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.