One Piece At A Time | Week Ended 11/15/19
My investment strategy has changed a bit now my that my brokerage firm, as well as most others out there, have moved to ZERO commissions. I had typically tried to purchase in dollar amounts that put commissions at 1.0% or less. I've always wanted to implement, at least partially, the dollar cost average method but commissions prohibited me from pursing that. However, now it's very feasible and reasonable to do so.
My focus has always been on quality businesses, but the problem was typically buying shares at good valuations, often I had to settle for good enough. The longer that I've been invested, the more that I've come to realize just how powerful hitching your investment wagon to great companies can be. That's why I've shifted my focus to dollar cost averaging to build up my positions; because the larger your purchases the more attention that needs to be paid to valuation.
I'd still prefer to do larger scale purchases, but the problem is that quality businesses don't often trade at good valuations. In general valuations aren't exactly cheap; so I'll just keep building up my stakes in great businesses.
In total I invested $1,022.10 and boosted my forward dividends by $23.28. That's an average yield of 2.28% across all of the purchases. Similar to many of the purchases that I've gone after with the DCA approach the yield is lower, but it offers much better future growth prospects. And of course there's the fact that some of the bread and butter dividend growth companies out there are trading at similar valuations to their higher growth counterparts.
The valuations here look decent, but nothing to get too excited about. For the most part the purchases were all made in what I deem to be the fair value range for each business. Unfortunately, most of those were on the high end of fair value rather than the low end.
Nothing really stands out from a valuation standpoint. The "worst" was Visa which is growing, and should continue to do so, by leaps and bounds. Plus the business model, as currently constructed, is incredibly profitable.
The best value purchase by dividend yield theory was Johnson & Johnson where dividend yield theory suggests a fair value price of $142. My purchase at $130.25 was ~9% lower than the fair price.
Becton, Dickinson & Company was the worst by dividend yield theory which suggests a fair price of $214. Part of that is likely due to BDX announcing a dividend increase sometime over the next week. I expect a smaller raise than their historical growth rate with the raise coming in around 5% as management follows through on their debt reduction plans.
My FI Portfolio's forward 12-month dividends increased to $7,731.37 with my FolioFirst dividends at $101.13. My Roth IRA's forward dividends remain at $626.73 while my Rollover IRA's dividends increased to $2,327.16. My taxable accounts can expect to produce $7,832.50 over the next year with all accounts providing $10,786.39.
Are you doing more dollar cost averaging now that most every brokerage firm is at $0 commissions? What do you think of my purchases from last week?