Saturday, June 8, 2013

Recent Buys

On Wednesday, June 5th I made 2 buys of some dividend champions in Coca-Cola (KO) and Proctor & Gamble (PG) after further weakness in both shares.  Neither purchase was made at my ideal price points but I'm still happy to add to 2 very solid companies with solid entry points.  I've been struggling with whether it's better to wait for the bargain prices or not and thanks to some of the comments from the readers I went ahead and made these two purchases.  In the long run, I don't think it will matter that I paid a little too much and the added dividend income from these purchases and continued years of increases will more than make up for waiting for the perfect price.

I picked up 35 shares of Coca-Cola for $41.11 each costing me a total of $1,446.80 after commission.  This gives me a per share cost basis of $41.34 on this lot and based on the current annual dividend of $1.12 will carry a YOC of 2.71%.  This purchase will add $39.20 in annual dividends before further increases or reinvestment.  Unfortunately this lowered my YOC for my entire position in KO since I had originally picked up shares back in 2011 for about $8 less per share after the split.  The added income is still worth it though.  The added bonus is that I'll receive the next dividend payment from KO, since the shares will trade ex-dividend on on June 12th.

For my second purchase, I added to my small stake in Proctor & Gamble, actually by tripling it, but don't get confused it was a very small position to begin with thanks to wanting the price to drop and never doing so.  This caused me to miss out on dividends and never add to my position.  Live and learn.  I picked up 20 more shares of PG for $76.81 each which cost a total of $1,544.15 after commission.  The per share cost basis on this lot if $77.21 and based on the current annual dividend of $2.41 carry a YOC of 3.12%.  These shares will provide $48.12 in annual dividends before future increases or reinvestment.

Both of these purchases were for smaller amounts than I normally aim for because I wasn't in love with the prices.  I wanted to add to both positions but I didn't want to eat up too much of my capital in case a larger pullback is coming.  Overall I'm happy with both buys since the total return projection using Yield + Dividend Growth is 2.71% + 7% = 9.71% for KO and 3.12% + 6.50% = 9.62% for PG using conservative dividend growth rates.

My FI portfolio's YOC is now 2.96% and my forward 12-month dividends are up to $2,633.24.  This is 75.24% of the way towards my goal for the end of 2013.

I've updated my Portfolio page to show the two purchases.

8 comments:

  1. Nice buys and nice you will get the next quarter dividend.

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    1. Thanks. I'm pleased with the purchases but not thrilled with them. In the long run they'll do just fine though. I'll still get 3 dividend payments from KO this year so that's a plus.

      Thanks for stopping by!

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  2. Obviously these are great companies. To be honest, I'm not thrilled about the prices (you probably aren't either). We are in a tough situation right now, and I'm faced with the same problem. I'm leaning more towards XOM or CVX at this time (which changes day to day). Really though, KO and PG are the type of companies we should be buying as long term holders. You can't ask for anything more reliable and predictable.

    You know, I suppose PG isn't too bad right now. I'd consider that also.

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    1. CI,

      I'm happier with PG's price than KO's, but given the current market environment and my large cash position I figured it's okay to pay up for quality. Eventually we'll all get better prices but we can only work with what's available. I don't want to go down the quality chain and pay fair value or slightly over for a less quality company. I recently initiated a position in CVX too and will be looking to add at less than $120.

      Thanks for stopping by!

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  3. PIP - few investors have gone broke buying Coke! I have my eye on it, but just not much room in my US portfolio for any new stocks right now, so anything I do buy will have to be very compelling. PE for Coke is pushing 21 (although forward PE looks closer to 18) so still a bit rich for me here. I am waiting, and if it dips below $40 will re-visit.

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    1. DoD,

      That's what I'm counting on. Maybe they should change their slogan to that. I'm not overly excited about the entry price but the fact that they will continue to be around, growing their business and in turn my dividends even in the worst economy, I'll overpay slightly for a great company like KO. I would love another dip below $40 and am quite annoyed that I just missed the last dip. Of course it happened on a day when I didn't set my limit orders the night before and woke up after the markets had opened.

      Thanks for stopping by!

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  4. Nice KO purchase. I did similar a week or so ago. I'm comfortable that in 30-40 years time, I won't be regretting having made this purchase at these levels. I don't intend to sell my Coca Cola shares again- ever!

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    1. Integrator,

      I like KO as an investment and am actually drinking a Cherry Coke right now as well. When your holding period is decades to forever and with the intention to continue adding on further dips, the prices don't matter as much. Luckily I never parted ways with my KO shares and I don't intend to do so either.

      Thanks for stopping by!

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