To The Moon

So, more often than not i share my wins. But to show balance, i don't always win. Today im going to share a very recent loss.

$NextEra Energy Partners LP(NEP)$ has been an amazing stock for me until last year when they announced they may not be able to continue to increase their dividend payments in the near term due to high interest rates, and the stock price got smashed. I truely believed this was a market overreaction. So I brought more because their dividend return popped to over 20%. 

So why did i originally invest in this company and why did i have the conviction to buy more? Well it fitted my dividend return and dividend growth criteria, i invested in it a few years back, it was returning over 15% in annually in dividends and had over 10 years of history of increased dividends every single quarter. I think it was a dividend aristocrat. 

After the company announcing they may not be able to continue increasing dividends due to high interest rates, well they increased the dividend for the following 3 quarters, and interest rates reduced by 1% in total. To me nep was a cash cow, being milked by its parent company NEE. And it was just prudent for the management to signal a potential macro downturn.

But this week, it seems the management has changed and now they are in deep enough shit that they have halted all dividends going forward which has caused a further hypersonic drop in the share price. 

I own quite a few dividend stocks so NEP is about 1% of my portfolio, the loss isn't huge for me because of the dividends i have received over the last few years, but its around US$700. My issue is that the company no longer meets the assumptions i set when i brought it. Do i bag hold? No. It could take a year or more to recover. And quite frankly i have lost confidence in management. To go from a dividend aristocrat to a dividend nothing... it basically tells me heads need to roll, decades of reliable returns have been reduced to zero in a week.

But am i overreacting? Nope, i see the sense in what the new management is doing. But the company no longer fits my investment criteria. So im out, hate to turn paper losses into real losses, however investing is about opportunity cost. The cost to bag hold, versus cutting the loss now is easy.

The whole point of this article was to explain my thinking, in retrospect I don't think my thought processes were at fault, all my assumptions were reasonable. Counter cyclical yes after bad news. But at the end of the day, i was wrong. Not beating myself up about it. Just moving on.

NEP is now and will not be a good place to park money for a decade. It mite turn around in a year, hope it does. But it will not meet my criteria for  a dividend stock for at least 10 years. Sad really, but not all investments are scoppie snacks. We win, we also loose, but most importantly we learn. 

What have i learned? Well my loss was not due to holding the stock actually, it was buying call options. That was stupidly in retrospect, i got greedy, its a dividend stock ffs. Buy options in growth stocks, not dividend stocks, and never go short. Always go long, predicting the market short term is too risky. You mite have the conviction, but the market does not.

Anyway i hope this post is helpful, id love your feedback :) and likes, and reposts.

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