Whenever I buy or sell a position in my portfolio I try to get a post up shortly thereafter discussing the reasons for the purchase and all of the juicy details. I'll usually tweet about the purchase within an hour of the purchase but I'm not always free to get a post written. If you want to find out about my purchases as quick as possible, make sure to follow me on Twitter @JC_PIP.
I'm in a great place right now as I routinely get to save a large portion of my income each and every month. The negative to that is that after the huge increase in share prices through 2013 a lot of the value has been sucked out of the market. It's a delicate balance between building up cash for better valuations in the hopes they come relatively soon and investing my savings to try and reach financial independence as quickly as possible. The solution I've settled on is to do a little of both by building my cash and simultaneously investing in some of the highest quality companies at reasonable valuations. The solution is largely predicated upon my high income/savings rate and a problem I'm glad to have to deal with. If I had less capital to invest on a regular basis I'd lean more towards building cash right now and doing as much research as possible on the best companies I can find. This past Thursday I went ahead and put some capital to work by adding to my position in Johnson & Johnson (JNJ).
I purchased 17 shares of Johnson & Johnson for $97.71 per share. Of course if I knew that later in the trading day the shares could have been bought for $1.00 less per share I'd have gladly waited until the afternoon. My per share cost basis for this lot of shares came to $98.18 after commission. Based on the current quarterly dividend of $0.66 per share these shares will provide $44.88 in annual dividends and carry a YOC of 2.69%. However, based Johnson & Johnson's history I find it highly likely they'll be announcing another dividend increase later this month to mark their 52nd consecutive year of increasing the dividend payout. Most likely to between $0.70 and $0.73 per share per quarter. This would increase the YOC to between 2.85% and 2.97% and increase my expected dividends to between $47.60 and $49.64.
This was the second purchase of Johnson & Johnson that I have made, the first coming towards the end of September 2013. I normally look to average down my cost basis but that just wasn't an option here unless I wanted to continue to wait and not increase my position in such a great company. My cost basis increased by 6% to $93.43 and subsequently lowered my YOC for the position down to 2.83%.
I mentioned above how my focus right now, in what I feel is a frothy market, is on some of the highest quality companies available and purchasing as reasonable valuations. The quality of Johnson & Johnson isn't in question but rather the reasonable valuation. Johnson & Johnson is trading at a decent 20.14 TTM P/E ratio but a solid 15.43 Forward P/E ratio. The current yield isn't great at around 2.70% but given the increase that will be coming later this month I decided to front-run the announcement a bit. Analysts expect revenue growth of 4.10% during FY 2014 and 4.60% during FY 2015 which will continue to provide the fuel for higher earnings and most importantly continued dividend growth.
Thanks to some dividend reinvestment and dividend increase announcements my forward 12-month dividends are now at $4,146.83. This puts my forward dividends 82.94% of the way towards my goal of $5,000 by the end of 2014.
I've updated my Portfolio page to reflect this purchase.
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Are you trying to build up cash in hopes of better prices? Or still investing like clockwork? What companies are you interested in?