Thursday, July 23, 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.

On Tuesday, July 21st I initiated a new position.  I know my plan is to try and build up positions rather than continue adding new ones, but this is an excellent company in a stable sector trading at fair value that I've been after for a while now.  I purchased 11 shares of The Hershey Company (HSY) (Full Analysis Here) for $90.57 each.  After commission my per share cost basis comes to $91.02.  Based on the current quarterly dividend of $0.535, this position will provide $23.54 in annual dividends and carry a YOC of 2.35%.  I hope to get a chance to average down my cost basis if the share price falls from here.

Hershey has a dominant 45% of the domestic chocolate/confectionery market which is truly amazing.  The dividend growth streak is relatively short at just 5 years.  That has them off the radar of dividend growth investors because it seems like a company that should have a long streak.  But that doesn't mean this isn't an excellent company.  Market leader in their specialty.  Dominant market share.  Fairly inelastic demand for their product.  Able to raise prices and still grow volumes.  And trading around fair value.  I recently did a full stock analysis on The Hershey Company over at Seeking Alpha that you can check out for more information on this excellent company and the current valuation.

Currently Hershey is pretty much a US only play which means there's around 7 billion as of yet untapped consumers.  Hershey has been trying to expand internationally which would provide tremendous growth for them going forward as their current market is able to provide 5-9% annual growth year after year.  Plus Hershey is due for a dividend increase based on when they've normally been increasing it the past few years and just a 7% increase will boost the yield up to 2.50%.

If you happened to notice this purchase was smaller than my usual purchase size.  That's because I recently started a second brokerage account with TradeKing.  The commissions at TradeKing are only $4.95 (Affiliate link) for stock purchases which means I can invest smaller dollar amounts to keep at my target "expense ratio" of 0.50% or less.  Going forward I will be including all purchases within either of my portfolio's into just one portfolio on my FI Portfolio page.

My FI Portfolio's forward 12-month dividends increased to $6,046.62.  Including the $56.62 from my Loyal3 portfolio brings my total taxable accounts forward dividends to $6,103.24.

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 The Hershey Company?

Image courtesy of Stuart Miles on FreeDigitalPhotos.net.

11 comments:

  1. Nice purchase, JC. You make a compelling case for HSY in your stock analysis...I will definitely need to consider this company.

    Congrats on the purchase
    R2R

    ReplyDelete
    Replies
    1. R2R,

      HSY is an excellent company. Not necessarily a fast grower but a steady 5-9% per year works just fine with me. Especially since they can grow volume and increase prices. That's always a good combination.

      Thanks for stopping by!

      Delete
  2. Congrats JC!

    I think the international aspect is key for them. I know that Europe has a lot of strong competition but Hershey can compete as far as taste and price point.

    ReplyDelete
    Replies
    1. Adam,

      I have to agree. I think the international space is what could provide big growth for them going forward but there is a lot more competition there. Plus the chocolate they make in the US is different than the chocolate that's made in Europe so the texture/taste is different. But if HSY can sacrifice a bit on their margin to try and gain share outside of the US.

      Thanks for stopping by!

      Delete
  3. I think HSY might have just made it onto my watch list. I was always a little underwhelmed by the yield, but it's competitive advantage and strong brand make it too compelling to ignore any longer. I think Dividend Mantra just bought HSY for the first time a couple weeks back, as well.

    And on an unrelated note, your blogroll on the right is my first stop each morning. Thanks for keeping that on there.

    Eric @ Retire29

    ReplyDelete
    Replies
    1. Eric,

      The yield isn't anything fantastic but it will continue to grow over time. The brand name here in the US is strong and I'd love to see a real push into international markets. The Chinese expansion isn't going great just yet but the great this is the strength of the US operations affords them time to figure out the international game plan and strategy.

      It's funny I keep thinking of taking it off because it takes up a lot of space on the sidebar but it's so useful that I never do. Glad that you enjoy it as well.

      Thanks for stopping by!

      Delete
  4. Thanks for sharing JC. Love the company as it's on my buy list. I will get around to it after some more healthcare plays. Keep it up bud and let's keep hustling hard. Cheers.

    ReplyDelete
    Replies
    1. Hustler,

      I really want to add more healthcare and consumer staples to my portfolio. Two great sectors to be in, but unfortunately both sectors are generally a bit expensive. But you can find value from time to time. Just upset I missed the dip into the $87-88 range for HSY during the Grexit worries. Oh well, I'll add more share of this excellent company in the future.

      Thanks for stopping by!

      Delete
  5. Nice buy here, JC. The YoC is a little lower than I prefer, but dividend growth looks solid. Keep up the good work.

    I also have a TradeKing account. It's a great, easy-to-use online brokerage. I'm curious about your affiliate link -- is that a special kind of link? If so, how did you go about setting it up?

    ReplyDelete
    Replies
    1. Ferdi,

      The yield is typically a bit low with HSY which is about the only bad thing about HSY.

      I've seen better online and mobile platforms but TK does what it needs to do. And maybe I just haven't messed around with it as much.

      Thanks for stopping by!

      Delete
  6. Thanks for sharing your recent buy. Interesting pick these days with many awesome industrial names going on sale. Nothing wrong with HSY as it is a great long term dividend payer and solid company all around. I just think that the Canadian banks, energy and many industrial plays like EMR, MMM and CAT are starting to look even more attractive.

    ReplyDelete