Almost three years ago I wrote a post titled, “Why I Love Stock Spin Offs.” I essentially discussed the typical “unlocked” values stock spin offs can provide for both the parent and offspring stock once the separation occurred. In general, many stock spin offs do offer great value and benefits to shareholders as the newly separated businesses can better focus on their core business or sector more efficiently. Many conglomerates operate businesses in various sectors and thus have an inability to focus their company core competency in the appropriate direction. Of course, these are the spin offs that tend to offer the best return for their shareholders as two smaller yet potentially stronger companies emerge. Sometimes, however, a company may decide to shuttle off a weaker portion of their business into a standalone company which might not always end favorably for the offspring or parent for that matter.
The reason I bring up this post I wrote a while back is largely because of my mention in a recent post about my Johnson Controls International plc (JCI) spin off, Adient plc (ADNT), announcing that it will pay its first dividend to shareholders with an expected yield of 1.58%. It got me thinking about all my other spin offs I have received over the years such as, Abbott Laboratories (ABT) spin off of AbbVie Inc. (ABBV), Ingersoll-Rand’s Plc (IR) spin off of Allegion plc (ALLE), Kraft Foods (KFT now KHC) spin off of Mondelez International, Inc. (MDLZ) and the Ventas, Inc. (VTR) spin off of Care Capital Properties, Inc. (CCP) among others.
See, the names I just listed all created spin offs that also pay me a dividend. But the question then comes up… What about all the other spin offs I received in my portfolio that do not pay me a dividend? What is to become of those stocks? After all, I am a dividend/income oriented investor and having cash sitting in stock that does not pay me anything on an annual basis can be viewed as a “waste” of funds. Some those names include Kimberly-Clark Corporation’s (KMB) spin off of Halyard Health, Inc. (HYH), Air Products and Chemicals, Inc. (APD) spin off of Versum Materials, Inc. (VSM), Yum! Brands, Inc. (YUM) spin off of Yum China Holdings, Inc. (YUMC) and the HCP, Inc. (HCP) spin off of Quality Care Properties, Inc. (QCP).
Now I know a lot of you out there own many of the same stocks I just mentioned and are probably wondering the same thing I am. Should I sell these stocks or remain patient and hope that the boards of these respective companies will vote to initiate a dividend one day? Generally speaking, I’m a very, very patient person and am inclined to just sit tight and wait and wait and wait. Of course, my patience can run out one day but I am inclined to simply stay the course, for now, as almost all my stock spin offs have been positive experiences thus far in terms of capital appreciation after the spin off occurred as well as many of them also paying me a dividend adding to my passive income stream. Just for the record, I currently own approximately $3,200 of non-dividend paying stock in my portfolio. Sometimes I think about what that $3,200 could potentially earn me in a year instead of sitting idle in a non-dividend paying stock.
What are your thoughts about stock spin offs in general? Have you kept or sold off your spin offs that either pay or don’t pay dividends? Please let me know below.
Disclosure: Long JCI, ADNT, ABT, ABBV, IR, ALLE, KHC, MDLZ, VTR, CCP, KMB, HYH, APD, VSM, YUM, YUMC, HCP, QCP