I recently received a question from a long time subscriber about dividend growth investing, and the implications mergers and acquisitions on my long term investing strategy. The question is all about my thoughts on potential acquisitions, and whether it’s better to buy the company doing the acquiring or the one being acquired. Today, I want to leverage the real world of example of Campbells Soup (CPB) and Kraft Heinz (KHC), since there is speculation right now that KHC will end up buying CPB.
At the end of the day, I don’t worry too much about mergers and acquisitions. I just end up buying the stocks that I like, and I diversify so mergers and acquisitions don’t disrupt my passive income.
1) You never know if an acquisition will even happen at all. Until the deal is signed (and approved by regulatory bodies), it’s all speculation.
2) Even if a deal does go through, it’s not always advantageous for the shareholders of the company being acquired. It all comes down to tax implications and the terms of the deal (all cash, all stock, or a combination). Worth nothing: I love all stock acquisitions. And, I cannot stand ones that are heavily skewed towards cash (like the recent DPS one).
I’m a long-term dividend growth investor. I don’t worry about speculation and short term profits. In fact, capital appreciation doesn’t mean too much to me at all since I invest purely for dividends. Timing companies that may be acquired could be a great strategy for “buy low, sell high” investors – those looking for short term profits. Such a strategy, however, doesn’t really work for me.
I like to buy and hold quality dividend growth stocks and hold forever. In fact, I personally own Campbells Soup (CPB). I hope it stays independent. However, if Kraft Heinz (KHC) ends up acquiring CPB, I’ll likely hold onto the combined company.
More thoughts on Campbells Soup (CPB) in my deep value investing video:
Learn more about my thoughts on Kraft Heinz (KHC) in this investing video:
Want to learn about my huge gains on Dr. Pepper Snapple (DPS):
Learn why I sold Dr. Pepper Snapple and redeployed my gains:
Find out why Kraft Heinz is #1 on my dividend stock watchlist:
Disclosure: I am long Campbell’s Soup (CPB). I own this stock in my stock portfolio.
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