Latest Stock Purchase 8/26/14 – John Deere

Today was a quick trigger type of day.  I wanted to initiate a position that has been gaining a lot of attention – not only on our watch list, but from the dividend blogging community as well.  I made a purchase on my phone while at a Financial Institutions conference with 3% battery life left.  After the trade was made, my phone died.  Timing? We’ll see. As you remember from our Sunday post, the diplomats released their current – Watch List – and stocks we are considering, with a close monitor on.

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Yes – I am officially in the John Deere (DE) club!  I hopped on the tractor and want to plow the ever growing field of green, that has been increasing every year at an astonishing rate.  The P/E was in a great territory, the comparisons and fundamentals are extremely sound.  I heard the engine and it was loud, almost as if the green and yellow was seeping through the pours.  Here are the main reasons why I purchased the big ol green tractor:

  • The yield at the purchase price I bought it on, which I’ll disclose later, was at 2.85%.  This was up a midge from our article, 2 basis points, and I was looking at any other price drop.
  • At the time of the article = $84.76, the price dropped to $84.16/17 and I placed a quick limit order at 84.15 when I saw it down today, just before my phone died.  I did not know if I bought the trade until 90 minutes or so ago.  Talk about a surprise because it hit.  A 72 basis point drop off was fine with me, which caused my P/E also to look a smidge better as well on the purchase
  • The 2.85% vs the 5 year average of 2.15%, was too much to not look at.  70 basis points is great and I expect this to rise in the future at a level that is sustainable.
  • Their low payout ratio is amazing.  Even if they go through a contracted cycle and EPS is pressured from ~$8.25 range to $6 – that is still a 14 PE ratio!  Great value as an investor.
  • The three year growth rate of 13+% couldn’t be looked away from as well and that’s including a 17+% this past year.  I’m looking forward to next May, that’s for sure, which is when they typically have raised or even February.
  • Fundamentally sound, current & quick ratios at 1.5X+, liquid and paired well with my Scott’s Miracle Gro.

This total purchase of 23 shares at $84.15, total purchase cost of $1,935.45 and adds $55.20 to my projected annual Dividend Income, which inches me closer to my projected annual dividend income goal of $4,000.

How do you feel about the purchase?  Think it was at a great price to initiate a position in them?  Thoughts on increases going forward?  Would love to hear from both – fellow tractor riding owners and non-John Deere stock holders.  Thanks everyone, talk soon!

-Lanny

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13 thoughts on “Latest Stock Purchase 8/26/14 – John Deere

  1. Lanny,

    Love the purchase. I’ve bought shares in DE over the last two months and I think this will be a great long-term hold. As you point out, even with a drop in earnings over the next cycle the valuation still looks attractive. Meanwhile, all the fundamental metrics are pretty sound.

    Glad to be a fellow shareholder!!

    Best wishes.

    • DM,

      You helped poke that idea even further, so thank you. Fundamentally = great. EPS may decline = bring on a 25% haircut, the dividend, payout and valuation is still low aka I will buy again, just as you had done if it drops buy a few more percent.

      Excited to join the John Deere family. Excited for the first dividend receipt!

      -Lanny

    • Henry!

      Thanks for the stop by, appreciate the support. I hope it works out, it has for others for years – their financials are strong, liquid assets, with a good receivable churn rate and the short term debt is small as well. Hopeful that earnings stay strong and it should be able to cover future dividends for years to come. Glad to home some of the big green!

      -Lanny

    • John,

      Interesting feed, thanks for posting. All I know is that I can’t predict where it is going, the price was in my buy range, so I scooped some up. It seems the yield remains very little unchanged until 5 months out, if I am reading it correctly.

      -Lanny

      • They annual yield looks like it’s going to be 2-2.2%.

        Basically equity options written on DE are pricing in that yield, not the current one you quote.

        It’s hard to know what it’ll actually end up being, but ~2% is the figure being backed by the money in the options market right now.

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