Since I am have free trades for a few more months, I was able to make a series of small purchases over the last several weeks. With Mr. Market being moody, there were plenty of positions that I wanted to add to or begin establishing. There is one new name on this list and I was able to add this company three times during this time frame! With the market sliding, I turned my attention to Dividend Aristocrats. In times like these, I like to try to add to those companies that have demonstrated their ability to pay their dividend through many economic cycles. Especially when the Aristocrats are trading at a discount.
Summary of More October Stock Purchases
I’ll provide a quick summary of each of the purchases in this section and then discuss the purchases in greater detail in the subsequent section. Here are my October stock purchases:
- Stock Purchase #1 – Illinois Tool Works (ITW) – 4 shares @ $127.00 /share on 10/19/18 – $508.00 Cost basis added – $16.00 in annual dividend income added.
- Stock Purchase #2 – Exxon Mobil (XOM) – 10 shares @ $78.96 on 10/23/18 – $796.60 Cost basis added to my wife’s Roth IRA – $32.80 in annual dividend income added.
- Stock Purchase #3 – Exxon Mobil (XOM) – 6 shares @ $79.02/share on 10/23/18 – $474.17 Cost basis added to our regular investment account – $19.68 in annual dividend income added
- Stock Purchase #4 – Exxon Mobil (XOM) – 4 shares @ $77.22/share on 10/24/18 – $310.28 Cost basis added to our regular investment account – $13.12 in annual dividend income added.
- Stock Purchase #5 – AT&T (T) – 10 shares @ $29.97/share on 10/25/18 – $297.70 Cost Basis added to my wife’s Roth IRA Account. $20 in annual dividend income added.
- Stock Purchase #6 – Leggett & Platt (LEG) – 13 shares @ $35.78/share on 10/26/18 – $465.14 cost basis added. $19.76 in annual dividend income added.
In total, I purchased $2,851.89 of stock during this time frame, adding $121.36 in annual dividend income! This equates to a 4.25% yield on cost. One fun thing is that three of the companies pay in an “off” month. It is always nice to add to positions that will pay in either the first or second month of the quarter.
Detailed Review of the four companies purchased
Wow. I was very fortunate to make so many small purchases over the last couple of weeks. I mentioned I would provide a little more detail about WHY I purchased shares in these four companies during this timeframe. Using the Dividend Diplomats Stock Screener and other metrics/considerations, I was able to arrive at a purchase decision for the following reasons. For all metrics cited below, I will use the stock price on the date of purchase and the average analyst earnings per Yahoo! Finance.
Illinois Tool Works (ITW) – This has been one of my favorite companies to purchase this year. I have added to my ITW position several times during the year when the company’s stock price was in the $130 range. The Dividend Aristocrat checked all the boxes of our stock screener in that price range and they announced an insane 28% dividend increase in August. After the increase, their payout ratio was still below our 60% threshold. Well, imagine how I felt when the company’s stock price fell into the $120s? You knew I had to add to my portfolio in some capacity. At my purchase price, the company’s P/E ratio was 16.7X. I will look to add more if the company’s stock price continues to stay in the $120s or even gets back to the low $120/share range, like it hit at one point during the crazy month.
Exxon Mobil (XOM) – This may have been a surprise for some of you. I have not considered or discussed purchasing Exxon for years on this blog. So what gives? In a downturn like this, I always have my sights on a trying to pick up a Dividend Aristocrat that is a powerhouse in their industry at a discount. To me, Exxon could not have checked that box any better. Once their price dipped below $80/share, I was instantly interested. They passed our stock screener. XOM’s P/E Ratio was 16.90 (Assuming an average purchase price of ~$78.50/share), their payout ratio was 70%, and the company has demonstrated their ability to increase their dividend annually. XOM’s dividend payout ratio slighty exceeded our 60% threshold. However, in my article explaining “What the Payout Ratio is,” I mentioned there are certain industries where companies typically carry higher payout ratios. The oil industry is one of those. Thus, I am less concerned with the higher payout ratio. Once the price fell, I was all in.
AT&T (T) – I have owned AT&T for years and it is a company that I will continue to add to over the years. My wife and I receive over $400 annually from this company, so clearly it is a favorite of ours (and many in the community). Much like the oil industry, the telecom giants will typically maintain a high payout ratio. Interestingly though, their payout ratio is only 55% assuming an average annual EPS of $3.58/share. The company’s P/E Ratio was well below 10X and the company is a Dividend Aristocrat. Again, another company that checks all the boxes of our dividend stock screener. I didn’t have a ton of capital on hand, so I thought this was a great company to purchase with limited funds and still receive a nice chunk of dividend income.
Leggett & Platt Inc. (LEG) – Last, but not least, LEG. I initiated a massive position back in the second quarter. Suddenly though, with the impact of tariffs and the broader economic environment, LEG’s share price fell through the floor. I was starting at an unrealized loss. Naturally, I had to run LEG through our stock screener and see if it made sense to add to my position. On top of it, the company’s earnings release wasn’t that bad in my opinion. The company’s sales growth was strong (8%) and their earnings grew as well. However, guidance was lowered as a result of the items mentioned earlier. The reduction in EPS was small though, to $2.40–$2.50/share versus the prior range of $2.55-$2.70/share. To be safe, I’ll use $2.40/share for the purposes of our stock screener. The company’s P/E Ratio was 14.90X, their payout ratio is 63%, and they are a Dividend Aristocrat and announced a nice increase earlier in the year. Again, yet another great company that passed our screener.
What are your thoughts about my purchases? Have you added to any of the companies listed above? If not, what other companies are you considering purchasing during this current market environment? Would you have purchased XOM if you were me? Or would you have looked elsewhere?