Bert’s Stock Purchases – December 2018

Wow, has December been a crazy month in the stock market to say the least.  Lanny has taken advantage of some of the craziness and put some capital to work and so have I.  There have been some frustrating moments for me (I’ll describe those later in the article).  But overall, I was excited to grab some stocks at a discount and continue to build my forward dividend income.  Luckily, my account was still eligible for free trades and I was able to engage in a lot of small trades.  With a fresh cup of coffee in hand, I’m ready to summarize the stock purchases.  Let’s dive right in!

For each of the purchases listed below, I’ll run the company through the Dividend Diplomats’ Stock Screener.  I’ll use my purchase price (or average purchase price if I purchased multiple times), average analyst forward EPS per Yahoo! Finance, and the company’s annual dividend.  Also, please note this article will not include my last purchase, United Parcel Services (UPS), as I already summarized this in a different article.

Purchase #1: Abbvie Inc (ABBV)

I started this purchase spree off by adding to a position I had initiated earlier in the quarter.  Over time, I had amassed a small position in AbbVie Inc and the stock price continued to fall subsequent to the purchases.  With each fall, a few extra shares were added to lower my overall cost basis.  This month was not any different and I was able to add 5 shares at $85.00/share on 12/10/18.   Here are the results of our stock screener.

  • Price/Earnings Ratio – 9.75X (Forward EPS of $8.72/share)
  • Dividend Payout Ratio – 49%
  • Dividend History –  The company’s increased their dividend annually since their spin-off.  On top of it, we all know about the company’s insane dividend increases that have been recorded over the last few years.  A large dividend increase was announced in February (35%) and November (11.4%).

Over time, I’ve written about how I like the company’s position in the industry.  On top of it, ABBV secured a non-exclusive licensing agreement with Pfizer to distribute Humira beginning in 2023.  There were some questions about the drug after the patent expired and securing this contract for the future was nice to see from an investor perspective.  With the passing of our stock screener and some of the other news, I had no problem adding to my position in the company.

Annual Dividend Income Added with Purchase: $21.40

Purchase #2 – BP (BP)

Purchase #2 was a dip into major oil; however, this purchase was more due to free trades and remaining cash in my Roth IRA.  Over the year, I maximized my Roth purchases.  After my last purchase, I had $193.00 remaining in my account to invest.  In my December stock watch list, rather than pick one stock, I stated that I was looking at Major Integrated Oil companies due to their slumping prices.   BP is the only oil company that I hold in my Roth IRA.  So I set a limit order for the amount that would allow me to add 5 shares of the company ($38.60/share) and the trade eventually executed on 12/14/18.

  • Price/Earnings Ratio – 10.63X (Forward EPS of $3.63/share)
  • Dividend Payout Ratio – 67%
  • Dividend History –  Dividend Growth is a different story for BP.  Like many major oil companies, dividend growth had ceased in 2015 when the price of oil plummeted.  Unlike competitors like Royal Dutch Shell though, BP increased their dividend once again in 2018.  BP has cleaned their balance sheet over the years and the impact of the major oil spills from years ago seem to be behind the company.  Dividend increases aren’t guaranteed, but the better financial position should allow the company to continue increasing if the environment allows it.

Since I was adding only 5 shares with leftover cash, I was much more willing to overlook the dividend growth history even though it does not pass our screener.  Typically, we use a 60% threshold for our dividend stock screener as well.  This isn’t a hard figure.  Rather it helps us identify if we need to dig in further and investigate the company in greater detail.   A 67% growth rate in the oil industry is not too concerning. EPS would need to fall nearly $1.19/share for the payout ratio to equal 100%, a lofty amount even in an environment where crude oil decreases.

Annual Dividend Income Added with Purchase: $12.20

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purchase #3 – Cardinal Health (CAH)

This was another stock in my portfolio that I own; however, it was not included on my December watch list.  Over the years, I have continued to add to my position in the healthcare giant based in Columbus, Ohio.   The company has rewarded me with a declining stock price, facing pressure from two fronts:  lawsuits related to opiods and rumored competition from Amazon.  Both of which are major news and developments; however, in a dividend stock analysis written here, I disclosed why I am still considering adding to CAH despite some of the headwinds.   On 12/19/18, I made two purchases totaling 13 shares for an average share price of $46.51/share.

