Thursday, July 3, 2014

Recent Buys

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.  I'm a bit late on getting these out but better late than never.

Last Friday, June 24th, I purchased 22 shares of Procter & Gamble (PG) (Full Analysis Here) for $78.66 per share.  After commission my per share cost for this lot came to $79.02 and based on the current quarterly dividend of $0.6436 these shares will have a yield on cost of 3.26%.  The important thing is that these shares will provide $56.64 in annual dividends before future increases or purchases.

I first purchased shares of PG in November 2011 as it was one of the first companies I purchased and added to it again in both June and September of last year and consider it a core position that I want to add to at least once per year.  Obviously I don't expect a return to consistent double digit dividend growth from a company as large PG but if PG continues with 5-8% annual increases they will be doing their job within m portfolio.

I didn't get to purchase these shares at the best value but I think it's at a decent value given the current market environment.  I purchased these shares at essentially my fair value price of $79.37.  While I normally look to average down my cost basis I actually averaged up a bit and increased my per share cost basis by 2.2%.  For a company as stable as PG I'm just fine with increasing my cost basis while getting to invest capital in a relatively heated market.  The YOC for my PG position decreased from 3.48% to 3.41%.  Just some quick stats about PG's current valuation.

TTM P/E  21.21
Forward P/E  17.60
Dividend Yield  3.20%
5 Year Dividend Yield Average  3.30%

Later that same day I also added to my newly initiated position in Deere & Company (DE).  I first purchased 18 shares of DE on June 11th and decided to double down on my position by adding 19 shares of DE on June 25th.  I purchased the new lot for $90.08 per share which comes to a $90.50 per share cost basis after commission.  Based on the current annual dividend of $2.40 these shares will carry a YOC of 2.65% and provide $45.60 in annual dividends.  And the good news is that I'll receive the next dividend payment for the shares as well as DE went ex-div the day after this purchase.

I did get to average down my cost basis a little bit from the first purchase.  This second lot was purchased for a 1.5% discount from the original lot and lowered my per share cost basis by 0.8%.  There's still worries about anything to do with agriculture and DE is right in the thick of that.  I expect a little bit of short term pain for the company but the dividend is still well covered even if the decline in earnings do materialize.  This is an issue you have to deal with if you want to invest in commodity/cyclical companies.  Every few years the earnings will decline but the important thing is to make sure they continually rebound.

My FI Portfolio's forward 12-month dividends are now at $4,490.09.  This is 89.80% of the way towards my goal of $5,000 by the end of 2014 and almost a $375 monthly average going forward.

I've updated my Portfolio page to reflect these changes.

What do you think of these purchases?  Are there any companies you're looking to invest in at current prices?

6 comments:

  1. Thanks for sharing, JC! I've been thinking about adding Proctor & Gamble or Johnson & Johnson to my portfolio this month. I'm very new to dividend growth investing, so I'm still adding some of the staples. So far I've purchased Coca-Cola, Kinder Morgan, and General Electric. Despite the high prices, I'm going to keep investing and hope there's a correction in the future.

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  2. Love PG as a company, but I think it's slightly overvalued right now. Dividend yield is great, though.

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  3. I have just bought 3M. Nobody ever talks about it and I think its a great company. I am looking to add Proctor and Gamble at some point, but I do think Deer are a fantastically managed company but a bit overpriced for my liking.

    You are are doing a great job Passive Income Pursuit. keep it up.

    Regards
    Louis Gunn

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  4. JC,

    These are two great purchases. Glad to see you'll be getting a bigger dividend from DE in August, I squeezed in just before the ex-dividend date as well. I can't think of a safer pick than PG and the forward earnings are really attractive now. As for the forward dividend goal: You can do it! Congrats on a stellar month in June and really excellent work all around, I've really enjoyed all the content!

    Have a great weekend!
    Ryan

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  5. congrats on your progress with your dividend portfolio. I love PG too. I bought their stocks in June. I am thinking about Deer&Co everytime I see their products in front of me...

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  6. I leased my place working with those decent real estate fellows two years back and they were completely astonishing throughout the methodology and in the two years since.

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