Monday, August 4, 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.

Mr. Market was in a sour mood to close out July and had the worst weekly loss in two years with the S&P 500 dropping 2.0% on July 31st alone.  That's just fine by me though as I had plenty of capital that I was ready and willing to put to work.  As a long term investor drops in prices don't concern me as long as the fundamentals of the company remain in tact.  So I took advantage of the dip to close out the month and added to three positions.

First I bought 30 shares of Verizon (VZ) at $50.47.  After commission my per share cost basis $50.74 per share.  Based on the current quarterly dividend of $0.53 theses shares will provide $63.60 in dividends and carry a YOC of 4.18%.  This purchase increased my per share cost basis for my whole position in VZ by 6.80%.

I only had 13 shares of Verizon that I received from the Vodafone (VOD) sale that completed earlier this year.  I'd been looking to add to the position and was probably a bit early on this purchase but the beauty about overpaying slightly is that the companies can grow into the overvaluation.  The debt load for Verizon is much higher than I'd like due to the VOD buyout but the dividend is still well covered by both earnings and cash flow.  I expect management to continue to focus on paying down the debt levels so dividend growth might be a bit muted for the next few years.  But reducing the debt level will set the company up for better long term growth.

Early in the afternoon I noticed that General Mills (GIS) was in my buy zone as well.  I hadn't added to the position since initiating one back in November so it was good to add to a quality company like General Mills.  I purchased 30 shares of GIS at $50.5099 per share for a per share cost basis of $50.77 after commission.  Based on the current quarterly dividend of $0.41 these shares will provide $49.20 in annual dividends and carry a YOC of 3.23%.  I now own a total of 65.276 shares of GIS for a average cost basis of $50.06 which is an increase of 1.22% from before the purchase.

General Mills appears to be fairly cheap given the levels of the overall market.  The TTM P/E ratio is just 18.68 with a forward P/E ratio of 15.82.  With a 54% payout ratio the dividend is still well covered by earnings.  The great thing about General Mills is that whether the economy is in boom or bust mode we all need to eat and General Mills provides a lot of what Americans love to eat.

The last company that I purchased was Walmart (WMT) (Full Analysis Here).  I purchased 21 more shares of Walmart for $73.67 per share.  After commission my per share cost basis came to $74.05 per share.  Based on the current annual dividend of $0.48 per this lot will carry a YOC of 2.59% and provide $40.32 in annual dividends.  I now own a total of 63.415 shares at an average cost basis of $75.36 per share which is an 0.86% decrease from before this purchase.

Walmart continues to face a struggling retail environment but this company will do just fine in the long run.  Walmart is another company that is relatively cheap given the somewhat expensive levels of the overall market.  Shares are currently trading for a 15.18 TTM P/E ratio and a 13.06 forward P/E ratio.  The dividend is still well covered by earnings with just a 39% payout ratio.

I'm sure I was a bit early with these three purchases but I think all of them offered good relative value.  I was sitting on a bunch of cash that was ready to be invested and decided to make a move at what could just be the start of the pull back that a lot of investors, myself included, have been hoping for.  There's still plenty left in the tank and the companies that I'm looking at adding are Johnson & Johnson (JNJ) (Full Analysis Here), Deere (DE), YUM Brands (YUM) (Full Analysis Here) and ExxonMobil (XOM) as well as a few others.

My forward 12-month dividends are now at $4,814.58 which is 96.3% of the way towards my goal of $5,000 by the end of the year.  With my relatively large capital stock pile and further savings throughout the rest of the year I expect to pass my goal handily.  I haven't increased my goal yet but expect to do so at my 3Q goals update.  My FI Portfolio now has a YOC of 3.53% and a YOP of 3.64%.  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.

Did you take advantage of the dip to end the month and add any positions?  What companies are you looking to add to if the markets continue to decline?

