Tired of reading my purchase articles yet? Better get used to it, because I am ready to unleash some capital on a go-forward basis. There are reasons I am able to buy more individual stocks, which I will explain in a later post. However, I unloaded capital, again, on Friday the 10th. This was not a significant amount of capital but wanted to explain my two small purchases in Kraft-Heinz (KHC) and a small community bank of Isabella Bank Corp. (ISBA).
Yes, two VERY different stocks, industries and sizes. I bought Kraft-Heinz in my taxable account, as I already had 29 shares previously in there. Further, I purchased Isabella Bank Corp. in my traditional IRA from funds that I had left over in there (therefore, not a new contribution, just small, leftover cash). We all know Kraft – they have Kraft cheese, oscar mayer, the best ketchup in the world, capri-sun, smart ones, kool-aid, etc.. To note, they are $74B in market capitalization.
KHC is far different than Isabella, as Isabella is 210M in market capitalization, very small. Further, they are located in Mt. Pleasant, MI and serves the surrounding communities for their community banking needs, having been in business for over 115 years. In terms of asset size, they are just over $1.8B and this is consistent with what I usually purchase from a community bank aspect. This was a very small purchase, as you’ll see in the notes below.
The Stock Purchase #1 – Kraft-Heinz Co. (KHC)
From using our Dividend Diplomat Stock Screener Metrics:
- Price to Earnings: At $59.25 with a forward earning projection of $3.71, this equated out to a p/e ratio of 15.97. A very solid p/e ratio, which is below the overall market on average.
- Dividend Growth: They are a “now” a young dividend company, given the merger between the two a few years ago. They’ve increased their dividend for 3 years and their average growth rate is around 4.3%. Not amazing, but not too bad either. See the Impact of the Dividend Growth Rate.
- Dividend Yield: With the $59.25 price point, at a dividend of $2.50, their yield was at 4.22%, well above the S&P 500 (on average) and above my dividend yield, overall, on my portfolio.
- Payout Ratio: Based on forward earnings of $3.71 and a dividend of $2.50 per year, this equates to a payout ratio of 67%. Little high and a bit outside of the 60% threshold I like, however, management is working to improve that bottom-line through cost reduction. See why the Payout Ratio is an extremely important metric.
Here is proof of my purchase:
In summary, I purchased 11 shares on 8/10/2018 of Kraft Heinz Co. (KHC) at $59.25 with a $0 trading fee for a total cost of $651.75. The 11 shares adds $27.50 to my forward dividend income projection and in total, I know have 40 shares of KHC producing $100.
The Stock Purchase #2 – Isabella Bank Corp (ISBA)
Using the same metrics above:
- Price to Earnings: At $26.50 with expected earnings of of $1.72, this equated out to a p/e ratio of 15.41. A very solid p/e ratio, which is below the overall market on average.
- Dividend Growth: They have increased dividends since 2005, or going on 13+ years. They have a 5-year dividend growth rate of 5%. Similar to KHC, not amazing, but not too bad either. See the Impact of the Dividend Growth Rate.
- Dividend Yield: With the $26.50 price point, at a dividend of $1.04, their yield was at 3.92%, well above the S&P 500 (on average) and above my dividend yield, overall, on my portfolio.
- Payout Ratio: Based on forward earnings of $1.72 and a dividend of $1.04 per year, this equates to a payout ratio of 60%. Further, I think this is skewed higher, due to the significant provision recorded in Q2, which is not going to be a consistent recording throughout the remainder of the year. I would anticipate a dividend growth increase to $0.275 per quarter to be announced by 8/23. See why the Payout Ratio is an extremely important metric.
Here is proof of my purchase:
In summary, I purchased 7 shares on 8/10/2018 of Isabella Bank Corp (ISBA) at $26.50 with a $3.95 trading fee for a total cost of $189.45. The 11 shares added a whopping $7.28 to my forward dividend income projection.
Stock Purchases Summary & Conclusion
So not significant purchases, but still capital deployment and stock acquisition, nonetheless. I deployed a total capital amount of $841.20 and added $34.78 in forward dividend income. Every dollar counts, right?
However, I won’t be done, just yet. I am feeling rejuvenated to be back on buying sprees and I would expect more from me, which ultimately does mean – more posts baby! I’ll keep everyone in the loop on what stocks I am adding to my dividend portfolio.
What do you think of the purchases? Hate the small community banking stance or love it? Are you buying something else? Thank you for sharing your thoughts everyone and, as always, good luck and happy investing!