Friday, November 30, 2012

What do you think of Costco's Special Dividend?

Earlier this week Costco (COST) announced a $7 special dividend payable to shareholders in December.  The idea behind it is to give shareholders an extra bonus prior to the potential dividend tax hike.  Several other companies have announced special dividends but Costco's will cost just over $3 billion.  Costco is a solidly run company that continues to grow.  I've never been to a Costco because where I live Sam's Club dominates the bulk shopping arena.

Thursday, November 29, 2012

Recent Buy

This morning I purchased 40 shares of Target (TGT) for a price of $61.81 per share.  With the current dividend payment of $1.44 I was able to pick up the shares for a 2.32% YOC.  I've been following Target for a while and the price just never quite got to where I felt comfortable jumping in until now.  I'm hoping for a further pullback to allow me to average down a bit in the position.  If you remember from my recent stock analysis on Target I calculated a fair entry price of $60.65.  I paid 2.25% over that price but I feel that this is a good starting point for my position in Target and I'll give it some time to see if there's a pullback.  If it stays flat then I'll probably be picking up some more shares unless there's other opportunities that are more appealing.

Wednesday, November 28, 2012

Recent Transaction

This morning I set a limit order to buy to close my put option on Archer-Daniels Midland (ADM).  I was able to purchase the put option back for $0.33 or $33.  I originally sold the put option in September at the $26 strike price and received after commissions $81.01 in option premium.  After buying to close the option I received a total of $40.03 on the trade for a return of 1.54%.  This is equal to a 7.50% annualized return.

Target Stock Analysis

I've been wanting to pick up some shares of Target (TGT) for a while but the price has always been just out of reach for me.  It's getting close to where I'd feel comfortable initiating a position so I figured I'd post my stock analysis on the company.  During trading on Tuesday, November 27th shares were trading for $62.95.

Company Background:

Target Corporation operates general merchandise stores in the United States. The company offers household essentials, including pharmacy, beauty, personal care, baby care, cleaning, and paper products; hardlines comprising music, movies, books, computer software, sporting goods, and toys, as well as electronics that comprise video game hardware and software; apparel and accessories consisting of apparel for women, men, boys, girls, toddlers, infants, and newborns; and intimate apparel, jewelry, accessories, and shoes. It also provides food and pet supplies, including dry grocery, dairy, frozen food, beverages, candy, snacks, deli, bakery, meat, produce, and pet supplies; and home furnishings and décor, such as furniture, lighting, kitchenware, small appliances, home décor, bed and bath, home improvement, and automotive products, as well as seasonal merchandise, which include patio furniture and holiday décor. The company sells its merchandise products under private-label and exclusive licensed brands. In addition, it provides in-store amenities. As of November 15, 2012, the company operated 1,782 stores in the United States. Further, it offers general merchandise through its Website, Target.com. The company distributes its merchandise through a network of distribution centers, as well as third parties and direct shipping from vendors. Additionally, it offers credit to guests through its branded proprietary credit cards, the Target Visa Credit Card and the Target Credit Card, as well as through its branded proprietary Target Debit Card.

DCF Valuation:

Analysts expect Target to grow earnings 11.77% per year for the next five years and I've assumed they can continue to grow at 3.50% per year thereafter, slightly above the long term inflation rate. Running these numbers through a DCF analysis with a 10% discount rate yields a fair value price of $93.92. This means that at $67.95 the shares are undervalued by 33.0%.

Tuesday, November 27, 2012

2013 Roth IRA Contribution Limit Increased

The contribution limit for IRA's in 2013 increased from $5,000 to $5,500 if you're under the age of 50 and from $6,000 to $6,500 if you're over the age of 50.  Of course as usual there are income limits imposed in order to make a Roth IRA contribution.  For Married Filing Jointly, the phase-out starts at a modified adjusted gross income of $178,001 and goes to $188,000.  For a MAGI that is less than the $178,001 you can contribute the full $5,500 and for MAGI's over $188,000 you can't contribute anything.  If your MAGI falls in the range, your maximum allowable contribution is decreased on a linear basis over the full range.  So if your MAGI is $183,000 then you can only contribute half of the max at $2,750.  For Single and Head of Household, the MAGI limits are $112,000 and $127,000.

