Lanny’s Stock Purchase February 2nd through March 1st

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:

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

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17 thoughts on “Lanny’s Stock Purchase February 2nd through March 1st

  1. Nice to see you in action Lanny! Reading your review of the purchase, I am tempted to initiate a position into the company myself. It is pretty hard to find companies that haven’t appreciated in price in recent months and CVS definitely looks attractive at these levels!
    Congrats on another step closer to FI Lanny!
    BI

    • BI –

      Thank you and their metrics equate to a purchase, that’s the hard/funny part. However, dividend growth is on pause, for the moment, as their debt loans ballooned from this deal. The above average yield with a low p/e ratio, difficult to come by in this market, though.

      -Lanny

  2. Wow definitely a light month for you! CVS is looking interesting and the valuation is so low that even just modest growth and improvement in debt should generate great returns for you. I already have a somewhat sizable position with a cost basis around these levels so I’m probably holding off for now. Lots of execution risk for CVS with integrating Aetna but I have a feeling it should turn out well over the long term as long as there’s no significant changes to healthcare in the US.

    • JC –

      I agree. If they can work through the tough/early parts of warping the two companies together and integrating ease of systems, customer satisfaction/fulfillment, I’ll be excited where they head, and yes – as long as healthcare doesn’t change for the worse for them : )

      -Lanny

  3. I’ve bought a little CVS myself in the past month. Starting about 63, adding a little every couple of dollars down. It’s just hard to pass on the opportunity to buy way below average valuations, with above the company’s average dividend yield. I see it as being greedy when others are fearful.

  4. Lanny,
    Nice. I like CVS and WBA and both look to be good values. CVS is the down the road value play, and it is probably more inline with the changing nature of the healthcare provider space.
    – Gremlin

  5. While it wasn’t one of your best months in terms of the DGI capital deployment, it’s great to see you contributing to a 401k again. $64 added to the DGI portfolio not to mention what was added to Vanguard is quite solid.

  6. I did not notice the big drop of CVS until reading your post. According to the stock graph, CVS will drop below $51.95. If the stock bounces back above $58.33 before reaching below $51.95, you can sell some shares then buy back. It is tough emotionally to experience a big drop.

  7. A more riskier buy then I’m used to from you. There seems to be a lot of negativity surrounding this stock and the prices keeps on falling. Together with the lack of growth I’m not too sure about this one. On the other hand if it rebounds in a few years time you might have made the right bet! 🙂

    • Mr. Robot –

      A lot of negativity. I know. I had a small position and wanted to average my cost basis down, as I do see plans in the future for a rebound in div growth. However, I could be flat out wrong, too.

      -Lanny

  8. Congrats Lanny on a solid month. Seems like you made a great purchase with CVS. It’s also interesting that you were able to make that purchase despite the fact that it wasn’t on your watchlist. How did that work by the way? Did you just see a news article on it or something? Just curious.

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