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. Markets continue to be weak so far in December and while there hasn't been a broad market selloff, there's still pockets of value. Some of the best current values are in the REIT sector as fears of rising interest rates have depressed prices for most of the sector. On Thursday, December 12th I picked up 40 more shares of HCP, Inc., a diversified health care REIT.
I first purchased 40 share of HCP back in late October and was already planning to look for opportunities to average down my cost basis as I felt it was a good starting point. As the share price has gone pretty much straight down since then I felt that it was a good time to average down my cost basis by doubling my position. Yesterday I added 40 more shares for $35.65 each. After commission my per share cost basis comes out to $35.85 per share. Based on the current annual dividend of $2.10 this lot carries a YOC of 5.86% and will provide $84.00 in annual dividends prior to reinvestment of future increases.
I was down around 16% on the first lot of shares so this lot dramatically reduced my cost basis. The new lot of 40 shares was purchased at a 16.32% discount to the first lot and lowered the total position cost basis by 8.16%. Subsequently, the YOC increased from 4.90% to 5.34%. Using the Gordon Growth Model with a 3.00% annual growth rate and a 8.00% discount rate gives a fair value of $42.00, which shares are currently priced much less than. Last month, HCP announced 3rd quarter results and the results were quite good. Funds from operations increased by 14% with FFO per share increasing by 14% year over year. Funds available for distribution increased 22% year over year. Given the solid growth they've experienced this year and great guidance for 2014, I expect to see a solid increase in the dividend with their next payout in February.
I also made several option moves yesterday to roll out some puts that I had previously sold. I'll have a post covering all of the moves in a few days.
With the new HCP purchase, some reinvested dividends and an unexpected dividend increase from my employer, my forward 12-month dividends increased to $3,587.99 which is 102.51% of the way towards my goal of $3,500 by the end of 2013. It's awesome to see my forward dividend goal get met and I'm already working toward knocking out some of the 2014 target.
I've updated my Portfolio page to reflect this change.
Are you buying in this relatively heated market or sitting on the sidelines? How are you doing on your dividend goals for the year?