Bert’s Recent Buys – PG and SBUX

Last week, with a volatile stock market, I decided to jump right back into the action. All of us have been watching this market closely and getting excited about the opportunities that have started to present themselves.    I had some extra cash on hand and wanted to add to several positions in my portfolio.  After some research, my investment decisions were made and I found the two stocks I wanted to purchase.  Here is why I purchased shares of Procter and Gamble (PG) and Starbucks (SBUX) last week.    

 

Purchase #1 – Procter & Gamble (PG)

This one shouldn’t come as much of a surprise, particularly because I LOVE purchasing consumer staple stocks.  Lanny recently laid the case/argument out for purchase shares in PG in his “Battle of Consumer Staple” article that was recently released.  With the recent pullback in the market, consumer staples have been getting hit pretty hard.   On the date I decided to make the purchase, Monday, the company’s stock price was trading around $78 per share.  I quickly updated the results of our Stock Screener assuming an average share price of $4.20/share:

  • P/E Ratio – 18.5X (approximately)
  • Payout Ratio – 65%
  • Dividend Growth History – The company is a Dividend Aristocrat for goodness sake

Sure, their recent dividend increases have not been that strong, but I have a good feeling about their upcoming increase based on the results of other companies.   Further, I own a healthy portion of the company and became very excited about lowering my cost basis in a company that I own that checks all of my investment boxes.   To me, this was a pretty easy decision to make and I quickly jumped on the opportunity that presented itself.

I added 9.6389 shares of PG ($3.95 automated Tuesday trade from Capital One Investing).  This purchase added $26.59 in forward dividend income to our annual total.   Now, I own 63.2008 shares of the consumer staple giant and receive $174.33 annually.

Purchase #2 – Starbucks Corporation (SBUX)

Now this stock is probably a surprise to many of you and it developed quickly for me based on a pretty negative day in the market.  A long time ago, I had purchased about $1,500 shares of Starbucks in my wife’s Roth IRA.  It was an entry-level position that produced between $8-$9 of dividends on a quarterly basis.  I have always been looking forward to adding to the stake; however, the right opportunity never presented itself.  Well, things changed this last week as the market had one of its crazy swings.  In fact, the day I decided to make the purchase SBUX was down over 3%.   So I quickly ran this through our stock screener  assuming a share price of $57.30 and the results were as follows:

  • P/E Ratio – At the time of my purchase, the P/E ratio was about 22.8X.  Sure, our stock screener looks for P/E ratios below the current market values.  The P/E of 22X was slightly lower than the broader market and this iis lower than the multiple has been for SBUX in a while.   There are cheaper options for sure, but I was happy with the multiple at the time of the purchase.
  • Payout Ratio –  ~48% using estimated 2018 earnings.
  • Dividend Growth HIstory – The company has increased their dividend for seven consecutive years and has posted very strong dividend growth rates over hte last few years.  SBUX’s 3-year average DGR is over 23%!

After assessing the results and realizing that I was ready to add to my position in SBUX, I transferred $750 into my wife’s Roth IRA and made the purchase.   We added 13.0701 shares (another automated trade on Capital One Investing) of SBUX, adding $15.68 in forward dividend income to our portfolio.  In total, we now own 41.0322 shares that produces $49.24 in annual dividend income.

Purchase Summary

I couldn’t be happier to add to these two positions and take advantage of the current market opportunities.   Our last purchase was a new position, Dominion Energy, and we were able to add a very solid position with our available capital.  With less cash on hand, it was nice to add to current positions we own,  fortify our current holdings, and set ourselves up for larger dividend payments in May.    One other thing that I like is that both of these companies pay their dividend in the second month of the quarter.    We receive such large amounts of dividend during the final month of the quarter, it is always nice when I get the opportunity to add to the other two months and spread out my dividend income.  To me, this will be something to consider focusing on as I move closer and closer to financial freedom.  But that is an article for a different day.  So for now, I am going to kick back, relax, and enjoy the new stock purchases (possibly while sipping on a cup of coffee from Starbucks).

What do you think of my stock purchases?  Did you purchase either PG or SBUX over the last few weeks?  Or are you focusing your attention elsewhere?   What stocks are on your watchlist?

-Bert

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34 thoughts on “Bert’s Recent Buys – PG and SBUX

  1. Bert, I’m hoping we will start to see positive benefits of the brand restructuring PF did over the past few years. Hopefully leaner with higher margins and in position to grow again. It’s hard to increase dividends much when a company is shrinking on an absolute basis. I think that has led to the disappointing dividend growth over the past few years. Tom

    • Tom,

      The 4% increase that was just announced was progress, but less than I was expecting. I agree, we have seen other companies that have crushed the lean and mean strategy. And lets not forget, PG is a large ship that will take some time to turnaround and get moving. I like the progress so far and am optimistic about their long-term prospects!

