Dear Mr. Berko: My wife and I are 56 and, together, our two individual retirement accounts, which own the same stocks, are worth $146,000. Why was AT&T taken out of the Dow Jones industrial average? Our broker of nine years retired last month, and the young new broker working in the same office says we should sell our AT&T stock (almost 1,000 shares each) because it was delisted from the Dow. He said that when a stock is delisted from the Dow, it falls in price, and he named a few examples, including Eastman Kodak and General Motors.
We invest for income, and he recommended we buy 1,400 shares each of ALPS’ U.S. Equity High Volatility Put Write Index Fund at $24, which pays 9 percent. We like the yield but never heard of this issue.
— HD, Durham, N.C.
Dear HD: Jumpin’ Jack Flash, that broker’s either smoking hash or drunk on sour mash! Hop on your mopeds, and then turn the throttle and get out of there as fast as you can, ’cause that meathead is dangerous to your wealth. And don’t you dare sell your AT&T (T-$34), which is a stock that you can keep for the rest of your retirement life.
Apple recently replaced AT&T on the Dow Jones industrial average. The Dow needed more representation in modern technology, and because the Dow is price-weighted (not weighted by market value like other indexes), T’s relatively low price made it a logical choice. Eastman Kodak was delisted because it couldn’t keep up with the digital universe, and GM got the ax because it declared bankruptcy. Though T had been a member of the Dow since 1916, its recent delisting may be more positive than you realize. Altria and Honeywell were delisted in 2008, and they are up 142 percent and 82 percent, respectively. Citigroup was axed in 2009, and it’s up 60 percent. Hewlett-Packard and Alcoa are up 60 percent and 75 percent, respectively, since their exclusion in 2013. AT&T has been flat since 2013, and this event may move the stock higher, surprising many AT&T devotees.