Bottom Line: I have just sold my Home Depot DRIP position and should get a check for about $1200 in the near future. Eventually, i'll plow this money back into Lowes after waiting 30 days.
I have carried both Home Depot and Lowes dividend reinvestment plans (DRIPs) since 2003. I bought into both DRIPS because I was optimistic about the housing boom. My buy and hold philosophy only holds to my DRIP portfolio.
I have a total of 24 DRIPs. I have found that having this many DRIPs is a bit too much. I initially thought that having so many DRIPs would give me plenty of stocks to track and dollar cost average into whenever a minority of them are in the dump. It never crossed my mind of having all of the stocks in the dump (heavily sold off). These 24 DRIPs have become annoying for me during my military moves. It isn't fun when you have to call all of your financial accounts and change your address every two years or so.
With exception to selling a partial Exxon Mobil (XOM) position, I have never sold a DRIP. But times have changed. I booked net capital gains on my 2008 taxes, but I am now planning on booking stock losses in 2009. I previously thought that one can only book stock losses if they had offsetting capital gains. That's false. According to Turbotax:
"Loss harvesting involves selling investments like stocks and mutual funds to realize losses. You can then use those losses to offset any taxable gains you have realized during the year. Losses offset gains dollar for dollar.
And if your losses are more than your gains, you can use up to $3,000 of excess loss to wipe out your tax bill on other kinds of income, such as your wages, savings interest or rental income." Full turbo tax article.
Looking at my DRIP portfolio I find that I have nine top losers (ignoring dividends):
($3004) on Bank of America, BAC
($1008) on Home Depot, HD
($969.88) on Aflac, AFL
($565) on 3M, MMM
($522) on Manitowac, MTW
($447) on Johnson & Johnson, JNJ
($403) on Yahoo, YHOO
($311) on Southern Company, SO
($269) on Lowes, LOW
Of the nine DRIPs, I have specific overlap between Home Depot and Lowes. Home Depot is 50 percent larger than Lowes (by market cap). A closer comparison of the two companies indicates that Lowes has better financials.
I made the decision to sell my Home Depot position after doing a Morningstar valuation review of all of my DRIPs. I found that both Home Depot and Lowes come recommended by Morningstar. I was about to buy more Lowes stock because of its financials and the fact that Lowes does not charge fees on reinvested dividends. I decided to delay increasing my position in Lowes at the last minute. I decided this because I remembered the 30 day tax wash rule (tax wash sale rules). Now, I'll pull the trigger on more Lowes shares in 30 or so days.
Hmm, what about selling my Bank of America and Yahoo DRIPs? I'll hold onto them for the time being. Hopefully Yahoo will get a deal with Microsoft and push the stock higher. As for my Bank of America DRIP, I've lost so much that my position is now only worth $600. I'll have to think a bit more about doing a wash sale on Bank of America. The biggest decision is what stock I'll buy to keep a financial in my DRIP portfolio...