Mr. Market you can keep taking that downturn all you want. As long as us Dividend Diplomats have capital and we feel there is an opportunity, we are going to try and strike, in the words of Austin Carr – throw the hammer down. The market was on a nice decline today, came slightly back, but then took another slide in the park for us. Let’s dive in about who, why and how much I bought of a certain stock!
Recent Purchase – Johnson & Johnson (JNJ)
Well, well, well. JNJ is back at it again for me it looks like! The last time I purchased them they were trading at $98.03. Today, I saw the swings and places a limit order at $91.75, a killer 6.4% decline since then, breaking the 5% barrier and traditional rule I have. Additionally, they have increased dividends for 52 years and are labeled as one of the dividend aristocrats, one of the reasons why I will stand behind them as a foundation stock for a dividend income investor. Let’s update the analysis since that last purchase, which thank goodness Bert came out with why always having a watch list prepared is important:
1.) Dividend Yield of approximately 3.27%, which is well above the S&P 500 of around 2.18% and also beats their 5 year average of 3.1% by 17 basis points. This is up from 3.06% when I initially purchased them, awesome.
2.) Dividend Growth – I love this metric and their dividend growth is essentially 7% over a 5 year span, something that is phenomenal, especially coupled with an above average dividend yield. This adds quite an impact to my forward dividend growth rate for my portfolio as a whole.
3.) The P/E ratio, based on projected (updated) EPS of $6.13 was 14.97, or below the 15 that I really like to see, well below the market as a whole and is attractive amongst their competitors; and given the stock price dropped $6.25+ since last purchase, P/E was lower as well.
4.) This leads to a payout ratio of approximately 49%, well below the 60% threshold we traditionally like, but above the 20% we look for, a lot of room for growth, but also quite a bit of earnings to grow the company internally. I dig it.
5.) Further, I like to re-up on my position if the stock drops by 5%+ since the last time I have bought them, given no dramatic things have changed. This just gave me even more of a headnod to grab this foundation stock.
Stock Purchase Summary
August was a busy month in buying Norfolk and EMR, hoping September can be a bang if it needs to be or whatever allows me to continue Crushing over $6,000 in projected dividend income. I can only thank Mr. Market for taking a turn on a stock I wanted to continue and build my position in. I deployed a total capital amount of $924.45 buying 10 shares (with commission) of JNJ and added a cool/flat $30.00 to my forward looking dividend income. With the power of dividend reinvestment – the total dividend I receive now from my position of JNJ should reinvest at a minimum of 1 shares per year will be added, given that the dividend stays, at a minimum, stagnant and that I now own over 40 shares producing over $120 in annual income alone from JNJ – thank you guys! Adding $30.00 to my annual goal breaks down to an extra, approximately, $2.50 per month that I will start to see the benefits of this specific purchase until the 4th quarter dividend (December). As I said earlier, this purchase also allows me to reach closer and closer to my goals for 2015.
I now own roughly $4,000 and as a dividend foundation stock, I am VERY COOL with that. Excited that I am seeing triple figures going forward in income from this beautiful company. Did anyone else pull the trigger? Making moves on the down day or staying on the sidelines watching the movement happen? What are you looking at? Thank you!
-Lanny