Trimming Underperforming Stocks from your Portfolio

A majority of the stocks in my portfolio have done well over time. There are a few under-performers in the mix; I have admittedly been lax about trimming them and trading them out over the years.  There are the usual rash of rationalizations I make; they will come back or they represent a particular diversification that is desired.

One stock I failed to trim for over a decade now is Gannett Co., Inc. (GCI).  I purchased GCI in Dec 2007 at the upper 30s in price; now it is at a mere 6 bucks.

Gannett does represent a particular niche in my portfolio.  It is in a tax protected account with a diversified portfolio of stocks focused on strong dividend yield using stocks that allow dividend re-investment into more shares.

Gannett is in a tough industry that has been steadily declining; newspaper publishing.  Back in 2007 there was still a glimmer of hope that newspapers would adapt in a digital world and come back - not so much anymore a dozen years later.

Still GCI represents a diversification point in my portfolio; it is the only individual stock that covers paper-based media.   It still has a a strong dividend yield; with the stock price down at $5.97 the forward yield is an astounding 23.38% (based on $1.52 yield).  However even with this yield the drop in stock price over time nearly wipes out the yield returns - when calculating quarter by quarter.

On top of this back in mid-November shareholders of Gannett Co. Inc. (NYSE: GCI) signed off on a roughly $1.2 billion proposal for the McLean company to be acquired by the parent company of rival GateHouse Media.  I doubt that the new company will still offer very high dividend yield; this further drives the plan to bail out of paper media stock and rotate into another sector.

The time has come to trim GCI and a few other under performers that I have held onto for more than a decade. My New Year's resolution will be to do this in January... or is this just a way of procrastinating and putting this off for yet another month.

One interesting point will be to compare my portfolio of dividend focused stocks to a mutual fund (or index) that follows the same strategy and see how the performance compares over a decade.  Have I beat the indexes with my stock-picking or not -- this will be an upcoming subject next year when I finally rotate out of the under-performers.