LONDON -- One of Warren Buffett's famous investing sayings is "be fearful when others are greedy, and greedy when others are fearful" -- or, in other words, sell when others are buying, and buy when they're selling.
But we might expect Foolish investors to know that, and looking at what Fools have been selling recently might well provide us with some ideas for investments that are past their prime.
So, in this series of articles, we're going to look at what customers of The Motley Fool ShareDealing Service have been selling in the past week or so, and what might have made them decide to do so.
Some big ifs
If a week's a long time in politics, a month in investing is... well, you get the idea. This time last month Aviva was at No. 6 in the "Top Ten Buys" list*. Now it's in the same position, but in the "Sells" list. So, what's happened?
Well, two weeks ago, Aviva announced that it was cutting its final dividend by a whopping 44% -- far more even than fellow-insurer RSA Insurance, whose 33% cut had created shockwaves a fortnight earlier. On the day of the announcement, Aviva's share price fell over 15%. Over the next few days, it recovered very slightly, but having fallen back again this week, it's now languishing close to its 2013 low.
Even after the swingeing final dividend cut, Aviva's yield is still almost 6%, which is well above the FTSE100 average, and should, in theory, be very attractive to income-seeking investors, especially given the much lower P/E the company is now on. But there was a sting in the tail of Aviva's announcement: The company expects to cut its next interim dividend by a similar amount.
And once a company has made the decision to cut its dividend -- something that's generally only done in extremis -- it's perhaps not surprising that people lose confidence, especially after chairman John McFarlane went on record saying he was working to save the payout, which he obviously failed to do. When confidence has left the building, shareholders choose to sell, and potential investors keep their distance.
Aviva could yet prove to be a rewarding long-term investment, if its management proves up to the task of reinvigorating the company, if the corporate restructuring that's underway improves performance, and if it can stabilize, sustain, and grow its dividend from what will be a much-reduced level. But those are some big ifs, and given that Aviva has now cut its dividend three times in the past dozen years -- it also cut it by 39% in 2001 and by 27% in 2009 -- it could take a brave long-term investor to believe that things will be any different in the future. Then again, fortune favors the brave. At least, it does sometimes.
A top-quality income share for 2013
If Aviva seems like too much of a risk, even for an almost 6% yield, what's an income-seeking investor to do? Well, here at the Fool, our analysts have been focused on finding "The Motley Fool's Top Income Share for 2013" for our readers, and they've found a top-quality company that's paying a 5.6% dividend, which is named in our latest report.
It's completely free of charge, but like all special reports from the Fool, it will only be available for a limited period, so click here to get your copy now!
*Based on aggregate data from The Motley Fool ShareDealing Service.
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