Tuesday, February 18, 2014

Recent Buy

I'm a bit late on this update but it was a crazy weekend with lots of work and other writing that I wanted to get done.  The markets have started to turn things around in February and I have no idea which was the head-fake, the dip or the subsequent recovery.  What I do know is that a company I wanted to own was trading at a price I was comfortable with so it was time to add to my position.  Out of the carbonated beverage makers, Coca-Cola was the first one I bought and for the longest time it was the only one of the two soda giants that were in my portfolio.  That all changed back in early December when I finally started to build my position in PepsiCo (PEP).  I knew I wasn't getting the best price at the time of the first purchase but I felt that it was a decent price to start building the position from.  Luckily Mr. Market gave me an opportunity to average down my cost basis and buy some more shares on Valentine's Day.  How sweet Mr. Market.

Earlier in the week PepsiCo had announced a huge 15.4% dividend increase, but Valentine's Day wasn't sweet for the share price.  PepsiCo announced earnings that morning and the markets didn't like it apparently and the price dropped.  I purchased 21 more shares of PepsiCo for $79.085 per share.  After commission my per share cost basis on these shares is $79.46.  That's a 4.1% discount from my average valuation price that I calculated in my stock analysis on the company,so I'm fairly pleased with the purchase price.  Based on the previous quarterly dividend these shares would have a 2.86% YOC and provide $47.67 in annual dividends.  However, since the dividend increase has already been announced, although not effective until the June payment, my YOC based on the increased dividend is 3.30% and the shares will provide $55.02 in forward dividends starting with the June payment.

I was able to purchase these shares for a 5.51% discount to the previous cost basis and lower my overall cost basis by $2.37 or 2.82%.  I'm hoping the shares will have a bit more weakness in price before the next ex-div date in early March.  I'll be looking to add some more shares if they can get down to the low $77's or break down into the $76's.  One more lot would bring the position to about par with my Coca-Cola position which I'm also looking to add to after this morning's weakness after announcing earnings.

My forward 12-month dividends are now at $3,970.45 which is 79.41% of the way towards my goal of $5,000 by the end of 2014.

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

12 comments:

  1. Nice buy JC. I have my eye on PEP also. I really like their diverse snacks group......far more than their cola and juice division. If the S&P doesn't break above these levels, technical traders will have a rather unfriendly chart pattern. Happy hunting

    -Bryan

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    Replies
    1. Bryan,

      I do like their snacks business. I keep going back and forth on whether I'd prefer the two be split or if I like them better together as a hedge for each other. I like their transition towards healthier snack foods as well and think that will be a bigger driver of growth because America loves its snack foods. And there's a lot more talk about healthy foods now compared to when I was growing up.

      Thanks for stopping by!

      Delete
  2. I like PEP here as well, and have been looking at splitting my OKS position for some diversification purposes and picking up some shares of PEP with the proceeds. We will see, but PEP and KO are both solid, long-term holds for any DG investor.

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    1. w2r,

      Neither KO or PEP are absolute steals, but I think PEP is at a little better value right now. I really like their diversification with the snacks business. Own both and hopefully forever.

      Thanks for stopping by!

      Delete
  3. I have written this also on the blog von Dividend Mantra.
    I think KO and PEP are both companies, which an investor must have in the portfolio.
    At the moment, I have no one from this companies.
    But in the next 6-12 month, I´ll purchase KO and PEP for 1 or 2 TEUR.

    Best regards
    D-S

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    Replies
    1. D-S,

      Neither one is going to be delivering consistent 15% DGR, although PEP just gave us one, but these are solid companies that will continue to be around and paying out higher dividends. Not bad for a core position and I hope you can buy some at good prices whenever you start accumulating shares.

      Thanks for stopping by!

      Delete
  4. I have been watching PEP very closely and am greatly considering them for my next purchase. KO is also very attractive right now after the nice dip today. I feel like a kid in a candy store with so many things I want to buy but not enough funds at this time. Congratulations on hitting $3,970.45 with your recent purchase and keep up the good work!

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    1. Dividendasaur,

      PEP is high on my list to add to again if it drops further from here. I think PEP is a bit better value currently than KO and I really like PEP's snack food business as a hedge. I hate when the dips come because then I have to make the decision on where to put my limited capital. But it's a good problem to have.

      Thanks for stopping by!

      Delete
  5. PEP may actually be my next purchase and I just bought Coke this earlier this week as well. I only wish I would have waited to buy coke but you know what they say about hindsight. Grats on a great purchase, I know you won't regret it in the long term.

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    1. Captain,

      I think PEP is a good complement to KO. My hindsight is great, foresight not so much. PEP should do well over the long haul and I was quite surprised by the 15% dividend increase. I figured we'd be looking at 6-8% raises for the next year or two.

      Thanks for stopping by!

      Delete
  6. I think that's a solid buy. As a lifelong Buffet fan, KO has always had some sort of mystecism. But I very recently just picked up some PG for close to the same price of PEP (after yesterday's dip), and I'm decently pleased with it.

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    1. Ryan,

      I don't think you'll do too badly owning KO, PEP and PG for 10-20 years. I'd like to add to all 3 positions and I'm still looking for an opportunity to add to my JNJ position because that company is solid long-term as well. I made the huge mistake of not buying JNJ a few years ago in the $60's. Live and learn though.

      Thanks for stopping by!

      Delete