Sunday, November 25, 2012

Coca-Cola Stock Analysis

I can't believe I hadn't posted this before because Coca-Cola (KO) is one of my core holdings that I wish I could add more to and I really enjoy their product.  Coca-Cola closed trading on Friday, November 23rd at $37.93.

Company Background:

The Coca-Cola Company, a beverage company, engages in the manufacture, marketing, and sale of nonalcoholic beverages worldwide. The company primarily offers sparkling beverages and still beverages. Its sparkling beverages include nonalcoholic ready-to-drink beverages with carbonation, such as carbonated energy drinks, and carbonated waters and flavored waters. The company’s still beverages comprise nonalcoholic beverages without carbonation, such as noncarbonated waters, flavored waters and enhanced waters, noncarbonated energy drinks, juices and juice drinks, ready-to-drink teas and coffees, and sports drinks. It also provides flavoring ingredients, sweeteners, powders for purified water products, beverage ingredients, and fountain syrups. The Coca-Cola Company sells its products primarily under the Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade, Minute Maid, Simply, Georgia, and Del Valle brand names. The company offers its beverage products through company-owned or controlled bottling and distribution operators, as well as through independently owned bottling partners, distributors, wholesalers, and retailers.

DCF Valuation:

Analysts expect Coca-Cola to grow earnings 8.20% per year for the next five years and I've assumed they can continue to grow at 3.50% per year thereafter, slightly above the long term inflation rate. Running these numbers through a DCF analysis with a 10% discount rate yields a fair value price of $37.40. This means that at $37.93 the shares are overvalued by 1.4%.

Thursday, November 22, 2012

Happy Thanksgiving

Just wanted to wish everyone a Happy Thanksgiving.  I hope that you're getting to spend the day with loved ones.  I'm thankful to have my wife and my great family that supports me as well as a job that will allow me to reach early FI as long as I stay focused, even though sometimes the job is very trying at times.  Unfortunately I won't be spending the day with them, but I will be there in spirit.

Wednesday, November 21, 2012

Saving on trash

Earlier this week my wife changed our trash pickup service companies.  We'll end up saving significantly over the the 3 month billing cycle.  Our last bill was for a little over $105 for the next 3 months of trash pickup twice a week.  With the new company we'll be paying around $63 for 3 months of service but pickup is only once per week.  We don't normally accumulate enough trash to justify twice a week pickup so it was nice that she found a way for us to save on our trash.  It isn't a huge savings but we'll end up keeping around $170 more over the course of the year.

It's good for everyone to take a look at your bills, especially recurring ones to determine whether you're getting full use out of them.  In this case it would be just as easy to just stockpile our trash since we don't have full pickups anyways and save by only getting one pickup per week.

Monday, November 19, 2012

Walmart Moves Dividend Forward

Walmart (WMT) moved their next dividend payment forward from early January 2013 to December 27, 2012.  They did this to be help shareholders receive the payments before potential tax increases due to the fiscal cliff.  There's too many tax issues that they just don't see getting resolved so they moved the payment forward.  Other companies have announced plans to make their dividend payment earlier, but Walmart is by far the biggest company so far.

Friday, November 16, 2012

Recent Sell

This afternoon I decided to go on and sell out of my position in Pfizer (PFE).  I sold all shares at a price of $23.79 which netted a gain of $114.24 on the position.  The shares had a YOC of 4.71% which was nice and they were due for a dividend increase with their first payment of next year.  I'm still set to receive the next dividend payment in early December which will give me another $5.26 once the paid out.  My cost basis for the position was $426.78 for original cost and the adjusted cost basis counting reinvested dividends was $446.86.  The proceeds from the sale amounted to $561.11 after commissions.  My total return based off the initial purchase was 31.48% since September 2011.  My total profit/loss percentage for the position, based off the adjusted cost basis accounting for reinvested dividends, was 25.57%.

What are you buying?

Since the election finally finished the stock market has rarely seen a positive day or even flat day.  The DJIA has shed 700 points, 5.31%, since the Wednesday after the election.