      Bert

  2. I like both pick ups. No doubt we’re seeing many great opportunities these days with all this volatility. People talk about the ‘death of brands’ a lot with regard to any old guard consumer staple company but I think it’s just chatter and in the long run PG and other name brand staples will be just fine. After all, MCD was also branded as dead as fast food was falling victim to fast casual and fresh offerings. Of course, in just the last three years we’ve seen MCD, YUM, JACK and others show their muscle and resilience. I’m long both PG and SBUX!!!

    • Keith,

      I’m glad I picked up two stocks that you really like. I’m always happy to have support of the community. I agree with your assessment asbout consumer brands. It would be one thing if PG was a one brand company in a competitive industry. But their brand portfolio is so vast and they dominate the industries they occupy. That’s why I’m a fan of their long-term prospects. The MCD story is great and I remember a few years ago when they were on the way out. All I can say to myself is that I wish I had purchased more during those years because they have ROARED back.

      Bert

  3. Nice buys!

    SBUX I´ve had for a while, and I really like this stock! Makes me happy whenever I see someone with a SBUX-cup in their hand, and that is quite often. I think it´s reasonable to expect some growth to continue as the company penetrates more countries. Haven´t bought any SBUX-shares since september, but I might soon again. The timing seems perfectly ok as SBUX rarely is on extreme sale.

    PG is probably a great buy now, but I´m a little afraid that growth might continue to be weak. Or maybe the new brand-structure will really induce growth. Did consider buying PG the last few weeks, but instead got Altria, British American Tobacco, UPS and PepsiCo. These four will hopefully give me a combination of stability and growth. Also got one share of GOOG despite there is no dividend in sight. I just assume that Google will start giving out dividends within the next 20 years, and I want to have a piece of that stream.

    Cheers, and thank you for another good post!

    /GI

    • GI,

      I do the same. I laugh every time I see someone holding a glass of Starbucks 🙂 I couldn’t resist the opportunities at these current prices, that’s for sure. And I’ll add more if the price dips once again, but the current price levels seems to have reversed.

      In terms of PG. There are so many great stocks for sale and you lsited a lot of them. You can’t go wrong buying any of those companies. You should have achieved your goal of strong growth and stability for years to come. Nice Job GI!!

      Bert

  4. Hey, Bert. I own both PG and SBUX, and like your add-on purchases. I prefer SBUX for its stronger growth prospects (both EPS and dividend growth), despite its lower yield. I’ve been a bit worried about PG in the past year, but I was happy to see an uptick in the dividend growth with today’s announcement. The turnaround has been slow, but as you alluded to, it’s a big wheel to turn. As a fellow shareholder, I’ll certainly be rooting for your purchases to pay off! ‘Til next time…

    • ED,

      Glad to know that you are a fellow shareholder of both companies as well. IT is nice to have a high growth rate company like SBUX in my portfolio to boost my DGR, even if it lowers my overall yield. But I do like their growth prospects in the long run. PG’s increase was not too shabby and Ill take it. Let’s get this ship moving though and shoot four a double-digit increase next year 🙂

      Bert

  5. Nice buys here Bert. I am a fan of consumer staples and think you cant go wrong there…. I mean they are staples for a reason. Also I think SBUX has plenty of room to continue growing. Besides who wouldnt like a company that can make a $5 coffee trendy. Really nice additions. Thanks for sharing.

    • Thanks More Dividends. I like the long term prospects of both of these companies and I don’t think either company is going anywhere anytime soon. Let’s hope SBUX is on their way to becoming an Aristocrat!

      Bert

  6. Nice purchase on (PG) Bert. They’ve been on my watch list since I started, but I still have not pulled the trigger on them. I guess I’m waiting until I have enough purchase money to get more than a share or two.

    Brian

  7. I think you made two very nice buys. I love SBUX, and it is one of my largest positions. I think their growth in China is being underestimated by the market. I like PG too and should probably add a bit to my position here given the discount. I also think KMB is even cheaper and worth a look as well. I am like you where I don’t mind adding just $500 or $1K to a position if the price is right- juicing it slowly when opportunities arise. The one thing I’m worried about with SBUX becoming a potential aristocrat is that I feel that pricier coffee is something that people give up in a recession. However, SBUX didn’t have a dividend back in the Great Recession when it got hit pretty hard. It ended up being an amazing buying opp (trading around $4 or $5 in Jan 2009 for a now easy 10 bagger) so there’s potential for more great buys ahead if it gets hit during a recession. They are a much stronger company now, and their China business will easily be bigger than their U.S. business within the next couple decades or so.

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