Monday, June 1, 2015
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.
Since my last few purchases have been some higher yielding REITs, W.P. Carey and Omega Healthcare Investors, I felt more comfortable adding a lower yielding higher growth company to my portfolio to add a little bit more juice to my dividend growth. On May 22nd, I purchased 15 shares of Ross Stores, Inc. (ROST) for $101.50 per share. After commission my per share cost basis came to $102.03. Based on the current quarterly dividend rate of $0.235 my position in ROST will provide $14.10 in annual dividends and carry a YOC of 0.92%.
Unfortunately the day I made this purchase also saw the share price of ROST fall around 4%. Since initiating the position the share price has declined over 5% and I'll be looking for a chance to average down my cost basis sometime over the coming week should the price remain at current levels or drift lower. My original target entry price was around the mid-$90's for a starter position in ROST but became impatient and loosened my standards a bit. I still feel that my purchase price is solid for a long term hold but with the recent dip in the share price an average down is definitely a possibility. Another thing I really like about Ross Stores is that they should pick up market share during struggling economic times since they offer department store items at discounted prices. It's one of the few companies that should hold steady or even see growth during a recession.
I really like Ross Stores, Inc. (Full Analysis Here) over the long term. Based on managements' expectations there's still plenty of room for store count growth domestically. There's also the possibility that they could follow in TJX Companies (Full Analysis Here) footsteps and expand internationally as well once their domestic operations are further developed. Management has shown a solid growth plan with conservatively opening up stores in new markets and then developing the market fully before moving onto new markets. They also use very little debt to finance the growth preferring to fund growth through cash flow. Even better is that the dividend is well covered by both earnings per share and free cash flow and with forecast earnings growth over 10% per year there should still be excellent dividend growth going forward.
My FI Portfolio's forward 12-month dividends increased to $5,839.58. Including the $55.98 from my Loyal3 portfolio brings my total taxable accounts forward dividends to $5,895.56.
Image courtesy of Stuart Miles on FreeDigitalPhotos.net.