Recent Buy (1) - Roth IRA
I finally was able to make a purchase in my Roth IRA. The last purchase that I had made was all the way back in February 2017 when I purchased some shares of McCormick & Company (MKC). Since my Roth IRA is relatively small at just ~$17k market value I just reinvest all dividends back as they come in. Especially since I'm not regularly able to put new capital each year into my Roth IRA.
One of my goals for my investments is to build up the positions rather than build out the number of 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 trimming some positions in my Roth IRA during March I got the opportunity last week to initiate a new position for my Roth IRA, although it's one that I already own in my taxable account.
On April 4th I purchased 18 shares of Walgreens Boots Alliance (WBA) at $54.37 per share. The total cost basis, including commissions, comes to $983.61 or $54.65 per share.
Walgreens Boots Alliance is a Dividend Champion with 43 consecutive years of dividend increases. Based on the most recent quarterly dividend of $0.44 the YOC for this position comes to 3.22% and I can expect to receive $31.68 in dividends over the next year prior to any raises or reinvestment.
Due to this purchase my Roth IRA's forward 12-month dividends increased to $412.93.
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, Archer Daniels Midland has increased dividend payments for 43 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-, 5- and 10-year rolling dividend growth rates can be found in the chart below.
Frankly the stock seems too cheap to ignore for a Dividend Champion with an absurdly low payout ratio. Dividend growth might be a bit slower while they work things out but I believe that the valuation is cheap enough that even a bad scenario for Walgreens will still generate solid returns.
I was going to go into a lot more detail here, but it's go time now. I just got the call from my wife saying that her water broke and here I am at work about 3 hours from the hospital. So I'll leave you with a chart regarding dividend yield theory and Walgreens Boots Alliance. So excuse me if there's any major typos or things that don't make sense because I expect to have more time to fully write this out.
For now it's time to go welcome a new member of our family!
What do you think of my purchase of Walgreens Boots Alliance?