Man oh man has October been exciting so far. Lanny and I started off the month strong by making several rounds of investments (Lanny’s summary article can be found here and mine can be found here). We were feeling pretty happy with our decisions. On top of it, I created a dividend stock watch list to prepare myself for another set of purchases. Then, well, we all know what happened. The market had a massive two-day sell-off. Many investors capitalized on the downturn and we have been seeing a lot of purchase articles featuring some great stocks. This may be one of those articles, as it reflects my purchases from right before and during the October sell-off. The splash isn’t as large as you might have thought and we are still being patient. But I did have the chance to purchase three different stocks last week. Here is a summary of my second round of purchases in October!
Purchase #1: WestRock Company (WRK)
I didn’t go very far for my first purchase. This was one of the first companies on my October dividend stock watch list. At the time I created my watch list, WRK’s stock price was $50.56/share. With a price of $50.56/share, WRK’s P/E ratio was $12.4X and the rest of their metrics checked out. WRK was looking undervalued. Then, on 10/9/18, I checked the market shortly after open and noticed that WRK’s price was down over 8% that day! I immediately purchased 3 shares with the capital and picked up 4 shares at $45.06. At that price, WRK’s P/E ratio had fallen to 11.07X. I then subsequently picked up 6 more shares that day at a slightly higher price.
After doing some research about what caused the dip, there were two items I could identify. First, WRK announced that their operating facilities were impacted by the unfortunate hurricane that struck North Carolina, causing delays in production. The company was also experiencing some increased costs as a result. With these events in mind, management stated that their quarterly earnings would be impacted. In the short-term, there will be some pain. But in the long-run, the company should recover from the storm and return to operating in a regular business environment.
Here is a summary of the two purchases I made:
10/9/18: 4 Shares @ $45.06/share – Cost Basis of $180.23
10/9/18: 6 Shares @ $45.50/share – Cost Basis of $273.00
The 10 additional shares added $17.20 in dividend income to my forward income Now, I own 45.194 shares of the company and my position produces $77.33 in dividend income annually. There was one annoying thing about this purchase though. This was made before the big market sell-off. And trust us, WRK was hammered by the sell off. The company’s price fell to the low $40/share range. If I would have known, I would have waited to make this purchase for sure. Oh well, what can you do, right? For now, I’m happy I was able to purchase WRK at a discount and continue to lower my cost basis in the dividend stock.
Purchase #2: Iron Mountain (IRM)
Ah, onto my next purchase. IRM….another stock on my watch list. I have been adding to my position in small chinks for the last few weeks. In my watch list, I showed that the company’s metrics passed our stock screener. So I won’t share the details once again in this article. In my last purchase article, I mentioned how I added 35 shares over two purchases. The lowest purchase price was $34.21/share. Similar to WRK, after my first set of purchases, IRM’s price continued to fall. If I liked the company at one price and there were not any significant news releases after the purchase (which there weren’t), why wouldn’t I continue to add when the price continued to fall? Well that is exactly what I did and here is a summary of those purchases.
10/10/18: 13 Shares @ $32.88 – Cost basis of $427.42/share
10/11/18: 5 Shares @ $31.69 – Cost basis of $158.45/share
The additional 18 shares added $42.336 to my forward dividend income. Now, we own 53 shares that produce $124.66 in dividend income annually. If the price continues to fall significantly, I will look to add to my position.
Purchase #3: Leggett & Platt (LEG)
Last, but not least, the first purchase that was not on my watch list. This purchase was caused by a large drop in price during the market’s crazy two-day stretch. If you recall, which I would understand if you didn’t, I established a large position in LEG back in the second quarter. I purchased 67 shares of the company at $41.57/share. It was a large enough position where the company was off-my radar. It also helped that the company’s stock price took off immediately after my purchase. So it made sense to look elsewhere at the time.
Then, after updating my portfolio last Thursday, I noticed that LEG’s price had fallen drastically. The company’s stock price was trading well below $40/share and their stock price is down over 16% during the month. The month wasn’t even halfway over yet! Suddenly, I was staring at an unrealized loss. So I quickly ran LEG through our famous Dividend Stock Screener to see the metrics. I used a share price of $40/share at the time of the analysis, forward EPS of $2.61/share per Yahoo! Finance, and an annual dividend of $1.52/share. Their P/E ratio was 15.3X and their dividend payout ratio was 58%. Both pass the first two metrics of our stock screener. In terms of having a history of increasing their dividend, the fact that LEG is a Dividend Aristocrat speaks for it self. Obviously LEG passes.
10/12/18: 7 Shares @ $38.83 – Cost basis of $271.81
This purchase added $10.64 in dividend income to my portfolio. In total, I own 74 shares and my position produces $112.48 annually.
Summary
This wasn’t the largest splash in the market, which may surprise some of you given the decrease that we’ve realized over the last few days. But in total, I was able to purchase $1,310.91 of stock during this span. The new purchases added $70.176 in dividend income to my portfolio. My yield on cost for the purchase is 5.35%. Not too bad! One interesting tidbit is that each of these purchases will bolster my “off months.” IRM and LEG pay their dividend in the first month of the quarter and WRK pays their dividend in the second month. It is always nice to bolster these two months when the opportunity strikes!
What do you think of my purchases? What stocks have you added during the last few weeks? Are you targeting certain companies during this sell-off? Would you have stayed away from any of these companies?
Bert