Tuesday, August 16, 2016

Recent Transactions - 8/16/16

It's been a while since I summarized my recent transactions, so I'll do that here, and the list is longer than usual, as I am including all transactions since my last recent transactions post. This is a combination of new positions opened, as well as adding to existing positions. There were no sells for this period, so these are all adds to my portfolio.

New positions:

  • FLO: Flower Foods. SureDividend opened my eyes to this one, as it had not previously been on my radar. I had been on the lookout for adding companies in slower changing industries (to where moat sizes do not change overnight, such as what may occur within the technology industry), and it turns out that you'll find few slower changing industries than bread, as Flower Foods is a company specializing in bakery products. They are also looking to incorporate healthier organic foods into their products, which is a plus for me. Most of the metrics looked very favorable (P/E less than 20 and comparing well to its historical P/E, yield over 3.5%, dividend growth for 10 yrs, dividend growth rate of about 10%, etc). The only metric that gave me pause was the payout ratio which is high at over 60%. However, with most of the other metrics looking attractive, it shot to the top of my watch list. Then a good buying opportunity surfaced when reports of the drivers lawsuit surfaced a day before they reported that they missed earnings, which resulted in an almost 20% decline of the stock price, when it dropped to below $15/share. As a result, I loaded up with a total of 67 shares (cost basis of $15/share, giving a me a Yield on Cost of over 4%!), buying some the day of the lawsuit report, and then the remainder the day after when they reported the earnings miss. I expect to add to my position through the month of August.

  • VUG: Vanguard Growth ETF. Even though I am "Seeking the Dividends" and deep into research of traditional dividend stocks, I have harbored thoughts of getting some exposure into growth stocks, at least in my Roth IRA account for more capital appreciation. However, I could not see dropping $700+ for a share of Amazon or Google/Alphabet. I also was on the fence on whether to add a low yielder like Disney that also had growth potential. As a result I decided to start a position with this ETF which has coverage in these companies plus many others. Another plus is that this is a commission-free ETF for my TD Ameritrade Roth IRA, so I picked up a couple shares, and my intention is to keep adding to this up until I have maxed out my Roth contribution for 2016. As there are some dividend payers within this ETF, there is a small yield of about 1.4%. I expect this to provide a good balance with the other more conservative holdings in this account (ie ABT, CAH, TD, OHI, etc)

  • TGT: Target. This is by far the retail establishment I spend the most time and money in, as it is my defacto grocery store as well as department store. I really didn't think of it as a strong investment until I did some research on it from a DGI standpoint. Attractive 3+% yield, and impressive double digit percentage dividend growth. The one drawback had been the valuation. Although I was not able to take advantage of the Brexit drop to the high 60s, I did decide to start a position as I deemed it at fair value at 74, and the yield and dividend growth to pass up. I did pick up 3 shares in my Robinhood account, and I figure I will add on pullbacks to strengthen this position. In the meantime, I'll be happy to wait, collecting some dividends in the meantime.

  • OHI: Omega Healthcare Investors. I already had a couple of REITs (NRZ, VNQ ETF), but had added these in my taxable accounts, before understanding the benefit of having them in a tax-advantaged account. For a while, though, I had been wanting to add a healthcare REIT, as they operate in a space that I envision not going away anytime soon. It combines the stability of healthcare with that of real estate, and then with the fact that you have an aging boomer generation that will need these services. Although HCP is the more well known REIT in this space, it has been facing substantial headwinds, and there is an expectation that although they are the only healthcare REIT dividend aristocrat, that the dividend will be cut at some point, as a result of the impending spinoff. OHI, though in possession of a not as long dividend increase streak, appears to have a more stable outlook with regard to the dividend. There is some risk with uncertainty of the healthcare situation with the next election approaching, but these services will be needed regardless, so I feel pretty good about this purchase of 27 shares for my Roth IRA account.

For existing positions, based on my criteria, I decided to add shares of the following companies, as I like the businesses that they are in, their market/moat position, and they appeared to be either undervalued or fairly valued.

  • CSCO: Cisco Systems - 1 share
  • CMI: Cummins - 1 share
  • EMR: Emerson Electric - 5 shares
  • QCOM: Qualcomm - 1 share

For valuations, I employ a simplistic approach of computing fair values based on P/E ratio comparisons with industry and history, and averaging them with fair values computed via the Dividend Discount Model, and fair values looked up using Morningstar. I may have a future post going into more detail my strategy for determining my entry point, as well as ranking which stocks to focus on.

With all these additions, my forward 12-month dividend income is now: $1,159.20

What were your recent buys/sells?

I always enjoy about others' choices, so feel free to leave a note below in the comments.

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