Here's what's on my shopping list at current prices as of Thursday's close.

Friday, November 9, 2012

Recent Buy

With the market continuing to drop I added to another position yesterday by picking up 20 mores shares of MCD for $85.52 each.  McDonald's reported it's first monthly same store sales decline in 9 years and promptly sold off about 2% on the day.  McDonald's still has plenty of growth ahead and as far as I'm concerned this is just a bump in the road.  Unfortunately I'm now out of capital for a little bit until I can get some money transferred over to my FI portfolio.

Blog Milestone

Tuesday of this week marked 1 year of Passive Income Pursuit being up and running. It's been a great year and I expect more and better things in the future. Thanks for following along.

Thursday, November 8, 2012

Recent Buy

Yesterday morning I put in a limit order to pick up 34 more shares of Kinder Morgan, Inc (KMI) at a price of $33.35.  It would have triggered early in trading but I didn't put in the order until later in the morning after the price had already recovered.  As it turns out right before the close of the markets the order was filled.  I was able to average down in my KMI position for a second time with this purchase and now own a total of 125 shares and will be done adding to the position barring a pullback to around $31 or $32.

Wednesday, November 7, 2012

AT&T Increases Dividend

AT&T announced an increase in their quarterly dividend from $0.44 to $0.45 per share.  This is a 2.27% increase.  The new quarterly rate will be payable on February 1, 2013 to shareholders of record as of January 10, 2013.  I wish they could increase the dividend more but they already have a high yield and payout much of the earnings as dividends.

Investing Milestone

My FI portfolio has now passed the $50k mark and my total brokerage accounts including my Roth IRA passed the $60k mark.  It's nice to know that with consistent contribution I can build up my portfolio and increase my net worth and my dividends receivable.

Portfolio Update - November 2012

Today I've updated my portfolio for everyone to see the changes

Check out My Portfolio here.

Tuesday, November 6, 2012

Recent Buy

This morning I set a limit order in my Roth IRA to pick up some more shares of Norfolk Southern Company.  I was able to purchase 11 more shares at a price of $60.96.  This was exactly $1.00 lower per share than my purchase last week.  My fair value price for NSC sits at $67.03, so I was able to pick up the shares at a 9.50% discount.  This pretty much exhausted my capital for my Roth IRA until I can add to it next year.  Our MAGI should be less than the limits for next year so we should be able to continue contributing to it.

Emerson Electric Increases Dividend

Emerson Electric released their earnings for the 3rd quarter 2012 that beat analyst estimates by $0.06.  They also announced a increase in their quarterly dividend from $0.40 to $0.41.  Unfortunately the $0.01 increase in the dividend is only a 2.50% increase.  The new dividend will be payable on December 10th to shareholders of record as of November 16th.

Becton Dickinson Stock Analysis

Since I'm really lacking on health care industry exposure it was time to start looking at some of the different companies, so today we'll look at Becton Dickinson and Company.  Becton Dickinson closed trading on Monday, November 5th at $76.59.

Company Background:

Becton, Dickinson and Company, a medical technology company, develops, manufactures, and sells medical devices, instrument systems, and reagents worldwide. The company’s BD Medical segment produces medical devices that are used in various healthcare settings. This segment’s products include needles, syringes, and intravenous catheters for medication delivery; prefilled IV flush syringes; syringes, pen needles, and other drugs to treat diabetes; prefillable drug delivery systems; anesthesia needles and trays; sharps disposal containers; and closed-system transfer devices. Its BD Diagnostics segment provides products for the safe collection and transport of diagnostics specimens, as well as instrument systems and reagents to detect various infectious diseases, healthcare-associated infections, and cancers. This segment’s products consist of integrated systems for specimen collection; safety-engineered blood collection products and systems; automated blood culturing systems; molecular testing systems; microorganism identification and drug susceptibility systems; liquid-based cytology systems for cervical cancer screening; rapid diagnostic assays; and plated media. The company’s BD Biosciences segment produces research and clinical tools that facilitate the study of cells and their components. This segment’s products comprise fluorescence-activated cell sorters and analyzers; monoclonal antibodies and kits for performing cell analysis; reagent systems for life science research; cell imaging systems; laboratory products for tissue culture and fluid handling; diagnostic assays; and cell culture media supplements for biopharmaceutical manufacturing. It markets its products through independent distribution channels and independent sales representatives to healthcare institutions, life science researchers, clinical laboratories, the pharmaceutical industry, and the general public.

