Is this a $33 million sign to sell your Computershare Limited shares?

Credit: ed_needs_a_bicycle

With the Computershare Limited (ASX:CPU) share price at a 5-year high, should shareholders be viewing recent director actions as a cause for concern? Over the past 3 weeks since the half-year results, non-executive directors have sold down some $33 million worth of shares.

Non-executive directors Mr Christopher J Morris (also a founder) and Ms Penelope Maclagan have sold just under 2.5 million shares between them since the 23rd of February.

Should ordinary shareholders do the same?

There are several things to consider when directors sell shares:

  • Why are they selling? (is the company bad, or is it something else e.g. a tax bill, buying a house, a divorce, etc)
  • Are they still adequately aligned with shareholders (this is more important for management figures like CEOs and CFOs)
  • What are the prospects of the company? (in terms of share price, growth, and risks)
  • The ‘value’ of the signal (how much information does a director share sale really give you?)
  • The timing (sales following loss of a key contract, for example, might raise additional concern)
  • Times when directors were wrong (e.g., they bought or sold and shares went the opposite direction)

I’ve written more on the last 3 points in an earlier article, here. Talking specifically about Computershare, shareholders should remember that both Mr Morris and Ms Maclagan have been with the company more than 30 years. They retain 35 million and 11.8 million shares respectively – a sizeable stake. It would be entirely reasonable for them to take some money off the table.

Secondly, it’s also important to note that Computershare shares are up 50% in the past year, and are at a 5-year high. Shares also appear highly priced, at an estimated 26 times full-year earnings – this, for a company that grew ‘Management’ earnings per share by just 4.4% at the latest half. Investors might also consider taking some profits.

Speaking for myself, I'm not keen on Computershare, and definitely not at today's prices. Here are 3 more dividend ideas that I think are good buy and hold today:

Top 3 ASX Blue Chips To Buy In 2017

For many, blue chip stocks means stability, profitability and regular dividends, often full franked..

But knowing which blue chips to buy, and when, can often be fraught with danger.

The Motley Fool's in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool's Top 3 Blue Chip Stocks for 2017."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

If you're expecting to see the likes of Commonwealth Bank, Telstra and Wesfarmers shares on this list, you'll be sorely disappointed. Not only are their dividends growing at a snail's pace, their profits are under pressure too due to the increasing competitive environment.

The contrast to these "new breed" blue chips couldn't be greater... especially the very real prospect of significant share price gains, something that's looking less likely from the usual blue chip suspects.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand - and how quickly the share prices of these companies moves - we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor Sean O'Neill has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.