Lanny’s Recent Purchase – NSC

I’m back at it again!  The market again, has taken a downturn south and one of my newly created positions from last month went on sale this week/today more specifically.  Sometimes… if you have the idle cash it’s best to use that and average down a position that you want to build, buy more income for less and smile as you do it.  I was lucky enough to do just that, I made a purchase today to a position I already have.  Let’s take a look on who that was.

Recent Purchase – Norfolk Southern (NSC)

I purchased an additional position or in my words – re-up’d my position into Norfolk Southern (NSC) today, and I did it with straight aggressiveness.  I purchased this stock with Bert back in early July and knew that I wanted a full, at least, $3,000 position into them.  I initiated a position at the ripe price of $86.00 per share then, which was already down $14/share subsequent to my NSC stock analysis back in April.  Well, since my purchase in July (a whole month ago) the stock was hovering in between $81-$85 for quite some time.  Today… I set a limit order at $80.00, wondering if it were to hit or 7% below my stock initiation price.  Well… it did hit.  Let’s update the analysis: 

1.) Dividend Yield of approximately 2.95%, which is well above the S&P 500 of around 1.90 to 2% and also crushes their 5 year average of 2.30% by 65 basis points.  This is up from 2.744% when I initially purchased them, awesome.

2.) Dividend Growth – I love this metric and their dividend growth is 11.3% 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 (and is approximately 4.5% higher than my weighted average growth rate before the purchase).  I like it.  However, they didn’t have an increase in July that they traditionally do, this I will continue to monitor.

3.) The P/E ratio, based on projected (updated) EPS of $5.42 was 14.76, or below the 15 that I really like to see, well below the market as a whole and is attractive amongst their competitors.

4.) This leads to a payout ratio of approximately 43.5%, 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.   Commodity fluctuation has occurred with coal and oil, impacting businesses across the board.  I’m not too concerned at the time being, given the macro effect.

Stock Purchase Summary

I have begun deploying more capital as I stated in my July dividend income post, which you’ve already seen me fire some ammo when I purchased Emerson last week.   I can only thank Mr. Market for taking a turn on a stock I wanted to build my position in – so.. thank you? haha.  I deployed a total capital amount of $1,526.95, buying 19 shares (with commission) of NSC and added $44.84 to my forward looking dividend income.  With the power of dividend reinvestment – the total dividend I receive now from my position of NSC should reinvest at a minimum of 1 shares per year will be added, given that the dividend stays, at a minimum, stagnant.  Adding $44.84 to my annual goal breaks down to an extra, approximately, $3.74 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 absolutely love when I can round out and be happy with my position of $3,000.  The impact of that 4th quarter dividend will feel nice coming in at approximately $21 for the quarter (as I own 36 shares now).  Cannot wait to begin the reinvestment with this train, which since I purchased in July, will begin September 10th for the 3rd quarter payment.  What do you think of me re-upping when it dropped 7% in share price?  Would you have done the same?  Thoughts everyone?  Thank you!

-Lanny

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