Whenever I make a new purchase for my portfolio I feel it's only fair to get a post written giving all of the juicy details. I want to be as transparent as possible with my journey to reach financial independence through dividend growth investing. Being open about the moves I make allows for better discussion with all of you and helps spread ideas around as well as letting me create my own "investing journal" to chronicle why I purchased a company in the first place and that way I can revisit if something changes and make the decision on whether to continue owning the company or not.
Earlier this week I wrote about another rental propportunity that I happened to find. Given the right property in the right location you can generate a lot more cash flow on a monthly basis by investing in real estate. However, my big concern with going that route is being adequately diversified. The approximate $25k that I'd need for the downpayment on that property would only net me on property and require the use of debt or I could continue to build ownership stakes in 5-10 companies. Since I'm still a little undecided on rental properties as an option right now, I still like to invest in real estate investment trusts (REITs). So yesterday I added to one of the best run REITs out there, Realty Income (O).
I purchased 36 shares of Realty Income for $43.75 per share. After commission my per share cost basis works out to $43.97 per share. Based on the current annual dividend of $2.19 per share these shares will provide $78.97 in annual dividends and carry a YOC of 4.99%. I previously owned 55.685 shares at a per share cost basis of $40.16 so this purchase was made at about a 9.5% higher price than my cost basis. My total position in Realty Income now carries a cost basis of $41.66 which is an increase of 3.7% from before this addition.
Realty Income doesn't fit the high or even moderate dividend growth camp but it does provide a solid current yield at around 5.00%. I try to balance out my portfolio with some high current yield positions to help spur on the overall growth of my portfolio. Another thing that I like about Realty Income is that it's a fairly stable business with built in rent increases. Earlier this month Realty Income announced their Q2 results and they were quite good. Adjusted FFO were up 8.5% per share year over year. You need to look at funds from operation as opposed to earnings per share for REITs due to the large non-cash items that negatively effect earnings. It's similar to looking at the difference between cash flow versus earnings because depreciation is a drag on earnings but does not effect actual cash flow. Even better news out of the quarterly report was that guidance for FY 2014 was raised which should continue to lead to further dividend growth. Plus what's not to like about a company that proudly displays their dividend history on their investor relations page and refers to itself as "The Monthly Dividend Company".
I'll gladly buy more on further weakness in the share price but there's no telling when that might come. So in the meantime I'll just sit back and collect my dividends from this great company.
My forward 12-month dividends are now up to $4,660.70. That's 93.21% of the way towards my goal of $5,000 by the end of the year.
I've updated my Portfolio page to reflect this addition.