Recent Buy – IBM

As it turns out I was not able to sit on the sidelines too long after my purchase of Emerson Electric last week.   On Friday I was paid, which means I had $400 readily available to invest since I have a portion of my paycheck automatically deposited into the checking account linked to Sharebuilder.   I have been watching a lot of stocks over the last month or so as a result of the Greece turmoil and the general pullback in the market that recently occurred, which has caused a lot of great dividend growth stocks to become discounted.   I purchased one of the stocks on these watch lists, the question is…which stock was it?

Ah, yes….Big Blue.   Even though I spoiled it in the article’s title, I added 2.5141 shares of IBM to my current stake, increasing my forward dividend income by $13.07.  I am now the proud shareholder of 7.31 shares of IBM!  So why IBM over the other stocks on my various watch lists?   First, as shown in our July Watch List, IBM passes the Divided Diplomats’ Stock Screener with flying colors, sports a current dividend yield of 3.25% and a forward payout ratio of only 32%.   On top of the solid fundamentals, management has shown its commitment to rewarding shareholders as the company continues to buy back shares regularly and their five-year average dividend growth rate is 14.88%.  Some pretty solid and impressive metrics.

In our last watch list article, I mentioned that I wanted to begin using capital to increase several positions in my portfolio.  Due to the availability of cash over the years, I was forced to initiate some small positions in companies (<$1,000) with the intention of adding to the stakes over the years.   I hate having small positions and would one day love to have a minimum position of $2,000 in every stock in my portfolio.   Unfortunately, that takes time and capital.  Even though I have tried  to run a lean cash position like Lanny recently, I still have a long way to go to reach a minimum investment of $2,000.  I thought I had missed the boat on IBM as the stock price rose into the $170s over the last month and I was kicking myself for passing on re-upping IBM countless times over the last 8 months.   Luckily for me, I was presented with another opportunity to invest in Big Blue as the company had a nice pullback after their last earnings release.   I was able to re-up my position when the stock was trading at ~$160/share, which is actually lower than my initial purchase price last year.

While I know there are mixed reviews about IBM and it seems like investors either love or hate the company, I saw enough positive information in their recent earnings release and 10-Q to continue to buy into management’s long-term strategy (which convinced me to buy the stock in the first place last year).  The company is continuing to invest in new business initiatives and cloud services and the investment is beginning to show results.  A strategy change for a company the size of IBM is not a quick and easy process and it will take time.  Since I am a buy and hold investor, I am willing to wait and will continue to collect a >3% yield along the way.  If the price remains the same or falls further, this won’t be the last time I write to you about investing in IBM!

What do you think of my purchase?  Are you looking to initiate or add to a position in IBM?  Would you have added to IBM or the other stock on my Watch List, Canadian Imperial, as Canadian banks have taken a beating over the last month?  Do you have a minimum investment threshold?

Thanks everyone for stopping by. I am looking forward to reading and answering your comments!

Bert

Facebooktwitterredditpinterestlinkedinmail

11 thoughts on “Recent Buy – IBM

  1. Wow, IBM is one of the largest stocks that mr Buffett invested in. The well established well diverse biz of IBM will be here for a longtime for you to continue to rift the dividend. Nice buy!

    • Thanks Vivianne! The size, capital, and changing structure are some of the biggest pluses in my opinion and help me weather the short-term storms. Plus, as you said, it doesn’t hurt having Mr. Buffet as a fellow shareholder. Now, if only my stake was as large as his 🙂 I don’t see the DGR slowing down too much over the next few years.

      Thanks for stopping by!

      Bert

  2. Great Purchase Bert. It’s nice to have various income sources instead of banking just on a few companies. Make our own ETF’s sort of thing. I like diversifying and it’s nice to add to big Blue. Keep at it and follow your own gut and strategy and needs. All we can do is support you. Thank you for sharing and keep hustling it up!! you hear me!? 🙂 Cheers my friend.

    • Thanks Hustler! Right, over time these portfolios grow into our own etf/mutual fund. But what makes it great is that we have complete control over the stocks that enter and exit the fund. Show me a manager that allows their shareholders to do that haha

      You know I won’t stop hustling until I reach financial independence. As always, thanks for stopping by and your support since you have joined the community. Take care my friend!

      Bert

    • Thanks Tawcan. What isn’t there to love about the stock as a long-term dividend growth investment. Hopefully when all is said and done I will be able to call IBM one of my largest holdings before the year is over. I love being a fellow shareholder with all of you and Mr. Buffet.

      Take care and thanks for stopping by!

      Bert

  3. Bert,

    Nice move here. IBM still strikes me as one of the best values in the market. I’m all topped up on my position, but I’m certainly glad to have you as a fellow shareholder! 🙂

    Looking forward to collecting growing dividends for years to come…

    Best regards.

    • Thanks DM! You and Lanny have been preaching IBM for a long time now and I agree, it is an extraordinary discount when you consider the long-term dividend growth prospects of the company. I was upset when the stock appreciated at the beginning of the year and felt like I missed out on a great buying opportunity. Now that the stock price has receded, I am not going to miss out once again. So I am anticipating a few more purchases along the way until it is one of my largest purchases.

      As I said in an earlier comment, I couldn’t be happier calling myself a fellow shareholder with everyone in the community and Mr. Buffet. Thanks for stopping by and the kind words!

      Bert

  4. I read Thomas Watson Jr’s autobiography and walked away impressed with the culture at IBM which I don’t think is going to fundamentally change, ever. My grandfather worked his entire career at IBM and I’ve had one share all my life and never thought anything of it. With the share price trading at about 128 right now and the 1.40 dividend, I will be making DCA purchases for years to come. It felt great pulling the trigger.

Leave a Reply

Your email address will not be published. Required fields are marked *