Locked, Cocked & Ready to Unload! Stock Purchases October

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.locked, cocked & ready to unload

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:

  1. 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.
  2. 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.
  3. 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.
  4. 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:

Locked, cocked & ready to unloadNow 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

 

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22 thoughts on “Locked, Cocked & Ready to Unload! Stock Purchases October

  1. Some great buys, Lanny. Glad to see you are taking advantage of the market correction.
    Quick question – when you say that KRFT gets proceedings from MCD for McCafe, what coffee is MCD selling? is it GMCR or another KRFT product?

    GSK is another great buy….with all the negative publicity, its a good time to load up.

    Best wishes
    R2R

    • R2R,

      Thank you! With Kraft – they now have a deal, where the coffee in stores is using Kraft’s distribution channels, marketing etc.. for the coffee. It’s pretty interesting. I am sure all 3 parties: Green Mountain (for K cups), Kraft and McDonalds are all getting their piece of the pie on this one.

      GSK – my thought was – I inched in with a purchase and it dropped 5% with no real change in the company in the last month, I went in again. I feel good where my holding is at with pharmaceutical at this moment. However, there are a few other stocks on my radar.. and if they continue this trend with the market, I may have to find more capital to purchase more!

      Thanks again R2R, hope your weekend is going well!

      -Lanny

  2. Great purchases DD. I purchased GSK and MCD a while back and both stocks have dipped more than 5% since then. I am looking to purchase some more with the nice yields. Also looking to initiate position in T since I don’t have any exposure to the sector.

    • DGJ,

      Thanks for coming by! That’s awesome that you too are seeing the dips in these companies. I would with AT&T, the dividend stock may not move much in price, and has stayed pretty much stagnant, but it is a great foundation stock for a dividend portfolio, essentially yielding 5.35%. They have increased their dividends forever and I don’t see them stopping that trend. Also – not a bad time to add more to your positions with GSK & MCD if your calculations come out even better than they did beforehand in terms of fundamentals and valuations. Thoughts? Obviously I was on board, as that is exactly what I did! Thanks again Div Growth J.

      -Lanny

  3. DDs,
    Verizon is one of my biggest holdings. But I’ve been thinking about adding T, either in an IRA account or my main income account. Seems like a safe, easy high yielder. I use the service and like it much more than I liked being a VZ customer. $34.25 was the August low, and its back. So this may be a good time to buy, especially if it heads lower.
    -RBD

    • RBD,

      Thanks for the stop by! I know Bert loves VZ at the moment, but I am still big on T, especially after the DirectTV deal – I think there are synergies to be unlocked there and feel that T has a few more business lines than VZ. Also – Have to like AT&Ts 5.35% dividend yield at the moment – let us know if you scoop some up! Thanks RBD, talk soon.

      -Lanny

    • Done By 50,

      Not at all : ) Honestly, I was antsy in September because I only purchased one stock/one investment, simply because my “habits” were much more frequent. Luckily, patience allowed me to let the market create further value to my eyes at these levels on the three stocks – and bang, the capital was unloaded! GSK at approximately 6% I think can’t stay up there too long, especially being as large of a company they are at 107B+ market cap. Keep us posted with your moves! Good luck and thanks for coming by.

      -Lanny

  4. Banging them out with both barrels! I am hoping to join you on the purchase train. I *potentially* will have a $10k boost to my IRA from rolling over an old account, which will be some nice dry powder. I am looking at a range of positions, including GE, IBM, V, BBL, TD, AFL, and more. Should be a fun second half of the month if the money makes it through the system in time.

    • W2R,

      I felt like I was holding that double barrel for sure on Friday! Whoa… what will you do with the $10K?! I am pumped to read what’s going on. I know AFL has dropped over 5% since I purchased it last a few months ago and they will be increasing their dividend this month, more than likely, at least – do definitely think of making a move before that! Also – I do like the other stocks that you mentioned – V is a dividend growth stock, IBM is a rock solid long term play and you have to love a Canadian Bank in TD. I am excited for your second half of the month, but probably not as excited as you are. Talk soon!

      -Lanny

  5. Congrats on the purchases!
    I strongly considered adding to my position in T Friday. As a younger guy just starting I’ve been trying to figure out how to correctly balance building new core positions and adding to a position like T when it’s at a value I really like. Tough with limited funds and so many “buy and hold” companies I’d like to own!
    Way to take advantage of the market drop!
    -Joe

    • Joe,

      T is a great first stock actually! Also – they dropped more today and are at a 5.44% yield aka you can now get in at a better price. This is a buy and hold company for me in my portfolio. I would almost consider AT&T a foundation stock – small growth in the dividend yield, but definitely helps you reap benefits from dividend income earlier with an initial higher yield. Also – they are a huge company offering a vast array of products and services that consumers use: Phone, internet, entertainment, etc.. Let us know what you decide to do Joe!

      -Lanny

    • Seraph,

      I really wasn’t. For some reason they were at right metrics for me. However, looks like the market had a case of the mondays, and I’m hoping it has a case of the tuesdays, a wacky wednesday and a terrible thursday : ) Aka, lets keep it sliding, let the dividends roll in to purchase shares at a lower price and get some capital in there! Thanks for your post, glad you are a fan of those 3 as well, love that we share the same companies!

      -Lanny

  6. Very interesting purchase with GSK. According to your stock screener, you look for companies with increasing dividends. GSK doesn’t appear to be a company with increasing dividends at this time. What convinced you to purchase?

    • Joe,

      Thanks for the comment. Actually, when you average out where dividends have been, they do have a fairly nice/large dividend growth rate. 2014 dividends = $2.65, 2013 = $2.37, 2012 = $2.44, 2011 = $2.17, 2010 = $1.98, 2009 = $1.84. There was one decrease of 7 cents, but when considered your average growth rate from 2009 – 2014 = 7.72% average growth rate in their dividend. In my standard = that is pretty good, no? Let me know if you disagree and we can chat, thanks!

      -Lanny

  7. Good buys. Never looked at GSK in-depth myself, but I remember not liking something about it. Besides, I’m already long BAX, JNJ, and HYH (soon), so my medical exposure is up there already. Thanks for the research idea!

    • DDeveloper,

      Thanks for your comment. If you already have that much exposure/weighting in your portfolio, then you can either hold off, sell something you own and slide into GSK, but you can’t go wrong with what you own. I really had a low weighting, thus I added a few pieces of GSK on dips, to bring it to a healthy weight. Know what’s funny? The market so far hasn’t stopped sliding…. here we go and giddy up!

      -Lanny

  8. Lanny,

    Love the enthusiasm, my friend. 🙂

    I’ve also been busy with three stock buys over the last week or so. I call my capital my BB gun, but I suppose maybe it does have two barrels from time to time when the mood is particularly sour.

    Looks like you bought into four great companies that you’ll feel comfortable holding through thick and thin. And odds are good that you’ll be collecting more dividend income five years from now than you are today. Plus, you boosted your dividend income by a healthy amount right from the start. That’s the name of the game!

    Best wishes.

    • Mantra,

      Thanks for the post! I see you have been extremely busy, and using your acronym of the BB gun! I dig it. Also – man – talk about opportunities this week! I have to make sure I have enough capital to unload again, because there are mighty fine looking stock valuations now. On my radar since my last purchases over the few months: Aflac, McDonalds and oil companies (taking a beating). Thanks again Mantra – pumped for this to continue.

      -Lanny

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