  • Price/Earnings Ratio – 9.28X (Forward EPS of $5.01/share)
  • Dividend Payout Ratio – 38%
  • Dividend History –  CAH is a Dividend Aristocrat, already indicating the company has a strong history of increasing their dividend.  On top of it, an encouraging sign for me was that the company increased their quarterly dividend this year despite some of the headwinds that the company is facing.

With the company passing all three steps of our screener, I was happy to add to my position and continue to lower my cost basis.  After this purchase, I now own 81.624 shares of the company and will receive over $150 in dividend income annually.  If the price continues to fall, I may keep adding to my position as well.

Annual Dividend Income Added with Purchases: $24.75

Purchase #4: Exxon Mobil (XOM)

I didn’t go back too far to the well for this stock purchase.  For those of you that have been following, I have been adding small positions to XOM over the last few months as the company’s stock price fell below $80/share, then $75/share, and then, once the price fell below $70/share.   Sure, the price of crude continues to fall and it is something to monitor going forward.   But XOM is a Dividend Aristocrat and has increased their dividend through several oil crises over the years.   Plus, XOM performed well in the screener below, which is why I jumped on the opportunity to add 5 more shares add $68.75/share.

  • Price/Earnings Ratio – 14.75X (Forward EPS of $4.66/share)
  • Dividend Payout Ratio – 70%
  • Dividend History –  As I mentioned earlier, XOM is a Dividend Aristocrat.  The company announced a nice increase in April and I am expecting them to do so once again!

Similar to BP, despite the fact the company’s dividend payout ratio is above our 60% threshold, I am not too concerned based on the spread between the annual dividend and the company’s forward EPS.  Now, in total, I own 20.106 shares of XOM and the position produces nearly $60 in forward annual dividend income annually.   Not too bad!

Annual Dividend Income Added with Purchase: $16.40

Purchase #5: AT&T (T)

Last, but definitely not least, a Dividend Aristocrat that just increased their quarterly dividend AND is one of our Top 5 Foundation Dividend Stocks for ANY dividend growth investor’s portfolio.  That’s right, you guessed it, AT&T!  AT&T was not on my radar initially; however, with a price at $27.00/share towards the end of the month and a forward dividend yield of over 7.5% at that price level, it was hard for me not to dabble and add a small amount of shares.  Luckily, I had enough cash on hand to make a small purchase of 10 shares at $27.00/share.

AT&T passes all three metrics in our stock screener, making the purchasing decision easy.  AT&T continues to be an interesting investment because of the hangover from their recent acquisition.  How will it impact future cash flow?  How quickly will AT&T paydown their debt?  There are still some questions to be answered; however, for only 10 shares, I had no problem adding a small amount to my position.  AT&T continues to be one of the larger positions in my portfolio.

Annual Dividend Income Added with Purchase: $20.40

summary

In total, the purchases of these 5 companies added $95.15 in annual dividend income to my portfolio.  I mentioned I was frustrated, and that is because of one reason.  Despite all of the purchases, I missed out on opportunities to add during two of the largest decreases during the month.  Rather than taking advantage of great discounts, such a UPS below $90/share), I became greedy and set lower price limits that never triggered on those days.   Figuring I would wait and grab the lower share prices, I never successfully made the purchases as I watched prices subsequently climb.   From this, I’ve reminded myself the importance of running my stock screener ahead of time and understanding the true values in the marketplace prior to a sudden drop.  Then, I can quickly make an investment decision with less emotion and take advantage of a true discount.   It was a hard lesson to learn right now, but an important one to remember going forward.    In the meantime though, I’m excited to continue to add to my forward dividend income and take a few more steps towards financial freedom!

What stocks have you been purchasing in December?  Would you have added shares of XOM and BP at their low prices?  Or are you staying away from the oil market in general?  What are your thoughts about AT&T as well?

-Bert

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28 thoughts on “Bert’s Stock Purchases – December 2018

  1. Now that is a great series of buys! I am ready to pull the trigger any day now. Generally, I have been staying away from oil companies, but I keep XOM and BP on my watchlist. ABBV, JNJ, and CAH are on the top of my list, but we will see. Congrats on the great buys Bert! 🙂

    • MDD – Thank you very much. I’ll hopefully be right beside you adding at the beginning of 2019. I can’t blame you from staying away from oil. That’s why I’m only dipping my toes gently in the water right now haha Those three are great names a top of your list and I like it a lot. I’m happy to say that I own all three 🙂

      Bert

  2. nice Bert

    A nice array of buys. I recently added abbvie to our portfolio. Its one I have wanted for awhile and has done very well in this weird market.
    When i made this buy I was very tempted by T at 28 bucks though…

    As for oil stocks, Im watching them. Here in Canada suncor seems to be trading pretty cheap and im always buying my gas at petro canada now. Luckily this market has created lots of opportunitys out there, so i don’t really know what to buy until I got the cash these days. haha

    100 bucks added in forward income, very nice!
    keep it up!
    cheers and happy new yrs!

