Shortly after I purchased shares of KHC last week, I decided to jump back into the action. Mr. Market presented two opportunities for investments that were on my watch list. So I couldn’t resist the opportunity to add some nice dividend income, right? Here is why I purchased additional shares of Kraft (again) and initiated a new position in National Grid (NGG)!
Overall, this post my be brief/shorter than some of my other purchase articles. It isn’t that I didn’t research my investment decision. But I performed a detailed analysis of KHC in my last purchase article and Lanny did an excellent job summarizing NGG’s current profile in his last purchase article. So I don’t want to duplicate work. However, I will make sure to cover some of the important points in this article!
Stock Purchase #1 – Kraft Heinz Corporation (KHC)
Last week, I purchased shares of KHC at $57.93/share. KHC performed well in our stock screener as well. Their P/E ratio was below the broader market, the company’s payout ratio wasn’t too bad, and their dividend yield is solid. Sure, their dividend growth had a question mark based on the fact that the company did not increase their dividend in August. However, it wasn’t anything that was too concerning for me.
The, the day after I purchased shares at $57.93, KHC opened down over 3%! If I liked the metrics one day before, and there was no new news released, then how could I not buy more shares when the price fell? The answer was that I couldn’t.
I purchased 10 additional shares of KHC at $56.55/share. This purchase added $25.00 in forward dividend income. In total, I own 60.425 shares of the consumer staple giant. The position produces $151 in forward dividend income. If the price continues to fall, I may continue to build this position.
Stock Purchase #2: National Grid (NGG)
National Grid was a company that was not initially on my radar when I put together my September watch list. However, the utility sector continues to fall, which brought NGG and other great yielding companies on my radar. Then, I performed a quick sector analysis over my traditional investing portfolio (more to come in a later article) and determined that I was underweight in the utility sector. As with most purchases, Lanny brought a stock on my radar. Naturally, I loved his analysis and agreed with his conclusions, so I was convinced to initiate a position in NGG.
Here are some of the quick details. I’ll use the metrics from Lanny’s purchase article since my purchase price was essentially the same as his. Their P/E Ratio is ~7X, significantly below the broader market and the utility industry. Their dividend payout ratio is 41% and the company has demonstrated an ability to grow their dividend going forward. Thanks for doing the leg-work with this purchase Lanny. This company definitely crushes our stock screener!
With that in mind, I purchased 29 shares of NGG. This added $88.45 to my forward dividend income total. Since the company pays semi-annually in January and August, it will be a while before I receive my first payment from the company. However, I’m excited about adding this high yielding utility! Similar to Kraft, I will continue to add to my position if the stock price continues to fall or even remain at its current levels.
Summary – $113.45 in additional dividend income
All in all, another exciting week in the stock market and glad to move some cash from the sidelines! I couldn’t be happier with my purchases and the opportunity to add $113 in forward dividend income to my portfolio. Lanny’s new goal is to pump up his traditional investment account. Fortunately for me, both these purchases were in a traditional investment account and not my Roth IRA. While I still have a long way to go to reach Lanny’s level, I’m slowly starting to build up my traditional account!
What are your thoughts about the purchases? Are you a fan of KHC, NGG, or both? Would you have looked at other utilities over NGG? What about other consumer staple stocks?
Bert
It’s always frustrating when a stock like KHC drops immediately after making a purchase. But it does present a new opportunity when you have available cash. Tom
Tom – exactly. I’m fortunate that I was able to capitalize on this opportunity that had presented itself!
Bert
Bert,
Being a fellow KHC shareholder, there is not much more to say about them other than – nice move. With NGG I am very interested. I have watched them for at least 2 years now, and it looks like a great time to enter the space. Depending on capital to deploy, it might be a move I make before the year is over.
Enjoy that new income.
– Gremlin
Gremlin,
Thank you very much! I’m pretty pumped that NGG fell to these prices and I was able to initiate a position. Hopefully you can add a position here as well!
Bert
Hi Bert,
This is a little off topic, but do you have a recommended reading list for dividend growth investors? Or just good investing books in general? Looking to get smarter.
-Mike
Mike,
Not off topic at all. We don’t have a formal list, but I think a great place to start is the “Little Book” of investor series where they cover a variety of topics. I’ve learned a lot from them over the years. There are also great books by Benjamin Graham and other great investors!
Bert
Nice buys Bert, and I feel your pain with the price decline right after buying–same thing happened with me on my recent purchase and that is why I had two purchases fairly close together.
One of the books I was reading recently talked about one should set an expectation that once you buy a stock, the price will decline a little more and can provide a follow-up buying opportunity. With free trades at your disposal that could be a decent approach to experiment with.
What is the latest on KHC potentially looking at an acquiring another company? The last I recall reading was about Campbell’s Soup but I haven’t been keeping close tabs on that.
Thanks Divvy Day! Much appreciated, although it doesn’t add the same punch as all of those REIT purchases for you haha What was the title of the book? I’d be interested to read/learn more about it. I agree with that completely. If you liked it at X price 3 days ago, why wouldn’t you like it after it fell another 2-3% the next day? I think KHC cooled on purchasing of Campbells. But that doesn’t mean they have cooled on the acquisition spree. At least that is why I suspect they did not increase their dividend in August.
Bert
Haha, yes those REIT purchases added quite a punch to my portfolio–although in hindsight maybe I should have waited a week or two as there has been overall pressure on the sector recently. That could have added a few more shares for a little extra kick!
I can’t remember if I read that in The Single Best Investment by Lowell Miller or Rule #1 Investing by Phil Town (or possibly the book from his daughter Danielle Town). I’ve been reading too much lately that I have a hard time keeping them straight, lol. I believe it was in Phil Town’s book though.
I know all about purchasing something and having it drop in the next few days after purchase. OH well, its nice if you can capitalize on it. Usually for me thats not the case since I buy monthly. In any case interesting to see you expanding your KHC position.
Is there any explanation as to why utlities are falling again? Not that I mind because I can expand on ED then in my october buy 😀
haha Im sure it is a sector problem with interest rates and cost pressures. I don’t know for certain, but that’s my guess. As with you, I’ll continue to capitalize on this downward trend though 🙂
Bert
Hi Bert –
I cannot stop buying KHC. It’s addictive. All that yield in a ‘dividend pool’ account, where I let the divvy’s pile up and then reinvest when they hit a certain threshold — well that’s just a beautiful thing. KHC has tremendous potential both from a yield and a P/E expansion perspective. It’ll long be a staple in my portfolio, one of those stocks you acquire and just never, ever sell.
Great job getting in on the action at such a bargain price.
Cheers,
Jack
Jack,
Glad you are continuing to purchase as well. Couldn’t agree with your assessment more about the company and hopefully we are holding this together for a long time.
Bert
i also bought Kraft this year and happy with my purchase:) I wish I could buy a lot more but the US dollar is expensive right now.
It is very frustrating when the stock you just purchased drops right away, but it happens often enough.
Cheers
Caroline