Last weekend, Lanny and I put together a watch list and man was I determined to purchase one of the two stocks I was watching. I know I couldn’t have gone wrong picking either of the stocks; however, I only had enough capital to purchase one. Which stock was it? Let’s take a look and find out.
I am sure the suspense is killing everyone, but on Tuesday I decided to increase my stake in IBM by $900, adding 5.75 shares of Big Blue. This purchase added $29.94 in annual projected dividend income and now my current position in IBM will generate $67.98 in dividend income annually. In several of my recent articles, I have discussed a desire to increase the small stakes in my portfolio to an ideal minimum of $2,000 (which I know will take a lot of capital). This purchase of IBM puts me over this floor and I am now comfortable/satisfied with the size of my position. Would I love more? Heck yeah, who wouldn’t want to own more stock in a company. However, my IBM stake is now at the point where I can begin looking at fortifying other smaller positions in my portfolio. So look out Canadian Imperial, Archer-Daniels Midland, Citizens and Northern, and other small positions in my portfolio…because I am coming after you!
So I still haven’t stated why I chose IBM. As discussed many times over the last few months (here, here, and here), IBM has some impressive metrics from a dividend growth investors point of view. IBM has a a yield of ~3.25%, a payout ratio of 32.8%, a 5 year average dividend growth rate of 14.8%, and is currently involved in a nice share buyback program. From our point of view, what is not to love? Plus, IBM increases my portfolio’s weighted average dividend growth rate; which was a goal of mine at the end of last year. IBM just made sense when considering my portfolio so I decided to ask. A quick and easy purchase.
With this purchase behind me, let’s update my goals really fast to see the impact of this purchase. This purchase pushes me even closer to one of my most important investing goals, which was to pump $15,000 of “New” capital into my portfolio (excluding 401(k) contributions and re-invested dividends). After this purchase, I have now bought $12,075 of stock from funds transferred from my checking account into my Sharebuilder account. This represents 80% of my goal. Almost there! My forward dividend income of $2,295 is now at 83% of my targeted goal of $2,750, so I still have some work to do. I wish I could be like Lanny, who just flew past $6,000 of projected dividend income this month. Congrats Lanny on the amazing progress! Lastly, I promised myself I would max out my 2015 Roth IRA contribution before the end of the year so I will not have to play cath-up in 2016. I hold IBM in my Roth IRA, so this purchase now increases my total Roth contributions for the year to $4,010. Very doable by the end of the year!
Overall, I couldn’t be happier with the buy. I fortified a position that I currently own and continued to reduce my cost basis in the tech giant. Most importantly, I moved one step closer to reaching financial freedom! Hopefully we will all see each other there soon! What do you think of the purchase? Have you bought IBM recently? Would you have bought IBM over EMR if you were me? Thanks everyone, I am looking forward to your comments.
-Bert
Bert,
Nice purchase, IBM will be around paying you for a long time. Considering how the market decided to fall off a cliff of late, I think its time to get busy. If you wanted CAT, now is a great time to look at DE with their drop just today. Plus NSC is below $80. Just insane. Us little guys cannot play the game like the big boys, but we have patience and time on our side. And we need to use those advantages to the max.
– Gremlin
Thank you Gremlin! I am just happy to finally have a large position (from my perspective) in IBM that will allow me to really reap the benefits of the future appreciation and dividend growth that will occur when their engine really gets going.
I know, I was watching the mark on Friday just shaking my head, asking myself “Why don’t I have more capital available now?” Lanny was bothering me every 20 minutes about investing in DE and CAT. Boy would those companies look nice in my portfolio right about now. Both would fill a huge hole in my portfolio and would add some oomph to my dividend income and dividend growth rate. I should have some money available next week, so hopefully the market will stay down or continue to fall in the meantime.
Couldn’t agree more. WE NEED TO PUSH OURSELVES AND INVEST RIGHT NOW! Let’s push ourselves to invest every dime and capitalize on these golden opportunities. Did you make any moves this week?
Thanks for stopping by!
Bert
Good buy guys, but I’m really glad you put together a new watchlist. We’re going to get some opportunities in the near term!!
Have a great weekend
-Bryan
Bryan,
Thank you very much. There have been so many great stocks that have taken a beating over the last month. We could probably put together a watch list of 30+ great dividend stocks. Man do I wish we had more capital available so we could take advantage of it all. These kind of pull backs can really help lower your retirement age if you have the ability to capitalize.
Have a great weekend!
Bert
No tech name for me but I can see the allure of IBM. I know it has been a fairly popular name among many DGI bloggers. Of course, these days we are seeing many new buying ops with the market in a free fall. Like ADM and any of the large Canadian banks stocks. I just added to my RY this week. Thanks for sharing.
Myself and many others in the community have pounced on IBM over the last year or so. That +3% yield is huge. Couple that with a double digit DGR as well. Very hard to stay away from.
I also own ADM and CM, so I have been watching their markets closely. CM might be my next purchase because boy has that stock taken a beating now that it is trading below $70. I own a small position in the company as well, so I may throw some money to lower my cost basis and increase my position.
Congrats on taking advantage of the dip and buying RY! Will an ADM purchase be on the horizon as well?
Thanks for stopping by!
Bert
Not a really good buy, because time in not on your side. So the falling prices fetch your dividends for the next years. Sometimes it is better to stay at the side and to do nothing. Do you take a look at the charts when you buy a stock ? So for example at friday 22 you lost the dividends for nearly one year in the IBM stock.
Gonsman,
Couldn’t disagree more here. I definitely look at the charts and price when making a purchase, but that is only a part of my decision. I also take a larger look at fundamentals such as dividend yield, dividend growth, payout ratio, and so on since these metrics are just as important for a dividend growth investor with a long term mindset. Since I am a buy and hold investor, I can’t just focus on the price or potential short-term appreciation. Why would all of the other metrics we review matter if all I cared about was whether the stock increased or decreased? For me, if the price goes down in the short-term, oh well. It just presents a greater opportunity to re-up my position and lower my cost basis in a stock that I know is fundamentally strong and is set to continue to pay a growing dividend income stream over the long haul. So I lost the value in dividends via short-term price depreciation based on one bad day in the market…oh well. I will live with my dividend income stream that will allow me to re-invest my dividends at a lower price and pick up more shares in the company. I have a chart for that, and it is a chart that continues to show my dividend income growing. That’s the most important one to me.
Bert