I recently sold my shares in Abbott Laboratories (ABT).
I had a little more than 53 shares, and I got a letter about an odd lot tender offer. This is when a company tries to get shareholders with less than 100 shares to buy more to get up to that price.
I guess it is better for them, since small shareholders can require more bookkeeping. But I don’t think it’s always good for the small shareholder.
For one thing, if I read the letter correctly, I would have to pay $52 a share, plus a processing fee of $2.50 a share. That comes out to $54.50 a share. Right now it’s at $47.47, with an all-time high of $47.59.
I got a tender offer from Verizon when I had 14 shares. I bought more on the open market to get up to 100. They also offered to sell to me above the market price.
Abbott has a P/E right now of 31.88. I know PE ratio is not everything, but that is pretty high. I don’t mind re-investing dividends in stocks with a PE ratio that high, but I would not buy more shares or shares in a new company with a PE ratio that high. I think 20 is as high as I would go. If ABT’s PE ratio goes below 20, and they are still paying increasing dividends with a good payout ratio, then I would buy more someday.
I was hoping to get more of my stocks up to 100 shares, but if some company with a high PE ratio forces my hand, I will sell. I will have to get that $12 every three months from somewhere else. I did buy more JNJ. Even after selling ABT, I am still going to come out ahead. I might just buy more JNJ to get that to 100.
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