Monday, June 29, 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.
In my last post I listed some companies that were on my radar to purchase soon. Well, Thursday I did just that by adding to my recently initiated position in Union Pacific (UNP) (Full Analysis Here). I purchased 11 more shares of UNP for $97.04 per share. After commission my per share cost basis came to $97.49 per share. Based on the current quarterly dividend of $0.55 this lot will provide $24.20 in annual dividends and carry a YOC of 2.26%.
My previous purchase of UNP was at the end of May and since then the share price has drifted lower. My original cost basis on this position was at $101.81 per and this addition was purchased for 4.24% lower. I typically target a 5% decline before I average down on my cost basis but I feel that Union Pacific is a great long term holding and I wanted to build up my position more while I have the opportunity. The investment thesis for UNP hasn't changed over the last month. It's just the share price that has drifted lower and if I liked the company at $101.20 per share I should like them even more at $97.04.
A quick valuation of Union Pacific using the Gordon Growth Model with a $2.20 annual dividend, 10% discount rate, and $97.49 current price means that UNP would need to grow the dividend at 7.57% per year to earn a 10% annualized return. Since earnings are forecast to grow at 13.5% per year for the next 5 years, UNP shares appear undervalued here. The TTM P/E ratio is at 16.49 with a forward P/E ratio, based of FY 2016 estimates, of 14.13. I performed a full analysis of Union Pacific last month which can be found here.
Also, on Friday of last week I used $10 of accumulated dividends in my Loyal3 portfolio to purchase 0.0871 shares of Disney for $114.81 per share. Based on the current semi-annual dividend of $0.66 this lot will provide $0.11 in forward annual dividends and carry a YOC of 1.15%. It's not much but every bit helps, right?
My FI Portfolio's forward 12-month dividends increased to $5,967.83. Including the $56.92 from my Loyal3 portfolio brings my total taxable accounts forward dividends to $6,024.75. That's over $500 per month on average that I can expect to receive for doing nothing other than having the foresight to invest in excellent companies that pay and grow their dividends.
Other companies that I'm looking at potentially adding to are Union Pacific again as well as T. Rowe Price, Phillip Morris, and potentially Chevron. I'd also like to add another financial company or two to my portfolio with insurance companies and a Canadian bank being in the mix as well.
What companies have you been buying? What companies are on your watch list for purchase? What do you think about the long term investment prospects of Union Pacific?
Image courtesy of Stuart Milest on FreeDigitalPhotos.net.