A couple of years ago, I tried my hand at dividend hopping. The strategy was to buy a stock in time to qualify for earning a dividend and then sell it right after—”Hopping” from one dividend to the next.
I had two successful jumps before I encountered problems. I managed over a thousand dollars with a few special dividends that showed up quickly. My fourth stock became an issue, partly because I forgot to sell it promptly.
Mesabi (NYSE: MSB) is a Royalty Trust that pays a quarterly distribution to unit-holders of record throughout the year.
The trust owns the right to an iron mine, and they have a separate firm (Northshore) to do the actual mining. The trust gets paid based on the amount of iron pellets that get shipped from the mine.
So, after I got the juicy distribution, I sat in front of the TV and spaced out, forgetting to close my position.
Then the share price began to drop as people jumped away to different stocks. By the time I remembered to sell, it was too late, and the difference between my buy-in value and the dividend payment would have resulted in an overall loss if I decided to close my position.
I decided to wait for the next distribution and make my sale then. At the time, it seemed like an easy answer to my blunder. But of course, it got worse.
Cleveland Cliffs, the parent company of Northshore, which operates the mining operation, announced that they were halting mining due to low prices in the market.
This meant that there would be a much-reduced payment for the quarter. A lot of people closed their positions, and the share price dropped further.
I had bought my shares at $33 each, and I was then looking at $20 per share in value. The mining company went on to use the leftovers or “tailings” from the mine to make rolled steel to sell.
There were maybe 1-2 years of low payments after this. Just the rent on the facility.
As the shares dropped to $16, I decided to buy some more to lower my average cost. I purchased an additional 50 shares last year.
Mesabi ended up saying that the mine operator didn’t have the authority to halt mining even if it wasn’t as profitable. The contract required them to keep mining.
They went into arbitration to get things sorted out, and thankfully, the judgment was in Mesabi’s favor.
Just recently, we (investors) got word that Mesabi would be issuing a large distribution that included the value of the arbitration award. I have 150 units and will be receiving $5.95 per share, for a total payout of $892.50.
Certainly, a happy number to see after all the waiting. I also see that the shares are back up to the 30-dollar range, where I had bought in.
I should be able to make the final payment on my credit card that has the balance transfer for my Nissan LEAF once I get the distribution payment, and I sell out about 50 shares from my position.
It’s been a rough ride, but I am glad there was a bit of light at the end.
Fat Wallet Refugee 