Monday, February 11, 2013

Recent Buy

Earlier this afternoon I purchased 45 shares of Aflac (AFL) for a $50.15 each.  After commission, my cost basis is $50.33 per share.  These shares will provide an extra $63 in annual dividends before reinvestment or future dividend increases.  Aflac is a dividend champion with 30 consecutive years of dividend growth with a 10 year dividend growth rate of 19.3% and a 1 year dividend growth rate of 8.9%.  Their current payout ratio is a very low 22%.


Since Aflac is going ex-div on Wednesday I'll be receiving their next dividend payable on March 1st.  Unfortunately this won't be diversifying my dividend payouts since most of the companies I own pay on the Mar, Jun, Sept, Dec schedule but I'm not worried about that yet.  This most important part is investing in solid companies that have great prospects to continue raising the dividend.  The YOC for my entire FI portfolio remained the same, but for my non-ESPP share portfolio it lowered from 3.22% to 3.20%.  My forward 12 month dividends for my FI portfolio now sits at $1,890.20.  This is over 10% coverage of my total expenses from 2012.

Aflac has been on my radar for a long time and I've been kicking myself for not picking some up in the $30's or $40's.  I was debating myself as to whether I should sell a put to start my position or if I should go on and purchase some shares, especially since there's some pretty enticing put options giving 10%+ annual returns or cost basis' in the $48 range.  Since I hadn't made an outright purchase yet in 2013, I decided to go on and pick up some shares.  I still might sell a put in the future, but I think the market is at least due for a breather if not a pullback so I'm holding some more cash rather than getting it working right away.

I've updated my portfolio to reflect the new purchase.

20 comments:

  1. I really like AFL as well. Next correction I planned to pick up a couple insurance companies.

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    1. Marvin,

      I really like AFL long term, still can't believe I never picked some up before. I got a little worried about all the talk of their PIIGS investments. I have no problem adding some more if we get some more weakness.

      Thanks for stopping by!

      Delete
  2. I still regret picking up TWGP instead of a larger company like AFL. I'm giving TWGP until the end of the year to raise their dividend , if they don't I will likely pick up another insurer like AFL. Nice purchase!

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    1. AAI,

      I'm with you on TWGP. I've been going back and forth on whether I should dump them now or not. I've been leaning towards waiting to see about the dividend, if I think there's a good chance of it not being raised then I'll unload them. Hopefully Mr. Market will give us a chance to add some in the $40's. There's some pretty good put options for AFL so I might be selling one soon.

      Thanks for stopping by!

      Delete
  3. Nice pickup, and congrats on the >10% of your living expenses! That is really a big step!

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    1. W2R,

      It's great to see that without any further investment I'd have 10% of my expenses covered. Pretty big milestone. I'm hoping to be around 20% by the end of the year.

      Thanks for stopping by!

      Delete
  4. Good buy. It's hard to resist stocks after a fall like AFL took.

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    1. Headed Home,

      I'll gladly welcome another fall from here though, if not then it'll be put option selling. I like when Mr. Market goes crazy on the pricing of some stocks due to no real reason, like NSC's big drop last year. CAT and CMI's drops also gave me a chance to own some great companies with decent starting yields.

      Thanks for stopping by!

      Delete
  5. I really like AFL. I own a bunch already. I bought it back in 2011 when the market fell off a cliff during the first round of debt ceiling idiocy. I wouldn't mind buying a bit more in the future.

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    1. MyFIJ,

      I still can't believe I didn't pick any up a few years back. I'd like to add more to the position, possibly through selling puts. Of course if the sequestration talks come to a standstill we might get some more volatility dropping some prices for all of us.

      Thanks for stopping by!

      Delete
  6. Pursuit,

    Great purchase here. I recently picked up some additional shares and I feel it's one of the better picks in the financial space currently. A dividend champion with a low valuation, solid balance sheet and strong brand name.

    Great job on getting to 10% of your expenses being covered by dividends. That's awesome!

    Best wishes.

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    1. DM,

      Everything you mentioned is a great reason to own them. I expect that high DG to continue on for several more years.

      It's nice to see the 10% coverage, although there's still a lot of work to do to get to 100%. But it's one milestone along the way checked off.

      Thanks for stopping by!

      Delete
  7. PIP - Most of the dividend growth investors seem to be a big fan of this one, and I have put it on my watch list. My US portfolio is full, so I would have to bump something out to add AFL, and there is nothing I want to swap yet - although I have warned MSFT it will be sleeping in the shed if its performance doesn't improve soon :)

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    1. DoD,

      Well AFL is really more of a play on Japan, since most of their revenue is from the Japanese market. If I remember correctly it's around 75% JPN, 25% US.

      Thanks for stopping by!

      Delete
  8. I think AFL will be a nice dividend growth stock. I'd like to get back into the insurance industry which I exited a few years ago when HGIC was acquired.

    My main concern with Aflac is all the long term bonds they hold. I'm just not sure I'm comfortable with billions in bank bonds (and even airline bonds o.O) I wouldn't hold them myself and at this point I'm just not sure I want my companies to hold them either. I do think the stock is undervalued though and might eventually have a spot in my portfolio.

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    1. CI,

      Considering the amount of growth they have ahead of them, both in earnings and dividends to follow, I feel the value is definitely there. They're Euro exposure is what kept me from investing earlier, but they've been taking the right steps to limit the potential downside.

      Thanks for stopping by!

      Delete
  9. Love the pick up! I actually got into AFL in the high 30's. I did all my metric research and couldn't figure out why it was trading so low, but it was at the beginning of the Europe crisis (or at least when it hit mainstream news) and they have a ton of their bonds in EU.

    You said you hit 10% of expenses - your living expenses are only 20K per year?

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    1. Evan,

      I should have started my position then, but those prices probably won't be seen again anytime soon. The Euro bonds were the main reason I stayed away from investing in AFL.

      My living expenses for 2012 came in at just over $18k. That includes my rent, utilities, food, gas, car insurance and maintenance. Just the basics that I would need although if absolutely necessary I wouldn't mind cutting the car expenses. Even without a car payment it's still very expensive to keep. It doesn't include any travel/entertainment but before I call it quits I'll have a cushion to protect against possible dividend cuts, required expense coverage and then some fun money.

      Thanks for stopping by!

      Delete
  10. I love AFLAC. It's a free cash flow king, trading at only 2 or 3 times FCF. I wrote an article about how some of it's assets are reported as liabilities, per GAAP standards. http://seekingalpha.com/article/1032911-aflac-s-hidden-source-of-value

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    1. DG,

      Thanks for stopping by! I think it's your first visit, or at least first comment. There's plenty to like about AFL. I remember reading your article about AFL, it was another thing that helped sway me to jump in.

      Delete