Monday, August 18, 2014

Recent Buy

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.
On Friday I decided to add a new position to the portfolio.  It's a company that I've been eyeing for a while but just never added it into the mix.  That finally changed on Friday when I purchased 11 shares of 3M Company (MMM) for $141.63 per share.  After commission my per share cost basis came to $142.35.  Based on the current quarterly dividend of $0.855 these shares will provide $37.62 and carry a YOC of 2.40%.  I'll be looking to average down my cost basis if we happen to get a 5%+ pullback from the current price.

The initial yield is a bit low but the position will grow into a solid yield over time.  Shares of 3M aren't the cheapest available in the market with a 20.57 TTM P/E ratio but they are at a better 17.18 forward P/E.  The capitalization structure isn't ideal with a 39 debt to equity ratio but the company is very resilient and is a huge industrial conglomerate which allows them to ride out the economic storms better and usually come out stronger.  Heck, name a company and at a minimum they use 3M's tape and post it notes.  The payout ratio based off earnings and free cash flow are both about the 40% mark which leaves plenty of room for further increases especially when coupled with the potential growth.  Analysts expect full year sales growth of 4.20% for this year and 4.80% for FY 2015 and 11.97% earnings growth over the next 5 years.  If that growth does materialize then I'll be quite happy with what should be high single digit dividend growth at a minimum.

I've gone through a good chunk of my capital over the last few weeks and purchases will probably slow down some for my portfolio.  But I'm excited with the progress that's been made so far this year.  There's still quite a bit of capital ready to be put to work and adding in my large savings from each month that will continue to grow.  I'm still looking at adding some more Johnson & Johnson (JNJ) (Full Analysis Here), Deere (DE), YUM Brands (YUM) (Full Analysis Here), AT&T (T) as well as continue to dollar cost average into positions with my new Loyal3 account.

My forward 12-month dividends are now at $4,963.58 which is 99.27% of the way towards my goal of $5,000 by the end of the year.  I haven't increased my goal yet but expect to do so at my 3Q goals update after my next purchase or two.

Make sure you follow me on Twitter@JC_PIP to get quick updates about purchases that I'm making.

I've updated my Portfolio page to reflect theses additions.

What companies are on your shortlist to buy?  

15 comments:

  1. Congrats on the purchase PIP. Your next purchase should put you over the goal of $5000. Like I mentioned last time, I think you have to revise your goal :)

    DGJ

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    Replies
    1. DGJ,
      Im excited to raise that goal up. The next purchase should put me over my goal which is awesome since there's still 4 full months left in the year.

      Thanks for stopping by!

      Delete
  2. Thanks for sharing your recent purchase of MMM. A solid dividend payer all around with thousands of products used all over the world each day. MMM has been in my portfolio since 2007 and I plan to have it as a long, long, long term holding. As you saw my August purchases have been in the Canadian banking sector. I still think the best "relative" bargains can be found in financial and energy stocks. As you know, many consumer and industrial companies trade at historic high valuations.

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    Replies
    1. DivHut,

      I wish I had started my MMM position back in 2010/11 like I almost did, but I kept holding out for another $1 cheaper share price or something really stupid like that in hindsight. 3M will be a great long term holding and I like their exposure to just about every industry imaginable. I'm pretty overweight the energy sector so I'm trying to keep from adding too much there but I wouldn't mind a bit more financial exposure. I really need to take a look at the Canadian banks or some of the smaller regional US banks. Either way I want some more conservative financial exposure.

      Thanks for stopping by!

      Delete
  3. PIP,
    I recently purchased 25 shares of MMM for $146 per share. I would love to add more shares if the price drops. It's one of those companies that I think you just accumulate shares in with the intention of holding them forever.
    Good luck,
    Keith

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    Replies
    1. KeithX,

      I'm kicking myself for not buying some a few years back. Live and learn. The key is to identify the great companies and the valuations will generally work themselves out in the long run. I'm hoping to continue to add to this one for a long time and have this one continue to work its magic for me.

      Thanks for stopping by!

      Delete
  4. Hey PIP,
    Very nice buy here with MMM. This is one of the hold onto forever stocks. I use their products all the time for hanging pictures and also taping packages. I look forward to seeing your next buy. Thanks for sharing!

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    Replies
    1. Mongrel,

      Completely agree and the bad thing is that I recognized that a few years back but didn't buy. Big mistake. My wife and I actually just went and bought some command strip hooks from the store yesterday for her classroom. So yeah, we use their products too.

      Thanks for stopping by!

      Delete
  5. JC,

    I love this company and this was a great long term buy. BIG congrats on a killer month so far in getting all the cash invested. It's really showing in your forward dividends.....wow! You're already well ahead of where you thought you'd finish the year. Now keep firing!

    Best,
    Ryan

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    Replies
    1. Ryan,

      Yeah I had a huge pile and I'm glad to get a lot of it working for me instead of just building up. The move in forward dividends has been awesome and I expect some big things the rest of this year.

      Thanks for stopping by!

      Delete
  6. I love Minnesota Mining & Manufacturing, now known as 3M. Support the homestate. Also, I think it's a great investment. They are extremely diversified and spend a fair amount on R&D which is why I like them.

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    1. WE,

      Absolutely love this company and their reach into just about every industry imaginable. It might hurt the growth prospects because the company is so huge but I don't think it'll be an issue. I just wish I had started building this position years ago.

      Thanks for stopping by!

      Delete
  7. PIP - Thanks for sharing your recent purchase of MMM. It is definitely one of the companies on our watch list. Great long term hold and we would love to own some shares one day but will likely be on the sidelines for now until the price drops a bit.

    Best Wishes! AFFJ

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    Replies
    1. AFFJ,

      MMM isn't cheap but it's at a decent long term valuation. I'll definitely be looking to add more if the price dips. Really like this company and should have bought some about 40% again. That was a mistake.

      Thanks for stopping by!

      Delete
  8. MMM has been on my watchlist for a while now but I keep end up buying other stocks. I'll continue monitor MMM and possibly initiate a position in the near future.

    ReplyDelete