Talk about limited activity over here. Doesn’t help that it was a short month, but the month of February saw gains in the S&P 500 of 2.88%. Therefore, you had limited days to buy, a day off in the stock market and the overall market surged almost 3%! Yes, my activity was very low this month. So low, that I am beginning to even think the freezing temperatures we endured took an affect on my dividend stock purchasing! Let’s see what I was up to from February 2nd through March 1st!
The stock purchase
Well, well. The month of February marked the first time I was eligible for our 401(k) policy. I contributed approximately $1,750 into an overall stock market product that is offered from Vanguard. Simple, boring and effective. However, I still do have cash on hand to deploy in the market, due to a slow January, and I’m always looking to inject the capital into my taxable account. Financial Freedom doesn’t come by itself, everyone. Surprisingly, the stock purchase below was not a stock that was on my recent dividend stock watch list article.
Stock Purchase – CVS (CVS)
First, they weren’t on my dividend stock watch list. Second, they didn’t increase their dividend. Third, the price was too good not to grab! We all know who CVS (CVS) is and they recently closed on their acquisition of Aetna (health insurance company), which will explode their consumer base, ease of delivering goods and should pop their revenue, quite a bit. Why did I buy them? Well, the first time I purchased them was during early 2017 and their share price was $77.86, approximately. Therefore, with higher expectations and yield, it was too tough to pass up. It was so tough, I purchased them twice during the last 30 days – once at $64.88 (representing a 20% decline from the initial price) and again at $58.33 (a 10% drop from the $64.88 price point). Here are the quick-stats on the stock purchase by using the Dividend Diplomat Stock Screener:
- Price to Earnings: At a $64.88 and $58.33 price with a forward earning projection of $6.89 for 2019 (from 23 analysts), this equated out to a p/e ratio of approximately 9.42 and 8.47, which is well below the overall market on average.
- Dividend Growth: Sadly, due to the debt load they took on to acquire Aetna, no dividend growth and I don’t anticipate any until 4th quarter 2020 (as my estimation). Therefore, I was okay to pay at the prices I did, to drastically reduce my cost basis and buy a higher yield for the lack of dividend growth. See why the impact of the dividend growth rate is real!
- Dividend Yield: With the $64.88 and $58.33 price point, at a dividend of $2.00, their yield was at 3.08% and 3.43%, well above the S&P 500 (on average).
- Payout Ratio: Based on forward earnings of $6.89 and a dividend of $2.00 per year, this equates to a payout ratio of 29%. A very low payout ratio, to which, hopefully their cash flow can be used for continuous debt repayment.
Here is proof of my investment:
In summary, I purchased an additional 32 shares during the month for a total cost of $1,972.68. The 32 additional shares added $64.00 to my forward dividend income projection. In total, now, I own over 47 shares that over $94 in dividend income per year.
Stock Purchase Summary & Conclusion
Therefore, I deployed a total of $1,972.68 in capital and added $64.00 in forward dividend income. This equates to an average yield of 3.24%. Not too bad and happy with adding to my current position, and averaging down my cost basis nonetheless. As I’ve said in the past, this has been hard finding right buy opportunities. Dig deep enough, though, you can find them.
Similarly and keeping the message consistent, stick to the strategy that has worked for you and review to see if there is anything that you need to see out there that may impact your strategy going forward. You are in control and the emotion button is hard to turn off. Persevere and stay consistent, if you can and are able to. Lastly, my dividend portfolio has been updated and I am locked in and ready for further opportunities.
What other investments are you seeing out there? What industry has been your preference as of late? Anyone just stock piling capital and/or cash? Thanks again everyone, and, as always, good luck and happy investing!
-Lanny