Monday, November 10, 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 Tuesday, November 4th I added to my position in BP (BP).  I first purchased shares of BP back in May 2013 so it's been a long time coming for me to add to my position.  The decline in the price of oil has been well documented as well as the subsequent fall in share prices of many of the oil producers, BP included.  So I took advantage of the opportunity to add to my position by purchasing 35 shares at $41.64 per share.  After commission my per share cost basis came to $41.87.  Based on the recently increased quarterly dividend of $0.60, these shares will carry a YOC of 5.73% and provide $84.00 in annual dividends before further increases or reinvestment.  Shares of BP are trading relatively cheaply at just a 10.2 forward P/E ratio.  The good news is that these shares should also contribute to this years dividends since the ex-div date was 11/5 and I purchased a day beforehand.

As I mentioned earlier, I originally purchased 40 shares of BP in May 2013.  This second lot of shares was purchased for a 5.0% discount to my original cost basis and lowered the cost basis for my position by 2.3%.  I would have liked to have truly doubled down on my BP position but investable capital is a bit tighter than normal and I wanted to be able to make 3 purchases with my limited capital.  This purchase increases my YOC for my BP position from 5.44% to 5.57%.

Morningstar's fair value estimate is $56.00 and Yahoo!Finance's 1 year target estimate is $50.03.  A quick Gordon Growth Model analysis using the current annual dividend of $2.40, a long term dividend growth rate of 5%, and a discount rate of 10% gives a fair value price of $48.00.  So all signs point to a good valuation for shares of BP once they get past the last of the legal hurdles from the oil spill.

My FI Portolio's forward 12-month dividends are now at $5,311.52 and adding in the $35.46 from my new Loyal3 Portfolio bring my total to $5,346.99.  That's 97.22% of the way towards my revised goal of $5,500 by the end of the year.

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 this purchase.

Are you buying after the recovery in the markets or sitting on the sidelines?  Which companies are you thinking of adding to your arsenal?

7 comments:

  1. Nice buy. I think you bought at a good time (oil down + legal issues) at a good price. BP's 2014 dividend increase was over 5% which is great for a stock yielding over 5.5%. Good move!

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  2. I love positive reinforcement! I picked up shares of BP and CVX today. Gotta love the beat down oil stocks.

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  3. Nice pickup JC. It always feels good to get a little cash moving in the portfolio! I've already made three purchases this month, and will likely make a couple more if things swing my way. Of course, if prices were still what they were a month ago... :)

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  4. Oil is the theme of the day. I have a feeling we'll all look back at these days down the road and wish we had bought up more energy names. BP, TOT, COP, XOM, CVX, etc. etc. Good call with BP. I think it's a great and timely purchase. Just sit back and collect those dividends while you wait for the price to appreciate. Thanks for sharing.

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  5. Nice purchase JC. I initiated position in BP few weeks back and the price has dropped by about 10% since then. Might add some more if the price continues to be down. I also added COP last week as oil stocks continue to face pressure.

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  6. Nice work on this purchase! I'm right here with you and added more today as well. I bought it much in August, so this was a no-brainer for me :)

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  7. Good buy! I actually picked up BP yesterday at 41.25 and may add some more soon. It's down even more today, so it's hard not to add to my small position.

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