Wow… as my title suggests, I have had my portfolio ammunition – locked, cocked and ready to UNLOAD! There has been a lot of activity this month and thought – well, by Monday we are halfway through the month essentially and there’s been a lot of activity worthy of a post. My locked, cocked & ready to unload began the very first day of October and has came to another chapter Friday October 10th. This could go down as the biggest investments I have made in a single 10 day span. Ready? Let’s check it out.
October 1, 2014
Day 1 of October. After a stagnant September, I had capital and I had some ammunition that was built, locked, cocked & ready to unload onto the stock market during this downturn. As my savings rate was 54% in August and 57% in September, I had ample cash ready to be plowed in at any moment. I am very lucky to have been able to save this amount of money for each of those respective months, and if it wasn’t for my car accompanied by endless liabilities, it would have been even higher! Day 1 of October had hit and I was itching to buy a company and Bert has purchased this stock before… Kraft (KRFT). After much talk and review, I felt like the time was right and felt the dividend increase looming since they increased it on the first last year. Here are the reasons why I purchased Kraft:
- Maxwell House Coffee – My mom loves this brand, drinks it every morning and has drank it for as long as I can remember. It may not be the best tasting coffee, but I have to pay ode to my mom on this one! Keep on drinking that Maxwell House mom, keep on sipping.
- With that being said, Kraft now has licensing rights with Green Mountain (GMCR) to sell their brands in K-Cups, including the lucrative deal to receive part of the sales for the McCafe McDonald’s (MCD) coffee on the shelves in stores and in your Keurig machine, not a bad deal. This has been a large boom in the coffee convenience arena.
- Purchase price was $55.95, which was slightly up from the $53.91 at year end. Due to the relatively stagnant price movement, I felt compelled to look into the company even further. The dividend at the time was $0.525 per quarter or yielded 3.75% – I dig this. It’s greater than the market, and as we all know – falls with our dividend stock screener.
- With EPS approximately around $4.00 (conservative), this equates out to a 53% payout ratio, which is less than our comfortable 60% range. Further, the P/E ratio therefore was 14, or less than the S&P as well as the industry average of approximately 19. You can see why I was locked, cocked & ready to unload.
- Dividend Growth stood around 5% as this is a new ticker/filed/public entity and has only one dividend increase. I know management & the board are committed to increases. Further, Kraft just increased their dividend this past week from $0.525 to $0.55 or approximately 5% increase. The yield on cost already on $55.95 share price now = 3.93% or up 18 basis points!
Summary: I purchased 26 shares and ultimately with the dividend increase, added $57.20 to my projected dividend income total. These last 10 days obviously didn’t end there with the overall stock market plummeting this month. The S&P closed on 9/30/14 at 1,972.29. October 10th closed at 1,906.13 or a 3.3% drop for the entire month, with some companies dropping more than others. As dividend income stock investors – this is the greatest playground to be in. Whether that is scooping up stocks on our September watch list or even companies who are expected to increase their dividends this month – chances are they have fallen, providing a further bang for your buck via more dividends as you can acquire more shares at a lower price. Gotta love it!
Locked, Cocked & Ready to Unload October 10, 2014
Well, needless to say, I had a little too much fun in the office Friday the 10th. The market was edging downwards with a few stocks dropping, a few increasing and I knew I had to be aware of what I wanted to do. I made a few conclusions Thursday evening, late at night, to state the following: If AT&T (T) drops again (as they declined Thursday) and are down more than their dividend from their ex-dividend date, I will buy more shares. If GlaxoSmithKline (GSK) declines by 5% from my initial purchase, I will add more and if McDonalds (MCD) drops again today, even after their solid dividend increase last month, I will buy more. Surprisingly, these all came into play. What is a dividend diplomat to do? I know Bert was having fun trying to guess what dividend income stocks I was buying and what rounds I let out with my capital that was locked, cocked & ready to unload. I will do quick summaries as there is a lot to cover…
Purchase 1: AT&T (T)
- This was initially against a company Bert had on our September Watch List. Bert wanted/liked Verizon, but I tossed the idea around with AT&T. I like their fixed/dividend yield and even though they are slow growth – is a great foundation stock. Further, my exposure to telecommunication was low at around 5%, therefore, this increased it (with other purchases) to 7%. The dividend yield at the time of purchase was 5.34%, obviously higher than the S&P 500, as well as the P/E at approximately 10 vs the industry of 15. I liked the value buy here, with the payout ratio being below 60%, at roughly 54-55%. This offers room for slower growth (around 2-5%) and provides safety of their dividend.
Purchase 2: GlaxoSmithKline (GSK)
- I purchased this in September and I pulled the old question the other night after I saw it sliding little by little – If I bought it then, and if it declines 5% – shouldn’t I buy it again if I don’t think anything fundamentally changed with the company? Well I won’t go on and on about GSK, as the article linked in the beginning of this section describes why I purchased it. Essentially at the price of $44.39, GSK yielded 5.98%, which is very high and the P/E was 14 vs industry of 21 and S&P of approximately 19. To me, this is a great value for me and pushed my exposure to Pharm to approximately 6.68%, still very small, but higher nonetheless.
Purchase 3: McDonalds (MCD)
- Similarly, this bad boy was on our watch list from September. McDonalds increased their dividend 5% and initially their stock price pumped $96.50 range. And then the last few days landed… where the stock dropped approximately $4 or 4% from that dividend increase. Essentially the yield at my purchase price of $92.55 was 3.67% and this is much higher than what it has been yielding in the past. I figured that I’ve bought it at higher prices at lower yields – why wouldn’t I buy this again? Done. The yield is higher than the S&P, the P/E at $5.50 (conservative) EPS = 16.80 or less than the S&P and is less than the industry of 26. Further, the payout ratio equates to 61.8%, approximately at our ceiling for this, given the conservative approach. I’ll hang with the golden arches all day, as they continue to service billions worldwide.
Summary: I placed $1,000 into each of the above approximately or 30 shares of AT&T, 22 shares of GSK and 11 shares of MCDs. In total, this adds $151 to my projected dividend income total for the year. See snapshot of all 4 trades below for the month, so far:
Now do you see that I was locked, cocked & ready to unload?! I wasn’t messing around this month and I am trying to show why I am here and will continue to be crushing my way over $4,000 of projected dividend income. My portfolio page is updated to reflect this purchase as well as link above referencing the dividend income goal page.
I am beyond excited. I knew after my somewhat sidelined September, that there was no way I would sit on the bench during this downslide. I wanted to add to my current positions, which I did on the 10th in the 3 companies, and I am still eager to add to more. I just hope I don’t completely deplete my capital, but with my goal to save 60% of my income each month – that should help me get there. What gets me pumped up, though, is you the readers. I wanted be as locked, cocked & read to unload if it wasn’t to feel the support from everyone out here in this community. I know I may say it often, but I don’t say it enough – so thank you and thank Bert for being my “bro” through this. I appreciate the criticism and guidance everyone. Now to the questions – thoughts on these purchases? Have you been making moves? What do you see in the market? Thanks for stopping by and checking these moves out! Talk soon.
-Lanny