The Diplomats were back and at it again! Loving the end of February, the turmoil and the continuous short-term declines in the market that unlocks opportunity in just a blink of an eye. We were on the hot seat this week, and boy did we take some advantage of market fluctuations. Wednesday was a well placed trade on a wonderful asset management company – T. Rowe Price (TROW). Let’s see how, when and what led the purchase by both of us!
T. Rowe (TROW) Stock Purchase
It was early on a Wednesday and after I recently wrote about BHP’s (BBL) “wonderful” dividend cut the market was in full downward spiral from additional poor news on oil, commodities and other macroeconomic events. We recently wrote a stock analysis article over T. Rowe Price (TROW) a bit of time prior to this (just over a week) and it was a stock to definitely be on the look out for. I mean, who doesn’t love a dividend aristocrat, especially after receiving the punch to the gut from the BBL news earlier? I know I couldn’t wait to get my hands on a stock that passed all of the Dividend Diplomat stock screener metrics we like to look for, as you recall from the analysis article. The best part is – this trade occurred after T. Rowe had a 4% dividend increase in between the article and the purchase… loving it! Especially given the fact that the price at the time of analysis was slightly lower than what it’s been trading at due to the increase and not really a significant change in price.
Bert was on the phone with a co-worker during the morning, but hell – I was scouring the price chart like it was more than my job, it was fun and amazing, thrilling I would say. They were trading in the lower $68’s the previous day and I knew the market would be bringing it down. With the new increase and with the poor performance ahead from the market, I wanted to be stubborn and hold strong at a 3.25% yield entry point or in my calculations – $66.45. That would take quite a drop if you ask me to get there considering a 3% drop isn’t always a frequent occurrence with Dividend Aristocrats. But I’m Italian and stubborn so that’s where I kept my feet down. I was not buying this stock for a penny more than $66.45! I also wanted to keep Bert in the loop, so I was IM-ing him during the downturn – 50 cents a way, 30 cents away, 7 cents away, 5 cents a way and boom – TRIGGERED! My limit order of 47 shares at $66.45 triggered and the purchase was made. Bodda Bing! Why 47 shares? That is the exact whole number of shares to bring the amount of dividend income added of $100+, as the summary will show below. Before the dividend increase, this would have taken 49 shares to do, so loving the impact the dividend growth rate has here. Bert will tell you his side of the story next, but I was able to trigger the purchase and add a new Dividend Aristocrat to my portfolio. What’s funny – the stock price closed at $68.96 that day… timing, right?
Lanny’s T. Rowe (TROW) Stock Purchase Summary
I deployed a total capital amount of $3,130.10 to purchase 47.00 shares of T. Rowe Price (TROW) at a market price of $66.45 plus a $6.95 transaction fee. I wanted to stick true to my guns with making purchases over $3,000 and this one fit the bill, as well as adding the glorious additional dividend income amount of $101.52 to my forward-looking income – while capturing all 4 quarterly dividends this year, as we were able to purchase before the ex-dividend that is to occur within the next two weeks. This is very bittersweet for me as well, as T. Rowe (TROW) was the first brokerage I went through to make my first purchase/investment, ever, to which I still own and to this day. Very fortunate and thankful to have the capital and the timing of the market, without a doubt.
Bert’s t.Rowe (TROW) Stock Purchase SUmmary
Lanny’s given you the summary of the morning from his perspective. I think one word would accurately describe what was happening on our end…CHAOS! Kidding, kidding. But it was a crazy morning and an intense 30 minutes that resulted in the purchase/addition of a Dividend Aristocrat to my portfolio. When the market opened, I saw that every stock was sliding and TROW was falling. But as Lanny mentioned above, a co-worked called me at what could have been the worst moment of the day…right when TROW dipped below the $66.45/share price that we had set earlier in the day. I wish I didn’t need to, but I had to put the stock market aside to work with my co-worker about something that just came up at the last second. Within this 5 minute conversation call, I think I received 20 instant messages from Lanny updating me every time TROW’s stock price dropped a penny. I think he was updating me faster than Google Finance was refreshing the stock price.
When the phone call ended, TROW’s price was hanging around $66.40. So I log into my Sharebuilder account to determine how many shares I can buy at the current stock price. After performing some calculations, I had enough capital to purchase 48 shares if, and only if, the stock price remained at $66.41/share or lower. GREAT! That’s exactly where the share price was…or so I thought. Within the timing of this calculation, TROW’s price actually increased to $66.47/share and I was staring a measly 47 shares in the face. The big question was….should I wait? Should I take a chance that the share price would fall back down to below $66.41 and I could pick up 48 shares? Decisions, decisions. In the end, I decided it wasn’t worth the wait and decided to purchase 47 shares. I have been burned in the past by not purchasing a stock when the price was low and watching it appreciate later that day. Remember the major lesson I learned last year when I didn’t buy during a flash sale and missed my buying opportunity? This was the event that led me to create my infamous five “Always Buy” Stocks list. No, I wasn’t missing out on this Flash Sale of TROW. So I said screw it and I ended up buying 47 shares of TROW at $66.60/share as well. Just like Lanny, this transaction added $101.52 in projected dividend income to my annual total. I couldn’t be happier that I made this decision considering the stock ended the day $68.96 per share! For the record, the stock never dipped below $66.41 shares again. If I were as stubborn as Lanny, I would have missed this great buying opportunity and my cash would still be hanging out on the sidelines.
A few quick updates that I should provide after this purchase this week. I used the remaining capital available from my sale of three mutual funds at the beginning of the year for this purchase. The capital from the mutual funds did not cover my entire purchase however. So $1,551 of the capital used in this purchase was fresh capital that I transferred from my savings account to my Roth IRA. One of my 2016 goals is to invest $20,000 in fresh capital in the market, so I am officially 7.76% of the way towards achieving this goal. I have a ton of work to do still and a lot of capital to save. But this is a great start and I can’t wait to begin chipping away at this goal! This wasn’t the only goal that I made some progress on with this purchase. One of my other goals was to add 5 Dividend Aristocrats to my portfolio, which was a reaction to the 2015 KMI dividend cut that still is fresh in my mind. With the purchase of TROW, I have added 1 new Dividend Aristocrat to my portfolio so far in 2016 and am 20% towards achieving this goal. I love this purchase because TROW is a solid company that clearly fits many different things that I am looking for in a stock in 2016. Couldn’t find a better fit out there if you ask me!
Whew! Told you all that was a chaotic but fruitful half hour. In this quick 30 minute span, we added 94 shares of TROW and $203 in projected dividend income to our combined portfolios. We both followed Lanny’s new strategy of investing $3,000k+ in each new stock! TROW is a great company and we couldn’t be happier to add it to our portfolios. But what made this purchase special and more fun was the story behind it. The craziness and chaos that result in the two of us adding a share in a company that neither of us owned in a sector that was not represented in our portfolio. It is safe to say that we will never probably forget the day we added shares of TROW to our portfolio.
What are your thoughts on the purchase? Would you have selected TROW or one of the other asset management firms? Or should we have purchased a different dividend stock outside of the industry? Have you added a Dividend Aristocrat to your portfolio recently? Is Lanny too stubborn for his own good (Kidding – Guess which Diplomat wrote the conclusion…couldn’t help it)? Thanks everyone, we are looking forward to hearing from you!
-Lanny and Bert, The Dividend Diplomats