18 comments:

  1. Nice work JC. I think it's safe to say you'll surpass your 2014 dividend goal handily. I think your purchase of General Mills is particularly spot on. I have a large position in the company, and will add again if it goes down much from here. I initiated my position in Aflac on Friday and look to add aggressively in the next few months. Here's hoping Mr Market gives us a genuine sell off! Have a great week
    -Bryan

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    Replies
    1. Bryan,

      Yep, the forward dividend goal is going to get surpassed but I'm not sure yet about the dividends received goal. That one will depend on how many new purchases are in time for the ex-divs although I'm more concerned about getting good value with each investment dollar. I'll be looking to add some more GIS as well if it continues lower. Love their product lineup. I added some AFL this week so it's great to see someone else on board as well.

      Thanks for stopping by!

      Delete
  2. WMT has a huge moat, GIS is well recognized and has a huge consumer base and brand base. GIS also looks great financially from the info above!

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    Replies
    1. WE,

      Lots to like about both of those companies. Of course that's why I bought them!

      Thanks for stopping by!

      Delete
  3. Great additions PIP, I was in the market buying WMT, MCD, YUM, K and RIG. I am looking forward to a further decline in hopes to picking up some of my favs.
    -MrStockFox

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    Replies
    1. Mr. Stock Fox,

      I'll be holding off on MCD because it's still my largest position despite not adding to it in almost 2 years. I'm looking at YUM as well and will probably be adding some soon although I'm hoping for a bit lower price.

      Thanks for stopping by!

      Delete
  4. JC,

    Looks like you're gonna smash your $5k dividend income goal. Awesome!

    Great buys here. You've got a nice blend of yield, and you spread these purchases out across multiple industries. Good stuff!

    Keep it up.

    Best regards.

    ReplyDelete
    Replies
    1. DM,

      I imagine I should crush that goal and probably pass it sometime this month. With the purchases I made at the end of July and then the 2 purchases I made this week I'm now up to $4,924 in forward dividends and we still have just under 5 months to go in the year. I think it's time to raise that goal up a bit.

      Thanks for stopping by!

      Delete
  5. Great purchases PIP. I have a very small position in GIS, but WMT and VZ are great buys too. I am looking to buy KO/PEP/GSK sometime in August. Hopefully the market corrects a bit to get these at better valuations.

    DGJ

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    Replies
    1. DGJ,

      I'd been looking to add to my GIS position since I initiated it and getting in close to my previous cost basis was nice. I like KO and PEP and would love to add to those soon as well although I'm not sure about GSK. I need to do more research on them first. On the surface there appears to be a lot to like about GSK though.

      Thanks for stopping by!

      Delete
  6. PIP - Nice buys! You picked up some nice companies are decent values. We also picked up quite a few shares last recently. Hope Mr. Market continues to offer more opportunities to put more money to good use this week! :) AFFJ

    ReplyDelete
    Replies
    1. AFFJ,

      I don't think any of these purchases were steals but I'll gladly take some decent value out of some stable companies. Especially with as much cash as I had on the sidelines. I'd love to see a few more opportunities present themselves. There's 3-4 more positions that I'm wanting to add to although with the rebound today I don't expect that to happen this week.

      Thanks for stopping by!

      Delete
  7. Glad u giving Walmart some love as not many are. Great long term potential.

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    1. A-G,

      I really like WMT for the long term and like the smaller stores they're building in the bigger cities and their growing presence with online retail.

      Thanks for stopping by!

      Delete
  8. Isn't it ironic though how difficult it is to just "sit on a bunch of cash"?

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    Replies
    1. I honestly think that's one of the hardest things to do. Especially since as the cash pile grows the temptation to use it for something else grows.

      Delete
  9. Hi PIP,

    I have a question, where can i find the following historical metrics per year: High P/E, Low P/E, Low Yield, High Yield, Average P/E, Average Yield.

    Keep up the great work! Thank you,

    ReplyDelete
    Replies
    1. Anon,

      My stock analysis spreadsheet calculates the high and low P/E and yields. You can get the 5 year average yield from Yahoo!Finance at the key statistics page or go to Morningstar and go to the Valuation tab for the company you're interested in and get the 5 year avg P/E, yield, P/sale, P/cash flow and I think P/Book all for free. I'd also check out the key ratios page at Morningstar because that might have some information too and GuruFocus has a bunch of free information although I think that information might require a membership.

      Hope that helps!

      Thanks for stopping by!

      Delete