Closing out the April month on a high note! I have deployed more capital into a dividend aristocrat, as the stock price was falling down, a dividend increase was coming up and the timing was too tempting for me to sit on the sidelines. This marks the 5th individual stock purchase this year and the second in April alone. Feels great being in the driver’s seat, in my own lane on the highway to financial freedom! Come check out the purchase of W. W. Grainger, Inc. (GWW)!
W W Grainger, Inc. (GWW) Stock Purchase
From Google Finance, “W.W. Grainger, Inc. (Grainger) is a distributor of maintenance, repair and operating (MRO) supplies and other related products and services. The Company offers its products and services to businesses and institutions in the United States and Canada, with presence also in Europe, Asia and Latin America. The Company operates through two segments, which include the United States and Canada. The Company’s business support functions provide coordination and guidance in the areas of accounting and finance, business development, communications and investor relations, compensation and benefits, information systems, health and safety, global supply chain functions, human resources, risk management, internal audit, legal, real estate, security, tax and treasury. The Company’s other businesses also include Zoro Tools, Inc. (Zoro), the single channel online business in the United States, MonotaRO Co. (MonotaRO) in Japan, and operations in Europe, Asia and Latin America.”
See below for the metrics and reasons for purchase!
1.) Dividend Yield: At the time of purchase, their dividend was $1.22 per quarter or $4.88 per year at a price point of $193.78, this was a yield of 2.52%, greater than the industry average and S&P 500. Further, as this was a very well-timed purchase, they increased their dividend the next day by 5%. The total dividend is now $5.12 per year or 2.64% yield! Loving this all the way.
2.) Dividend Growth: Can we talk aristocrat status? Can we, though, truthfully? Yes, this company has increased dividends for over 45+ years! Right up there with JNJ & PG, two foundation dividend stocks for your portfolio. The three year average, though, is getting tighter at 6% and the 5 year average growth rate is at 10%, not bad.
3.) Price to Earnings Ratio: With analysts expecting $11.60 in earnings per share this year, this computed to a P/E ratio of 16.71. This isn’t too bad and is in line with what is included in our Dividend Diplomat Stock Screener! To perform this math – take the share price dividend by the earnings per share of $11.60. Further, the P/E ratio is less than the overall market, which is currently very hard to find.
4.) Payout Ratio: Additionally, their payout ratio, based on a $5.12 dividend, as we will use the latest dividend we have knowledge of – is right around 44%, right smack in that sweet spot of 40-60%. I like this sweet spot as it shows they want to reinvest earnings in the company and deliver other earnings directly to shareholders. It’s a similar “I may be seasoned, but I still like to party” type of deal. Excited about these results here.
5.) Performance & 5-year Yield Average: I would also like to point out Grainger’s yield of 2.64% is greater than their 5 year yield average by approximately 80+ basis points, showing further signs of undervaluation! Their 5 year yield average per dividendinvestor.com showed 1.80%.
See my trade screen shot below:
I purchased $1,350 worth at $193.78 per share for a total of 6.9463 shares, with a $3.95 trading fee. This added $35.57 to my forward dividend income and may not be the last time I pick up this type of entity! In fact, I will, within the next two Tuesdays, purchase more shares if they stay at or below this share price. Reason being – their ex-dividend date is the 19th of April and I am trying to make better use of my idle cash by potentially paying more down on my vehicle loan.
GWW Stock purchase summary & Conclusion
This is a new position in my portfolio within the industrial supply industry and will be producing a forward income of $8.89 per quarter, with another dividend aristocrat under the belt. This was a well-timed trigger, as I purchased the company on Tuesday and Wednesday, the 26th, they increased their dividend 5%. Another $1,350 deployed, dividend income added, an aristocrat feather has been placed in the cap… all leading to another step toward my goals set for 2017.
What do you guys think? Are you concerned Grainger (GWW) has competition from Amazon (AMZN)? Do you think there could have better uses from my idle cash? Better uses, such as – paying down my mortgage, walloping more towards my auto loan that I’m already paying down in a haste or something else? Would love to hear the feedback! Hope you enjoyed learning about a new aristocrat and talk soon. Happy investing everyone!
-Lanny