I try to make at least one purchase a month and usually two just because of the amount of capital I usually have to work with from my savings. Since I'm trying to reach financial independence as quickly as possible I don't feel that's it's to important to build up a large cash savings to deploy at the most opportune time in the markets. I made another purchase of Kinder Morgan earlier this month and decided to put a little bit more capital to work by adding to another small position of mine, General Electric (GE). General Electric is a huge industrial powerhouse with operations covering just about every facet of the economy, unfortunately that also included banking services which nearly brought down the company during the depths of the Great Recession.
Management has been working towards decreasing the role that the financing arm plays on their results and get back to their industrial roots. Earlier this month they filed an IPO to spinoff the retail financial unit which will further reduce the lending portion of the company and let GE focus on what it does best which is supply solutions to the industrial needs of companies worldwide. The spinoff is expected to finalize in 2015.
At the end of 2013, General Electric had a record backlog of $244 billion in orders which is a good sign for the demand for their products and the economy in general. I had a relative lacking in the industrial sector of the economy so GE fit the bill to provide decent value in an otherwise heated market and sector equalization. The Great Recession was very rough for GE shareholders as the dividend was cut leading to a double whammy of a falling share price and falling dividend. Since then the dividend has been increased 4 years in a row at a 16% annualized increase. Not too shabby, although I expect dividend growth to more closely mirror earnings and cash flow growth moving forward. But with 8.50% annual estimated earnings growth, that'll still be a solid annual increase.
On Tuesday, March 25th I purchased 60 shares of General Electric for $25.40 each. After commission, my per share cost basis for this lot of shares comes to $25.53. Based on the current quarterly dividend of $0.22 these shares carry a YOC of 3.45% and will provide $52.80 in annual dividends before any reinvestment or future increases.
I've been trying to add to existing positions rather than initiate new ones and my last purchase of GE came back in July 2013 when I purchased 50 shares. I typically look to average down my cost basis but that just wasn't available at this time. I'll still look for opportunities should they present themselves but for now I'm content with my position in GE. The new shares were purchased at a 3.45% premium to the original lot and increase my cost basis by 1.83% to $25.15.
Thanks to this purchase and some recent dividend increases, my forward 12-month dividends are now at $4,104.99. This puts my forward dividends 82.82% of the way towards my goal of $5,000 by the end of the year.
What companies have caught your eye for potential investment capital?