Imperial Brands shares: this is the move I just made

first_img See all posts by Edward Sheldon, CFA Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! Simply click below to discover how you can take advantage of this. “This Stock Could Be Like Buying Amazon in 1997” Back in late 2016, I bought Imperial Brands (LSE: IMB) shares for my Stocks and Shares ISA. At the time, I saw IMB’s valuation and dividend yield as attractive.It’s fair to say that my investment in the tobacco stock didn’t go to plan. Since I bought the shares, Imperial Brands’ share price has been stuck in a rotten downtrend.  A few weeks back, I finally decided to cut my losses and sell my Imperial Brands shares.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…Here, I’ll explain why I sold the stock and highlight the lessons I learnt from this poor investment.Imperial Brands shares: I’ve soldOne of the reasons I first bought Imperial Brands shares was I thought the valuation was attractive. Today, I still think IMB’s valuation is attractive. Currently, the stock trades on a forward-looking P/E ratio of just 5.5. The problem is, however, I’m struggling to see anything on the horizon that might result in a re-rating of the valuation. You see, since I bought the shares, sustainability has become far more of a focus in the investment management world. These days, nearly all institutional investors are turning to their attention to ESG investment strategies.As a result, big investors are increasingly avoiding sectors such as Tobacco. This means that, going forward, tobacco stocks may not generate the same kind of interest from institutional investors they did in the past. This could potentially keep Imperial Brands’ share price depressed.Challenging conditionsAnother issue that concerns me is the amount of regulation that tobacco companies are currently facing. Of course, government regulation in the space is nothing new. However, recently, governments seem to be cracking down on tobacco and other related products harder.For example, just recently in Spain, the Health Department announced it wants to raise tax on tobacco products in order to reduce cigarette consumption. Meanwhile, Australia is looking at banning the import of all e-cigarettes and refills containing nicotine.These kinds of new regulations are going to continue to make life hard for sector companies such as Imperial Brands.Dividend cutFinally, another reason I sold my Imperial Brands shares was that the company recently cut its dividend by 33.3%. Before this cut, I saw Imperial as an attractive dividend stock. The company had notched up an impressive dividend growth track record and the yield was attractive.However, this dividend cut changes things for me. Once a company has cut once, you often see more cuts down the track. With a new CEO coming in, I wouldn’t be surprised if the company reduces its dividend again in the near future.Lessons from this investmentDid I learn anything from losing money on Imperial Brands shares? Absolutely.The key takeaway for me is, don’t buy a stock just because it’s cheap and offers a big dividend yield. Cheap stocks can get cheaper. And a high yield is often a sign the market doesn’t think it’s sustainable. I should have listened to what the market was saying.Ultimately, this investment was a good reminder of the importance of focusing on a company’s growth prospects. Focusing on high-quality stocks with long-term growth potential is generally a more sensible strategy than buying stocks just because they’re cheap. Imperial Brands shares: this is the move I just made I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. Edward Sheldon has no position in any shares mentioned. The Motley Fool UK has recommended Imperial Brands. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.center_img Our 6 ‘Best Buys Now’ Shares I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Image source: Getty Images. Enter Your Email Address Edward Sheldon, CFA | Wednesday, 29th July, 2020 | More on: IMB Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee.last_img

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