Well, this was an unplanned sale and I was hoping to resolve this issue without having to sell the company. Normally, I firmly believe that investors should only invest in companies if they want to hold it forever. Renting stocks for the short run, looking for capital gains isnt the best way to invest and it has been demonstrated time and again, that traders get burned while trying to time the market. While this transaction of selling my position was not to lock in capital gains and trying to time the market, the resulting byproduct sure does seem that way. This transaction was mainly influenced to make my life easier over the course of years concerning dividend taxes.
After a few back-and-forth emails with my discount broker, I decided to sell my position in Medtronic plc (MDT). There is nothing really wrong with the company – and I really like the long term prospects. Medtronic is definitely one of the best run companies when it comes to medical devices and the cardiac/vascular group. Read my post from Sep 2013 when I initiated the position. The facts and the reasoning behind owning still stands – if you are interested in investing in this great company.
Recent Sell Decision
- Medtronic bought Covidien plc and decided to invert into an Ireland-based company. Although this resulted in a nice bump in the stock price, this resulted in a tax on my portfolio.
- My dividends from Medtronic resulted in a 20% withholding dividend tax, even though I am not supposed to be taxed (since Canada belongs to the “relevant territory” in this list). After some back-and-forth with my discount broker, this was the response I got:
In order for us to apply the favourable (0%) with-holding for this dividend, we need to provide client information to the Irish government. As we will not disclose any client information, we receive the unfavourable (20%) rate. The client will need to claim a refund on non-resident withholding tax through the Irish government.
- So, even though I like the company and I think it will do great over the coming years, it did not make sense for me to take the 20% cut in dividends unless I deal with more complicated tax paperwork at the end of the year. By selling this position, I make my life easier and hopefully my investment dollars will find a better home.
- The good news is that I was able to sell and lock in my gains – even though that wasn’t the intention. Over the course of owning this company for 1 year and 8 months, I saw a neat 46% gain including dividends. I suppose, I have to take refuge in the old saying – “No one ever went broke taking a profit”.
- Company: Medtronic plc (MDT)
- Quote: $75.90
- 52-week range: $58.25 – $79.50
- P/E: 24.33
- P/B: 3.7
- Yield: 1.6%
- Dividend Growth: 37 Years
- 5-yr Dividend Growth Rate: 8.3%
Full Disclosure: My full list of holdings is available here.