Monday, November 25, 2013

Recent Buy

I try to be as open and transparent as I can with my investing decisions in order to give a real life example of what it takes in order to become financially independent through dividend growth investing.  In order to keep track of my reasoning behind a purchase and inform you all about what's catching my eye, I have my Recent Buy series.  This allows me to have a written record as to why I made a purchase for my portfolio and be able to look back and see if that holding is still serving its purpose.  With the markets continuing their almost no stop climb higher, investment ideas have been lacking so I asked all of you for some help in coming up with some fresh ideas.  And you all didn't disappoint in the slightest.  There were several names that kept coming up and one that I really liked was General Mills (GIS) as I don't have a whole lot of exposure to the consumer staples sector.



On Thursday of last week I purchased 35 shares of General Mills (GIS) for $49.24 each.  After commission, my per share cost basis is $49.47 per share.  Based on the current annual dividend of $1.52 these shares carry a 3.07% YOC and will provide $53.20 in annual dividends before future increases or reinvestment.  The shares aren't exactly a steal at this price but considering how heated the market has been, I'll take around fair value for a solid company that will continue to increase profits and in turn dividends.  I was able to purchase the shares at approximately a 18.5 trailing P/E and a 15.8 forward P/E.  The five year average dividend yield is 2.9% and with a 3.07% YOC for this position, it's well above the 5 year average.   General Mills has been able to grow their dividends 8.7% annually over the past 10 years and 12.2% over the last 3 years.

I last looked at General Mills back in May of 2012 and will get an updated analysis up in the coming weeks.  However, Dividend Growth Investor has a much more recent analysis of General Mills and I still like where GIS is heading.  International expansion could provide a big catalyst for growth going forward, but even if they don't they have pricing power on an in demand product that should allow them to at least increase prices to match inflation.

My forward 12-month dividends are now at $3,269.66 which is 93.42% of the way towards my goal of $3,500 by the end of 2013.

I've updated my portfolio page to reflect this purchase.

16 comments:

  1. This is one company I really want to get, but a little to expensive for me right now. Do you think you will hit your forward 12 month dividend goal by the end of this year?

    ReplyDelete
    Replies
    1. FF Dividend,

      I think GIS is on the high end of fair value, but what isn't now a days? Unless both CSCO and O shoot up in price I'll have 2 put options get executed next month increasing my dividends by another $286 which will put me well over my goal. It's exciting to be ahead of schedule on that.

      Thanks for stopping by!

      Delete
  2. Nice buy. How long do you think they can sustain a 12.2% dividend growth though? I replaced HNZ with GIS earlier in the year and I've been waiting on a dip to add more. I may just end up buying more anyways if we don't get some type of correction.

    ReplyDelete
    Replies
    1. AAI,

      I don't expect that high of a DGR, but a consistent 6-9% annually will do just fine for a defensive position. I'd like the chance to average down my cost basis, of course who knows when that opportunity will come.

      Thanks for stopping by!

      Delete
  3. GIS is the one I am targeting as well.

    ReplyDelete
    Replies
    1. Anon,

      I really like GIS as it's a fairly stable company that should continue to provide annual increases. We all need to eat right?

      Thanks for stopping by!

      Delete
  4. In Germany, I know "Knack und Back": http://www.generalmills.com/en/Brands/Baking_Products/Knack_and_Back.aspx
    Many other brands from GIS are not known in Germany.
    I think, they make most of their revenues in the USA.
    The dividend yield ist Ok and the PEG is OK.
    I think GIS is a good purchase!

    Best regards
    D-S

    ReplyDelete
    Replies
    1. DS,

      Well spread the word about GIS to your fellow Germans! I know I'll be happy with that. GIS was a decent purchase here considering the market is fairly high and there's not a lot of values out there. As I mentioned the 3.07% starting yield is higher than the 5 year average so it's a bit undervalued on that front. I'll just sit back and take my 6-9% annual increases.

      Thanks for stopping by!

      Delete
  5. Pursuit,

    Nice buy.

    I love the company, but I'm not real crazy about the valuation. However, it's not overtly expensive either. I was looking hard at GIS just before the Heinz deal was announced. I missed my opportunity there. I continue to stalk this one. :)

    Best wishes!

    ReplyDelete
    Replies
    1. DM,

      I know the feeling. There's a lot of companies that I've been stalking more of this year, but they just continue to go up. Hopefully 2014 will bring some volatility back into the mix.

      Thanks for stopping by!

      Delete
  6. Nice buy man!! I like the company and hope I will be able to add it to my portfolio soon.

    ReplyDelete
    Replies
    1. Martin,

      I think it's a decent place to start acquiring shares and I hope to be able to average down at better valuations in the not too distant future. Hope to have you as a fellow owner too.

      Thanks for stopping by!

      Delete
  7. I just bought TGT on the drop, in for GIS next. As much as I like the lows in the energy sector I just have too much allocated there.

    ReplyDelete
    Replies
    1. WE,

      If TGT wasn't already over 6% of my portfolio I would have added on the pullback. I'm about like you where the energy sector seems to have some of the better values, but I'm a bit overallocated there at the moment. Plus you know that some time over the next 1-2 years there will be a big selloff in oil prices giving much better entry points.

      Thanks for stopping by!

      Delete
  8. Passive Income Pursuit

    Nice buy! I'm a fan of GIS and bought a few shares in my ROTH after thir last stock split around $35.07. Wish I loaded up then as I have watched it steadily climb near $50 now.

    ReplyDelete
    Replies
    1. SWAN,

      I hear ya! I should have loaded up on more COP and now it's back near it's pre-split price levels. I think GIS is a pretty good company. We all need to eat and why not put your money where your mouth is. *Pun intended.

      Thanks for stopping by!

      Delete