – the international logistics business – is very profitable. If and when union leaders and IDS management reach a deal, stocks could rise. Even so, I expect a fairly steep cut in the next dividend payout. Despite this, we will stick to this painful part for now.

Disaster dividend #3: Persimmon

Easily the worst investment decision of 2022 was convincing my husband to buy shares in a British housebuilder persimmon (LSE: PSN) at 1,856p in July. I hope that this property stock will be ripe for a recovery, as it has been stagnant since the spring of 2021.

Unfortunately, I was dead wrong. Persimmon shares have been in freefall since. Now, they stand at 1,411p, having crashed by 24% from our purchase price. They have also fallen 40.8% over the past 12 months. Urgh.

With interest rates rising, house sales in the UK are falling, and analysts expect house prices to rise quickly. This is hardly good news for Persimmon, but the £4.5bn group has a healthy pile of net cash on its balance sheet.

Even so, I expect this company to cut its cash dividend payout by half. Another black mark for respectable dividend investing.

In summary, these are three recent failures as a dividend investor. But many of my successes were easier than those losses. Indeed, my new family portfolio has shown a decent profit. So I will keep dividend investing for life!