One Piece At A Time | Week Ended 11/8/19

Ooops...I did it again!  Since Fidelity, and just about every other broker, took their commissions down to $0 I've gone on a bit of a buying spree.  I've always been drawn to the dollar cost average approach, especially for high quality companies; however, the commission structure didn't allow me to pursue that strategy.

Now that commissions are zero I can finally implement that.  I'd still prefer to buy high quality businesses in bulk at cheap valuations, but those opportunities aren't too ripe at the moment.  So I've been focusing on building up my stakes one or two shares at a time.

In total I invested $907.00 and boosted my forward dividends by $19.37.  That's just a 2.14% yield to start off.  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.

With last week's purchases none of the valuations seem too out of whack to me when looking at more traditional valuation measures such as P/E ratios.  The more expensive ones, Paychex and Stryker are both growing strongly and should continue to do so.  

However, when looking at EV/EBITDA multiples Hershey and Becton, Dickinson are the only 2 that I feel are in the realm of fair value.  

I also like to use dividend yield theory which uses the 5-year average dividend yield as a proxy for the fair value.  Based on dividend yield theory I over paid for all of the purchases that I made, but Paychex, Hershey and Digital Realty Trust were all within the +/-10% range that I can consider fair value.  

Stryker and Becton, Dickinson & Company were 15% and 13% overvalued or roughly 5% and 3%, respectively, above the fair value range.

While the valuations overall weren't exceptional for the 5 companies that I added last week, I still believe that for the most part they were fair.  Considering we're still in the midst of a bull market that's about all you can ask for when seeking out quality companies.  

That being said all 3 companies are clearly high quality and I'm not concerned about any of them over the long term.  You can check out my full valuation analysis for each company on Seeking Alpha:

The Hershey Company (HSY)
Stryker Corporation (SYK)
Paychex (PAYX)




  

My FI Portfolio's forward 12-month dividends increased to $7,708.01 with my FolioFirst dividends at $101.09.  My Roth IRA's forward dividends remain at $619.71 while my Rollover IRA's dividends increased to $2,313.35.  My taxable accounts can expect to produce $7,809.10 over the next year with all accounts providing $10,742.16.

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?