The purchase shouldn’t surprise too many of you. Often times, Lanny will find a great dividend growth stock on a discount and sell me on the fact that the company is a buy. Well, this time was definitely one of those instances and I followed his lead in purchasing shares in this dividend growth stock. Time to see why I purchased shares in CVS Health Corp (CVS).
Perfectly timed picture for this post. The day I made the purchase, I happened to be driving past my local CVS store. What are the odds? Last week, I added 13.8123 shares of CVS with a cost basis of $1,075. The trade was made using the automatic trade feature on Capital One Investing, so the cost per the trade was on $3.95 and I was allowed to purchase fractional shares of stock. One of the many reasons why I love Capital One Investing as my trading platform. In total, this purchase added $6.90 to my quarterly dividend income figure and will add $27.62 to my annual dividend income total. I know I have some work to do to reach my goal of $6,250 by December 31, 2017 after performing my Q1 goals review, so this is a small step in the right direction here.
In Lanny’s purchase summary that was published last week, Lanny gave an excellent summary of the metrics, the results of our stock screener, and some other items about CVS. So I am not going to repeat each metric. Rather, I will discuss the reasons why I purchased CVS.
- The company passed all three metrics of our dividend stock screener. Particularly, I love the 34% payout ratio that provides the company plenty of room to continue to growth their dividend and extend their streak of 14 consecutive annual dividend increases.
I love the fact that their current dividend yield over 100 basis points greater than their 5 year average dividend yield. That indicates that the company undervalued, has had some crazy dividend increases…or both. In the case of CVS, I think it was a healthy combination of both. - The company represents a new sector in my portfolio. I have exposure to healthcare through my positions in Pfizer and Cardinal Health; however, CVS represents the first retail healthcare company in my portfolio. It is always nice to continue to diversify your portfolio every chance you get.
- CVS pays a dividend in the second quarter of each quarter. This purchase will continue to build income in an “off month” in the quarter, which is a nice side benefit with the purchase. Income is income, I know, so the month doesn’t matter too much. But it is nice to add to a month with less income when the right opportunity arises.
- I am a big fan of the company’s move last year to acquire Target’s pharmacy and clinic businesses. The acquisition should add to the long term value of the company, as CVS found a way new way to connect and serve customers outside of their traditional storefront format.
- I was able to capture this purchase before the ex-dividend date in April, so I will be receiving my first dividend check in a few short weeks. A pretty fast turnaround if you ask me!
Bottom line, the metrics just checked out for this purchase and made too much sense to pass up on and look elsewhere for “discounts” in this crazy market. I was in the right place, at the right time, with a decent amount of cash on hand. Luckily, Lanny did the leg work for me with this purchase. Thanks Lanny! His purchase article had five great reasons to buy the company and after that, I was sold. This breaks my recent trend of adding to positions to create large positions in my portfolio. And trust me, this most likely won’t be my last purchase of CVS and I will look to add to my stake in the coming months to build a nice sized position. My goal is to receive at least 1 share annually of CVS via DRIP, so it looks like I will have a few more purchases in the future!
What are your thoughts on my purchase of CVS Health? Would you have investing in Walgreens instead? Or even a different dividend stock? Do you own shares in CVS?
Bert