    • PCI,

      Honestly, whether you picked ABBV or T, you couldn’t go wrong. At this time, there were so many great companies and options available You couldn’t go wrong. Just make your watch list, follow your investing metrics, and you aren’t going to go wrong with whatever option you select.

      Bert

  3. Wow! I’ve just started with dividends and each one of your updates is awesome and inspiring. $95 of extra income/ year going forward is great. Keep up the good work!

  4. 5 great companies at fair or better valuations! Hard to go wrong with that. I recently added to MO for the second time this month and IRM for the first time since October.

    • Kody,

      I love those additions right there for you, especially as an IRM shareholder. MO will be interesting and they are taking some major leaps with their new joint venture. It’ll be interesting to see how this all plays out. Enjoy those nice divvys though!

      Bert

  5. Hopefully, and in my opinion I think we might get
    One more test of the lows before seeing which direction things go so you might just get your chance to add yet. Don’t be too discourage, just look for even better deals out there. AAPL is one of them that peaks my interest.

    Have a happy new year!!

    • Happy new year to you as well ADD! Thank you very much, I am hoping we have one more crack at the lows like you suggested. If not, I’ll still work hard to find some of the other values that are out there. I know they will be there. Interesting about Apple. Do you have a price point in mind?

      Bert

  6. Bpught T as well bit earlier then planed. With price <30$ its just too good. Its like JNJ on sale for <100$ 😀 Oil companies looking interesting. Havent looked at BP for a while now but it was one of best investment options with INTC 4-5y ago. As I know they were very much invested in renewables compares to other oil majors. Wonder how they are doing in this field today. For oil majors I think its the future and ones with most invested in renewables has the biggest potential in L/T perspective.

    • P2035,

      I had to do a double check and make sure JNJ wasn’t under $100. I was thinking there was no way I could have missed that and sadly I was right. Thanks for getting my hopes up like that for a minute haha But yes, I agree with the premise of your comment. Some stocks you just buy when they hit a certain point and I felt that way with ATT at $27 as well. The key with these major companies was cleaning up of the balance sheet and the renewable/diversification away from just oil (like you said). All the major companies have been shifting this way.

      Bert

  7. Wow Bert, it looks like you really busy during December and took advantage of the opportunities. I wouldn’t worry too much on the missed ones – it’s quite hard to figure out where the bottom of the price could be. The most important thing is that you added $95 to your forward annual income which is huge for a single month, in my opinion!
    I personally initiated a position in BLK but I was on the other side of the scale compared to you. I bought 3 shares for $400/share and the price dropped lower straight after that 🙂
    Keep it up!
    BI

    • BI,

      Than you very much. I appreciate the kind works. BLK is picking up some steam with others in the community as well. Diversified investments and a solid dividend. I don’t know too much about them, but I’ve done some entry level research. Best of luck and congrats on the income added as well 🙂

      Bert

    • Jordan – Thank you! We definitely have been busy, that’s for sure. ABBV has a lot of fans. High growth, nice payout ratio, very low PE, and some nice products. There is a lot to like. Are you looking into it as well?

      Bert

  8. Hi Bert,
    nice purchases. I especially like XOM and BP. Cardinal Health does also make sense at the moment. There so many buying opportunities out there. I honestly do not know where I should invest first :P….
    Cheers

  9. Looks like you have been busy. Picked up a few shares of T myself recently. Lots of good value in the market right now. Hope everyone has saved up a little cash to take advantage of the opportunities.

  10. Here’s a nice summary again! It is a good article and I am glad that we have invested in similar shares again because I see that it is not only my opinion that these companies are getting into the portfolio. My recently purchased stock: ABBV, T, IBM, MAIN, LOW.

  11. I really like these purchases Bert, great work! Don’t feel too bad about the missed opportunities, I was in the same boat as I set some limits that ended up never being met before the price reversed–and I almost let the emotion of missing that sway me from realizing that there was still great value to be had.

    I cannot wait to see what you do in the new year with your portfolio!

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