My options include simply holding on to Brown-Forman and reinvesting dividends in other attractively valued opportunities. My second option includes selling and purchasing a company that is cheaper, such as IBM or Wells Fargo. The main concern is that I want to maximize return for the next 20 to 30 years. If I purchased IBM today, but it fails to increase earnings, while Brown-Forman continues its slow and steady growth, I would be kicking myself in 20 years.
If I sold my position in Brown-Forman, I would also have to pay a capital gains tax, as my cost is $39.98 per share. If I sold at $72 per share, this would be equivalent to receiving $67/share after-tax. Given the fact that I like the company’s prospects, I will hold on for now but would closely monitor it if it goes above $80 per share.
Unless your income stocks trade at ridiculous valuations such as 30 to 40 times earnings, it might be simply fine to hold on to them. Unfortunately, every situation is different. This is why a black and white approach is dangerous, while a more nuanced and selective approach is superior.
Full Disclosure: Long BF/B, KO, IBM, CVX, OKS, ED, PM, DLR, OHI