DCF Valuation:

Analysts expect BDX to grow earnings 6.12% per year for the next five years and I've assumed they can continue to grow at 3.50% per year thereafter, slightly above the long term inflation rate. Running these numbers through a DCF analysis with a 10% discount rate yields a fair value price of $92.60. This means that at $76.59 the shares are undervalued by 17.3%.

Monday, November 5, 2012

Net Worth Update - October 2012

October was a pretty good month for my net worth but not as good as I had originally hoped for.  Most of the disappointment can be attributed to the stock market declines and the rest was from a little overspending.    For the month, I ended up with around a $8,150 increase.  Just over $3k came from contributions to my 401k, employer matching and my ESPP shares and the rest came from after-tax savings and changes due to the stock markets.

Sunday, November 4, 2012

Income Update - October 2012

October's spending was right in line with August and September which is good because it hasn't increased but it's still higher that where I would like for it to be.  I was hoping to be able to get my spending down to the $1,300 mark but I just don't see that happening.  I know if I can cut back on my restaurant spending that I'll be able to make some pretty big strides in the reduction because for the most part my restaurant and grocery spending is the largest portion of my spending that I realistically have room to cut from.  My minimum expenses for October ended the month at $1,440.69 which brought my average for 2012 down to $1,519.96.  My average total monthly expenses for October ended up right in line with September at $1,578.41.  This brought my average monthly total expenditures for 2012 down to $1,691.36.  My PRI for October was a pretty disappointing $25.47 which covered only 1.77% of my minimum expenses.  This wasn't a total surprise because I knew that October would be a very light month for dividends.  However, my FI made yet another move higher totaling $185.98 for the month based on the yield on the 30 year US treasury bond of 2.88%.  This covers 12.91% of my minimum expenses for the month.  October was a great month from income bringing in my second highest monthly total for the year.


Saturday, November 3, 2012

Walgreen's Stock Analysis

I've been meaning to post some more stock analysis' so today we'll look at one of my recent buy's, Walgreen's.  On Friday, November 2nd, Walgreen's closed at $34.88.

Company Background:

Walgreen Co., together with its subsidiaries, operates a network of drugstores in the United States. It provides consumer goods and services, pharmacy, and health and wellness services through drugstores, as well as through mail, and by telephone and online. The company sells prescription and non-prescription drugs; and general merchandise, including household products, convenience and fresh foods, personal care, beauty care, photofinishing, and candy products, as well as home medical equipment, contact lenses, vitamins and supplements, and other health and wellness solutions. It also provides specialty pharmacy services for managing complex and chronic health conditions; customers infusion therapy services consisting of administration of intravenous medications for cancer treatments, chronic pain, heart failure, and other infections and disorders; and clinical services, such as laboratory monitoring, medication profile review, nutritional assessments, and patient and caregiver education. In addition, the company operates Take Care Clinics to treat patients, give prescriptions, and administer immunizations and other vaccines. As of October 30, 2012, it operated 7,944 drugstores in 50 states, the District of Columbia, and Puerto Rico, as well as approximately 700 worksite health and wellness centers, and in-store convenient care clinics in the United States.

DCF Valuation:

Analysts expect WAG to grow earnings 12.47% per year for the next five years and I've assumed they can continue to grow at 3.50% per year thereafter, slightly above the long term inflation rate. Running these numbers through a DCF analysis with a 11% discount rate yields a fair value price of $64.03. This means that at $34.88 the shares are undervalued by 45.5%.

