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?