Latest Stock Purchase 7/21/14

Wham!  And right out of left field – I purchased a stock on Monday, July 21st.  Ready to get down and dirty?  I’m talking about being outside, in your garden, your lawn, pruning up those rose bushes… so wait, what did I just purchase?

Scott’s Miracle Gro Company! (SMG) – was purchased on Monday the 21st (yesterday).  I was watching Dividend Mantra, DGI, PIM’s watch list  , Compounding Income getting on top of the Tractor with John Deere (DE)  – I thought Okay, if they are playing outside, I’m jumping out there too.

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The analysis on Scotts Miracle-Gro:

  • Dividend yield: 3.20% at the time, which is higher than the S&P on average, one of our pegs and from our post regarding why we use the 5 year average, is over 90 basis points (2.30%) higher than the 5 year historical average! The dividend increases have been nice with 34.6% last year, 8.33% year before and 20% three years ago, average of about 21%, I’m smiling ear to ear.  Not to sound cliche, but I think this stock will fertilize my dividend portfolio a bit.
  • Payout Ratio: This is around 50% based on a $3.50 EPS figure, but EPS was $2.00 for last quarter alone so… I think I feel very good here, Green Light is a go.
  • Price to Earnings: Based on an expected $3.50, P/E is 15.65 based on my purchase at $54.77, which is less than the S&P average of roughly 19.57.  Looks undervalued to me and undervalued compared to competitors of CF, Potash, etc.  Green Light.
  • Dividend Increases: 4 years.  Hmph.  Only 4 years?  Well they’ve only paid dividends since 2009 and they are going to, more than likely, increase their dividend within the next 30 days – if earnings are showing it now – I think this will be a go for years to come!

Highlights with the Company:

  • Down approximately 12% YTD at the date of purchase for reasons that could be associated with…
  • Sell off from stock of the CEO, he is getting older, around 58 years and not sure if he is looking to cash in right now or not.. or if he is selling because…
  • Costs to produce their products may increase further into the year or
  • Increase in fuel price to make their products and to also ship their products

This total purchase of $1,972 adds $63.00 to my projected annual Dividend Income, which inches me closer to my projected annual dividend income goal of $3,825.

Who is getting out there and getting into their yards, cleaning and fixing them up?  Who uses Scott’s products?  Also – do you think this is a company that is long-term focused and is here for the haul?  Thanks for stopping by, I’m hoping this company sprinkles magic on my portfolio and I’ll soon see the benefits grow from this wonderful fertilizer company.  Talk soon!

-Lanny

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9 thoughts on “Latest Stock Purchase 7/21/14

  1. Lanny,

    Great to see some outside the herd thinking. It looks like a pretty good entry yield and is near the year’s low (I love contrarian picks). While not a cornerstone company, SMG has a solid product line that is easy to understand all home owners know and love.

    MDP

    • MDP,

      I agree. Great entry point I hope and I believe now increased their dividend within the next 2 weeks. I think this is definitely not your typical go to stock given the short term dividend increase history as well as dividend payment history. I think that they are strong player in this market and their products speak for the name itself. We shall see how this plays out within the next few months! Thank you for stopping by. I an excited and will continue to add where I see fit! Some big players are having down days and we need to keep our eyes peeled. Thanks for stopping by and we shall talk soon!

      Lanny B

  2. Nice buy! I didn’t expect SMG to be on your watch list. It is indeed a quality company. My mom does a lot of gardening and we have bags of Scotts everywhere. Just curious, are you concern about revenue being somewhat flat over the last 5 or so years?

    Cheers!

    • Henry,

      Great points to make. I am not too concerned about revenue and net income. Did you happen to review the last quarterly filing? They performed fairly well and I am Here to see how they perform with summer months under their belt. Their dividend pay out ratio, ncreases and yield all seem very strong. Honestly, I analyzed this company in a few minutes flat and thought it was very strong and should be strong going forward. I know my friends and family always use their product as well!! Henry I appreciate you stopping by and let us know if you scoop and spread some Scott’s in your portfolio as well!

      Lanny B

    • Kipp,

      Thanks for the post! Hard to find undervalued stocks in the market right now but felt this was valued appropriately. A few big stocks have taken a hit or two this week so definitely keep your eye open. I appreciate the stop by as always, hope you have a great week!

      -Lanny

  3. Hi Lanny,
    I’ve been contributing to Scott’s bottom line recently by purchasing a ridiculous amount of their mulch for my garden. And apparently it needs to be replaced regularly too. If we keep the gardening activities up, I may well look at purchasing some shares so that they buy the mulch for me 🙂

    Keep feeding and fertilizing your portfolio so it grows faster, but watch out for any weeds! 🙂
    Best wishes!
    -DL

    • DL,

      Great post! Definitely appreciate the stop by as well – keep using Scotts… please? Haha, but in all seriousness – helped my friends family mulch their yard the other day and all they had was Scotts products.. lets say my smile was pretty decent that day. Not a bad idea to think about… use a product of one of the company’s you partly own.. I like the sound of that!

      I will keep fertilizing the portfolio and am trying to watch the weeds – you do the same, hope your weekend has been great!

      -Lanny

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