Today I purchased 50 shares of Tower Group, Inc. (TWGP) at $23.43 / share in my Roth IRA. I got a little impatient in waiting for my price and raised my target up a little bit which I shouldn't have done since the market would have given me the shares cheaper just a few hours later. Live and learn.
TWGP currently pays $0.75 / share per year in dividends. This will pay me $37.50 a year. TWGP is a dividend challenger with 5 years of dividend growth that has been rapid. The 5 yr dividend growth rate is 47% per year. While I don't expect that to continue I can foresee them continuing to raise around 20% per year. My current YOC is 3.18% and if they can keep something close to a 20% growth rate for another 5 years my YOC would jump to 7.91%. The most compelling reason that I bought in besides the potential for rapid dividend growth is the fact that the company is currently trading at a discount to book value and a 45% discount to the Graham number. They've grown revenue at 37.20% rate for the past 4 years with a 48% jump over the last year. They will have their 2011 year end results later this week. They're normalized PE for the last for years is currently 7.84. Unfortunately I'm getting involved with yet another financial stock. I just see too much value in some of the financials still. Of course I still have a long time frame seeing as how I'm only 28.