Friday, March 28, 2014

Recent Buy

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?


15 comments:

  1. General Electric should serve your dividend portfolio well in the coming years. Coca-Cola (ko) looks most appealing to me, but I am holding off on reinvestment and looking for lower prices. We'll see if we get them :o/
    -Bryan

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    Replies
    1. Bryan,

      I think GE should do well and I like the upcoming spinoff of the consumer credit business. Most likely I'll be selling those shares if we get some when the whole process is complete. KO still intrigues me here but I want a bit better price. I'll probably end up regretting that decision but I'm comfortable with my position in KO since it's about 5% of my portfolio.

      Thanks for stopping by!

      Delete
  2. Hi PIP
    Nice Purchase. I would also like to acquire the KMI to my portfolio.
    Regards DH

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    Replies
    1. DividendHawk,

      KMI is great and I think it's one of the best values in the DGI space. GE should do well over the next few years and I expect t upper single digits to low double digits increases which is right where I like it.

      Thanks for stopping by!

      Delete
  3. Im thinking of starting a position in GE as well. I need more diversification into the industrials and GE stands out

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    1. Roadmap,

      I was getting close to buying up some DE but then they didn't increase the dividend which got me a little worried. GE gives plenty of diversification in the industrial space so it's a good fit right now. I just wish I had purchased some back when I first started investing. I still think this is a good price though.

      Thanks for stopping by!

      Delete
  4. I'm thinking of GE also especially since they will spin off soon. I also bought KMI earlier this month.

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    1. Richie,

      KMI and GE are both great. And GE is getting better now that the consumer credit card business is about to be done with.

      Thanks for stopping by!

      Delete
  5. Nice grab! I was thinking about starting a GE position on Monday. Have to cross my fingers and hope it's a down day. It's my top idea right now, though I was hoping to get in closer to $25... I really like how GE is positioning itself!

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    Replies
    1. CI,

      I've been hoping it would go down, although I've been hoping for that for a lot of stocks. I missed GE for a bit cheaper earlier late last week but I'm still happy with this price. GE should be great and I'm glad they're finally getting rid of the consumer credit arm to let them focus on what they do best.

      Thanks for stopping by!

      Delete
  6. Pursuit,

    I like GE at these levels. I think it's a solid opportunity here for the long haul, and the near-term catalyst involving the sale of GE Capital's retail credit card assets is just icing on the cake.

    Nice buy!

    Best wishes.

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    Replies
    1. DM,

      The GE Capital spinoff is great since that was the big bugaboo during the financial crisis. I'm glad that GE is getting back to its roots of being the best industrial company in the world. I like current prices and probably should have gone in a bit heavier but we'll see what opportunities Mr. Market gives us.

      Thanks for stopping by!

      Delete
  7. I have been seeing a lot of purchases of KMI lately as it has been beaten up and is now providing a great yield. MLPs in general seem to be in a slump and now might be a great time to pick up some more bell weathers from the sector.

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  8. I think GE is a fair buy at current prices, and if they experience any kind of pullback of 10% of more it would be a screaming deal. I'm waiting for a little bit of a pullback on that and KO before I pull the trigger. I'm going to have to look more into KMI. They seem to be popping up on a lot of radars recently.

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    Replies
    1. Ryan,

      GE is a decent value here, not a steal, but there isn't much that is. I'd love to see a 10% pullback across the board because there's a lot of companies I'd really like to buy/add to but the prices right now just aren't really compelling. KMI is probably one of the best DG values out there right now. I think the negative article by Hedgeye was pretty much unsubstantiated and the KM response refuted the claims.

      Thanks for stopping by!

      Delete