Lanny’s Recent Stock Purchase – Kraft Heinz (KHC) & Isabella Bank Corp. (ISBA)

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).

The Stocks

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:

  1. 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.
  2. 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.
  3. 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.
  4. 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:

  1. 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.
  2. 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.
  3. 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.
  4. 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!

Facebooktwittergoogle_plusredditpinterestlinkedinmail

22 thoughts on “Lanny’s Recent Stock Purchase – Kraft Heinz (KHC) & Isabella Bank Corp. (ISBA)

  1. Hi Lanny,
    Any concern about KHC not increasing their dividend earlier this month. Maybe they delayed one quarter and will announce an increase in November? I’m not expecting much of an increase, but I haven’t seen any news one way or the other. Tom

    • Tom –

      Thanks for the comment. Never say never… I’ll be paying close attention to November. As of course – that is def. a concern, but potentially – the board need to see something before they agree on an increase. I’m aggressively watching.

      -Lanny

  2. Lanny,

    You’ve been on quite the buying spree lately and picking up a few new positions in companies less known among the DGI community. I like KHC and I’m happy to be partnered with Berkshire and 3G Capital in this company – I added to my position this week too! Best of luck!

    PIV

    • Vortex –

      Thanks for the comment. Exactly – Berk and 3G – that’s pretty good company, eh? Nice job adding to yours, now – can you tell management to fix their margin and increase their dividend? Thank you : )

      -Lanny

  3. We never get tired of buys. Always interested in seeing what others are buying. Might be a great idea in another persons buy.
    Had my eyes on KHC but haven’t pulled the trigger.
    Small community banks are awesome. I have one it pays a small dividend but pays around .50 cents a year supplemental dividend every year
    They are making an acquisition that becomes final in the fall so it will be interesting if the pay the second half of the supplemental dividend in Dec

    • Doug –

      Thank you, haha. I started to wonder – damn, these are a lot of quick hitter articles on the purchases, but I have to tell the community! Oooo, love that special dividend.

      Appreciate the comment, as always.

      -Lanny

  4. Love seeing the buying spree continue! I’ve looked at KHC previously but have quite a bit of exposure in that sector so haven’t been looking to add another holding. I like the addition of the small community bank, and they have quite a long history. A little surprised to see one of the big banks hasn’t tried to acquire them.

    I added some more to my CMI position after the recent buy that I posted about, and am looking at a few things now for my next buy. Look forward to hearing about the influx of new capital!

    • DivvyD –

      I agree. KHC got to a price point, where I felt comfortable with their metrics and I am all about the cost saving mentality, if positive. Further, I love community banks and the space that they are in.

      Yep, congrats on CMI. Just another solid dividend company to the portfolio.

      -Lanny

  5. As Doug said, we never get tired of buys. It’s so intriguing to see a dividend growth portfolio progress with each subsequent purchase, and the impact that has on future dividend income. With that said, I added to my position in Abbvie (ABBV) this week.

  6. I have dipped my toes in this type of investing, in that I have a few thousand in a few high dividend yield stocks, and I definitely have the bug. I look forward to more posts like this from you, and benefiting from your research.

    Question, and I have not fully explored your site yet; something I will do, but do you prefer to reinvest in your high dividend stocks, or do you take the dividends, and and invest them elsewhere?

  7. I really like your KHC buy. I should have bought it at $54. Their latest earnings call was a positive. In two to three years this wil be a growing company with higher revenues, cash flow and dividends, imho. Good luck with this pick 👍

  8. Keep it going Lanny with that diversification! KHC is a nice staple stock to grab while its price is depressed. ISBA is on my inflation beaters index as a contender with 12 straight years of dividend growth that exceeded the rate of inflation but I will caution that I have them on a watch list as they are late with announcing a dividend increase for 2018. Some other small banks i’m investigating are SBSI, FLIC & CBU,

    Best of Luck
    – Ken

Leave a Reply

Your email address will not be published. Required fields are marked *