Friday, November 2, 2012

Recent Buy

Let's start November off right with a purchase after I made 7 in October.  I decided to go on and take the chance to average down a bit in my Walgreens (WAG) position.  I initiated the position back in August by purchasing 35 shares and today I picked up another 32 shares for $35.06 each in my FI portfolio.  I now own a total of 67.275 shares of WAG since I'm currently reinvesting dividends in most of my positions.  Now that my expected forward dividends are starting to be a significant amount, I will probably be turning off the DRIP soon and selectively reinvesting the dividends into the best opportunities that I see at the time.  The Walgreen's purchase gives me semi-related exposure to the healthcare industry.  I need to add more to that portion of my portfolio since PFE is the only stock that is a pure-play health care company.

Pepsi Stock Analysis

It's been a while since I've posted a stock analysis so today we'll look at the other beverage giant PepsiCo (PEP).  Pepsi was trading for $69.44 at mid-day yesterday.

Company Background:

PepsiCo, Inc. engages in the manufacture and sale of snacks, carbonated and non-carbonated beverages, dairy products, and other foods worldwide. It operates in four divisions: PepsiCo Americas Foods (PAF); PepsiCo Americas Beverages (PAB); PepsiCo Europe; and PepsiCo Asia, Middle East, and Africa (AMEA). The PAF division offers Lay’s and Ruffles potato chips, Doritos and Tostitos tortilla chips, Cheetos cheese flavored snacks, branded dips, Fritos corn chips, SunChips multigrain snacks, and Santitas tortilla chips in North America; Quaker oatmeal, Aunt Jemima mixes and syrups, Quaker Chewy granola bars, and Quaker grits, Cap’n Crunch cereal, Life cereal, Rice-A-Roni side dishes, Quaker rice cakes, Pasta Roni, and Near East side dishes in North America; and snack foods under Marias Gamesa, Doritos, Cheetos, Ruffles, Saladitas, Emperador, Tostitos, and Sabritas, as well as Quaker-brand cereals and snacks in Latin America. The PAB division manufactures beverage concentrates, fountain syrups, and finished goods under Pepsi, Gatorade, Mountain Dew, Diet Pepsi, Aquafina, 7UP, Diet Mountain Dew, Tropicana Pure Premium, Sierra Mist, and Mirinda brands; ready-to-drink tea, coffee, and water products; and concentrate and finished goods, as well as brands licensed from Dr Pepper Snapple Group, Inc. The PepsiCo Europe division offers snacks under Lay’s, Walkers, Doritos, Chudo, Cheetos, and Ruffles brands, as well as Quaker-brand cereals and snacks; and beverage concentrates, fountain syrups, and finished goods under Pepsi, Pepsi Max, 7UP, Diet Pepsi, and Tropicana brands, as well as ready-to-drink tea products in Europe. The AMEA division provides snack food under the Lay’s, Kurkure, Chipsy, Doritos, Smith’s, and Cheetos brands; Quaker-brand cereals and snacks; and beverage concentrates, fountain syrups, and finished goods under the Pepsi, Mirinda, 7UP, Mountain Dew, Aquafina, and Tropicana brands.

DCF Valuation:

Analysts expect PEP to grow earnings 4.25% per year for the next five years and I've assumed they can continue to grow at 3.50% per year thereafter, slightly above the long term inflation rate. Running these numbers through a DCF analysis with a 10% discount rate yields a fair value price of $66.23. This means that at $69.44 the shares are overvalued by 4.8%.

Thursday, November 1, 2012

Dividend Update - October 2012

October was a slow month as expected for dividend payouts with only 2 companies paying out in my FI portfolio and only 1 company paying in my Roth IRA.  In my FI portfolio, my forward 12-month dividends to start the month stood at just over $930 and with the 7 purchases that I made in October I've increased my forward 12-month dividends to $1,309 for my FI portfolio and $180 for my Roth IRA.  I made a lot of progress on the forward-12 month dividends but will fall short of my $1,000 received in dividends for 2012.  At least I'm already over that mark for next year assuming all dividends are kept at the same level and not cut.  In October I made 7 total purchases with 6 in my FI portfolio and 1 in my Roth IRA.  I initiated 3 new positions in CAT, CMI and KMI and added to my NSC and KMI positions as well as twice to my MCD position.