Finally… a trigger has been pulled, the market has had a pull back and Bert, the Jewish one, did not also purchase the same stock I did this time around, joking Bert. I had been eager to add to my dividend income producing stocks, and the time for me was right. Since I am an auditor in the financial institutions realm and don’t have too much exposure to banking – that is what step I ended up taking. Let’s take a look at the purchase.
Recent Purchase – Canadian Imperial (CM)
I wanted to add to my current positions I owned and to start building a very STRONG base into companies that are in my portfolio. Further, I have a good rule of thumb, similar to others, if your cost basis is down 5% overall and you purchased a stock a few times in the past at higher prices – why not buy more at an even further discount to reduce the cost basis, pick up more shares and more dividend income for less money? Sounds like a plan to me. Well, on Wednesday the 15th, I purchased more Canadian Imperial or CM. This company was on the watch list I had when Mr. Market was taking a downturn, which I posted last week. Back in December, I did a 3 Canadian Bank analysis – and back then, they were trading at $86/share! Wild, huh? They have been on our watch list before, and I really do like this bank.
I know I had comments at my last week Market post about there being better banks out there. However, as a good company and a great dividend performer, I like CM, I truly do. Why? Well to bust out our stock screener and other metrics to… take a look at the numbers, with a summary screen shot along with 2 competitors:
1. Price to Earnings Ratio: Rock solid here, with a below 15 P/E, below the S&P and below the 2 competitors I evaluated. This showed, that even with a projected-lower EPS, they are trading at a price that shows a sign of being undervalued. This gets a check mark in my book.
2. Yield: The dividend yield is the highest among the 3 at roughly 5.00%. This is above my overall portfolio yield by over a full percent, therefore, this adds to that facet. Further, it’s not an alarmingly high dividend yield either.
3. Payout Ratio: As stated earlier, if you were worried about the higher yield, take a look at the payout ratio. Still under 60% and above 20%, therefore, there is plenty of room to keep growing the dividend going forward.
4. Dividend Growth rate: Ah, yes I do love the growth rate. The last 12 months, CM has increased their dividend 3 times, from $1 (CAD) all the way to $1.09 (CAD) each time. The dividend above is reflected/adjusted for currency translation back to US$. Further, the growth rate has been slightly better than the other 2. Not by much, but definitely showing better signs than what CM has historically performed.
5. The 5 year dividend yield average – pretty much right on target here. I usually like to see them yielding above their average, like the other two, but right now, this shows the yield is fair, possibly because they’ve increased the yield so much this year?
As I explained in my 2nd quarter goal post review, I was a projected dividend income of just over $5,901 going forward. Therefore, this also helps aid in that case, as it is a higher yielding portfolio, with some sort of growth rate, that has had a nice pull back in stock price. I know I deployed capital into Norfolk, which was a lower yielding stock at around 2.70%, this one definitely is adding some bang to my portfolio and helping me potentially hit my forward dividend goal in a more efficient manner, but not over zealous, if that makes sense?
Stock Purchase Summary
I deployed a total capital amount of $1,068.20, buying 15 shares (with a fee) of CM and added $52.80 (in U.S. $) to my forward looking dividend income. Though a lot of the community was suggesting other positions, I couldn’t help but look at my own, see that I was down in total over 5% and felt that it was time to re-up and add to my current position. Adding $52.80 to my annual goal breaks down to an extra $4.40 per month that I will start to see the benefits in the 4th quarter dividend, as I missed the ex-dividend date with this purchase. However, my total position now in CM yields/produces over $240 in forward income for me from just one stock, it’s awesome and feels like I have that Strong position that I was looking for. As I said earlier, this purchase also allows me to reach closer and closer to my goals for 2015.
It was weird, I once was feeling the lack of purchasing anxiety, but now I feel like I am on the right track. July has been a great month in dividend income so far, due to a few extra little things going on this month, that you’ll see in the month end post, so I’m looking forward to adding this purchase to my forward looking Jan/April/July/October income, as that is when they pay. The Greece impact, as well as other wild things in the market (NYSE shutting down briefly, China markets, oil/gas ups & downs, etc.) have allowed for great opportunities in the Mr. Market place. My account, funny enough, for where I make my investments and extra payments towards my mortgage, now sits at a whopping $85… talk about how I am still running on thin ice… but I love it and would have it NO other way!
Anyways – I have to thank each and everyone one of you for motivation and helping keep this train moving. Cannot do it without everyone and one of my best friends Bert included. What do you think of the purchase? Do you like the Canadian bank area? Would you purchase into this company? Would love the feedback, thanks everyone!
-Lanny