Wednesday, November 27, 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.  One recommendation was to add to my position in Realty Income (O) because it made up around 1% of my portfolio at the time.

I decided to go on an add to my position in O despite having an open put option that will expire in December that should be executed.  I purchased 30 more shares for $38.08.  After commission, my cost basis on these shares is $38.35 per share.  Based on the current annual dividend of $2.18 these shares will provide $65.47 in annual dividends before reinvestment or future increases and carry a YOC of 5.69%.  I initiated my position in O back in early July by purchasing 24 shares with a per share cost basis of $42.44.  The newest lot was purchased for a 9.6% discount to my existing position and decreased the average per share cost basis by 5.3% to $40.17.  As a bonus I should be able to receive the next monthly dividend payment.

I'd been looking for a chance to average down my cost basis since the first purchase and yesterday seemed like a pretty good day to do so.  It's not a steal at these prices but there isn't much in the market that really is.  I'd say it's on the high end of it's fair valuation range.  Based on the current annual dividend and assuming that management can grow the dividends at 3.00% per year, the Gordon Growth Model spits out a fair value price of $39.68 using a 8.50% discount rate.

My forward 12-month dividends now sit at $3,335.13 which is 95.29% of the way towards my goal of $3,500 by the end of 2013.

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

8 comments:

  1. Nice buy PIP,
    I was watching that one yesterday. I keep going back an forth on it, but I should jump in soon. Keep those buys coming
    -Bryan

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    Replies
    1. Bryan,

      I think O is pretty good right now and is at a good price to start a position. I wish I had waited until now to start accumulating shares, but impatience got the best of me earlier this year. Can't really complain about a 5%+ yield as you can use those dividends to fund purchases of other companies.

      Thanks for stopping by!

      Delete
  2. Nice! O is now close to the top on my watch list. Hopefully prices won't get thru the roof until I can buy it sometime in December ;)

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    Replies
    1. FabSavings,

      I don't think you have to worry about O's price going through the roof. I just wish I could add more but it just doesn't make sense to have that much exposure if I can avoid it.

      Thanks for stopping by!

      Delete
  3. Nice purchase, but I'm biased from having bought O myself recently. Enjoy the dividends!

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    Replies
    1. DGM,

      I plan to enjoy those dividends for decades to come!

      Thanks for stopping by!

      Delete
  4. Nice purchase, I plan to be adding O in my portfolio somewhere in the future.Your really close to your goal of dividends achieved, gongrats!

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    Replies
    1. Life in Center,

      O is a great company and they pride themselves on the fact that they are "The Monthly Dividend" company. Got to love that as a co-owner. I should cross that forward dividends goal before the end of the year, I just wish it was by a wider margin.

      Thanks for stopping by!

      Delete