One Piece At A Time | Week Ended 1/3/2020
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 investing, 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 and vise versa.
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 $807.66 and boosted my forward dividends by $25.29. That's an average yield of 3.13% across all of the purchases.
For my FI Portfolio I made 3 purchases at an average yield of 3.58%. The lone purchases in my Rollover IRA and Roth IRA carry yields on cost of 2.46% and 4.06%, respectively.
I continue to look at adding more shares of Altria because I believe that Mr. Market is severely discounting the business right now. Based on analyst EPS estimate, shares are trading at P/E's of 11.8x and 11.2x which seems crazy. Dividend yield theory suggests >50% upside potential too.
The only "bad" valuations were Pepsico (PEP) and Paychex (PAYX). Pepsico looks expensive based on P/E ratios, but was purchased right around fair value based on dividend yield theory.
Paychex is in a similar boat but does offer better long-term growth potential. I do expect Paychex to pause their dividend growth whenever the next recession comes, but as long as they keep churning out 10% dividend growth in the good years and maintain in the bad I'll be a very happy owner.
My FI Portfolio's forward 12-month dividends increased to $7,834.16 with my FolioFirst dividends at $101.20 My Roth IRA's forward dividends remain at $649.67 while my Rollover IRA's dividends are $2,363.97. My taxable accounts can expect to produce $7,935.36 over the next year with all accounts providing $10,949.00.
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?