Sunday, May 3, 2015

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.

I've had to slow down the pace of my investments over the last month because there's a whole lot in flux right now with our finances.  Starting in May I should be covering all of our expenses since my wife resigned early this year to be with our son while he's in the hospital.  So I've been trying to conserve more capital to help with the transition.  However, since I had sold some shares of HAL, my employer, I had some capital to invest back into some excellent dividend growth companies.  I mentioned in my dividend growth checkup that I wanted to increase my exposure to the health care industry.  I'm very bullish on the sector over the long term as the global population ages and also as a larger percentage of the emerging/developing markets' population moves to the middle class and demands better health care service.  That's two big tailwinds for the industry.

Earlier last week I initiated a new position in Becton, Dickinson & Company (BDX)(Full Analysis Here) but to close out the month I added to an existing holding in one of the great dividend growth companies, Johnson & Johnson (JNJ).  On April 30th I purchased 13 shares of JNJ for $99.26 per share.  After commission my per share cost basis came to $99.87 per share.  Based on the recently increased dividend of $0.75 per quarter this lot of shares will provide $39.00 in annual dividends and carry a 3.00% YOC.

I previously owned 50.213 shares of this dividend champion at an average cost basis of $96.86.  With the new purchase, I now own 63.213 shares at an average cost basis of $97.48.  I normally try to average down my cost basis but that's hard to do with excellent companies like Johnson & Johnson that continue to grow and almost always trade for a premium.

Johnson & Johnson isn't cheap at current prices but I'll gladly pay up for quality at a reasonable valuation.  JNJ has a 52 year streak of raising the dividend.  The TTM P/E ratio is 17.6 and the forward P/E ratio is 15.6.  Doing a simple Gordon Growth Model calculation with my cost basis of $99.87 and current annual dividend of $3.00 JNJ would need to raise the dividend by just 6.79% to provide a 10% annualized return.  I'm working on a more in-depth analysis of Johnson & Johnson and hope to have it up on Seeking Alpha some time this week.

My forward 12-month dividends are up to $5,687.10.  Total taxable accounts', Loyal3 and FI Portfolio, forward dividends are at $5,743.08.

I've updated my Portfolio page to reflect this addition.

10 comments:

  1. I'll have to take a look at that one JC, I'm not familiar with BDX. I put in a limit buy order on JNJ this weekend also. Relative to the broader US equities space, I think JNJ has a solid valuation. Have a great week!
    -Bryan

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    1. Bryan,

      BDX is great in the health care space. It's not cheap here but I wanted to own a piece of the company. I'd recommend looking into it for whenever the markets go haywire again. JNJ's pretty solid compared to the markets as a whole. I wouldn't call their shares cheap but I'll gladly pay fair value for a company this solid.

      Thanks for stopping by!

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  2. Solid buy. I was looking into that company last year and told myself just wait for it to go down. Then the next month it went up and again and again. Sometimes we have to buy high or completely miss the train.

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  3. Great buy, looks like the markets helped you get an even better price than I did with my latest purchase. I also have been averaging up since my first purchase in the $60's. I had been waiting for the stock to take a break and it just never did. It may not be cheap here but it's at the very least fair valued under $100. If I didn't buy here I may be looking back a year from now when it's even higher saying to myself how I should have bought.

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  4. I really like BDX; it's one of 3 healthcare companies still on my watchlist, and one of 2 must-buy stocks. And of course, you can never go wrong with JNJ!

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  5. Solid company. The need for their products is only going to grow.

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  6. JC,

    My largest position for a reason. One of the greatest companies on the planet.

    Enjoy that boost in your dividend income. Meanwhile, I fully expect JNJ to keep handing out those dividend raises year in and out.

    Cheers!

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  7. Great buy JC. Can't go wrong with a solid company such as this. Life's full of ups and downs and surprises. Investing in a high quality company like JNJ is sweet and simple. Keep it up bud. Health care sector and consumer staples are core holdings for life. Take care and cheers to us bud.

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  8. Nice buy, JC. JNJ has the best looking dividend growth chart of all... and for a reason. They have a great track record of raising dividends over many years. Enjoy the increased dividends!

    Cheers
    FerdiS

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  9. JNJ seems fair valued at current prices (unless price rose a lot in last days) and you get some high quality with it!

    Great moves!

    Mike

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