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