Freedom Buy 2019
Purchases for my FI Portfolio have been few and far between the last few years. That's not for lack of opportunities or desire rather it had to do with our lives being on a roller coaster. However, there's a light at the end of the tunnel as our main goal for this year is to get rid of all non-mortgage debt and then refocus our energy towards building up the portfolio.
We aren't contributing fresh capital to our investments just yet as we're focused on getting rid of our non-mortgage debt. *Should be gone before the end of the year!* However, that doesn't mean that we're not able to make new purchases thanks to the dividends that keep rolling in from our other positions.
One of my goals for my FI Portfolio is to build up the positions rather than build out the positions. Essentially I want to get more exposure to the companies that I own instead of many small positions that make it hard to be motivated to monitor the company. With the dividend growth strategy I still think it's fine since the bulk of the work should be done upfront; however, why invest more capital into your 20th or 30th best idea if one of the top 10 is attractively valued?
After making some sales in December and combining that with cash dividends that had been received I was looking forward to getting some of that cash working for me once again.
On January 16th I added to my position in Altria Group (MO). I purchased 25 shares at $47.18 per share. The total cost basis, including commissions, came to $1,184.45 or $47.38 per share.
Altria is a Dividend Champion with 49 consecutive years of dividend increases. Based on the current quarterly dividend payment of $0.80 per share my YOC for this lot is 6.75% and I can expect to receive $80 in dividends over the next year.
I now own 43.95 shares of Altria at an average cost of $53.91 per share. The YOC for my Altria position increased to 5.94%.
Due to this purchase my FI Portfolio's forward 12-month dividends are $6,594.92.
As a dividend growth investor any potential investment must Jerry Maguire me, i.e. "SHOW ME THE MONEEEEEEYYYY!!!!". I judge that based on a company's history of both paying and growing dividends to shareholders. As I mentioned earlier, Altria has increased dividend payments for 49 consecutive years.
I like to examine the dividend growth rates over varying time periods. Since many businesses see their operations ebb and flow this smooths out the dividend growth and can give an idea of how things could look in the future across the entirety of a business cycle.
The 1-, 3- and 5-year rolling dividend growth rates can be found in the chart below.
Altria's share price has been beat up since late October and is currently down over 30% since October 30th. Shares are currently valued around 11.3x FY 2018's estimated earnings and 10.5x FY 2019's estimates. That's an insanely cheap valuation for a business that's been steady as she goes for over half a century. The yield is now over 7% so growth isn't necessarily required to make this a decent investment over time.
I was originally targeting a 7% yield on the purchase of my second lot of Altria shares, but I just didn't want to risk the share price recovering. Don't let perfect be the enemy of good. So I went ahead and pulled the trigger on the second slug. And as it usually happens the share price quickly dipped down to that 7% yield level. I'm not worried though and am targeting a third slug of shares somewhere between $40-42 if it gets there.
What do you think of my purchase of Altria? Did you pick up some shares recently one this big dip?