Thursday, March 9, 2017

Recent Buys: Feb 2017 and March 2017

Hello everyone,

I am in the midst of what I expect to be my best dividend month ever, so I am happily collecting the money as it is delivered. What made that possible, however were the buys I made in recent months, so I thought I'd take some time to review them, and go through my reasoning for the purchases. Perhaps others can get some ideas from this to see if they would like to perform further research on these companies to see if they might be good additions to their watchlists.

I keep an extensive Google spreadsheet listing companies I own (24), and companies to keep an eye on (about 70, and adding to this frequently). I record various metrics (P/E, Shiller P/E, P/E histories, Industry P/Es, EPS growth rate, Dividend Growth Rate, Chowder Number, Beta, Payout Ratio, etc), and compute an average fair value based on various valuation metrics (I usually target a price 90% or lower than this calculated value to be a candidate for purchase), as well as provide a combined ranking based on these items to help me determine stocks to target either adding positions to or to start positions. As I write this, perhaps this would be a good future post idea, to go more into detail about my DGI selection system. Food for thought.

Aside from that, I look at the actual business, and see if I feel comfortable with the industry and long term direction.

Below are the companies I've added the most since the start of February 2017.

Target (TGT) - This has become quite the polarizing stock among dividend/DGI circles! It took a hit due to a substantial earnings miss and lowered guidance for 2017. Also the CEO announced that more money would be spent to bolster their online presence. Because of the drop in stock price, it has quite the attractive valuation (P/E of about 12, and 4% yield). Much of the revamping touted by the CEO and management sounds good in theory, but nobody knows for sure if will achieve the desired result. I like shopping in their stores, and it is much better shopping experience, than say Walmart. I do hope they manage to turn it around.

Some investors has sworn them off, others are all in. My portfolio is quite heavy with TGT stock (7.5%), but I am more optimistic about Target's prospects post-2017 than others. Retail is in a tough spot, but I am not as quick to declare all retail stores dead and buried. Also, TGT has been showing improvement with their online sales. Free Cash Flow is still very good, and the dividend is adequately covered by both earnings and cash. Dividend Growth has been good, though it will be somewhat less in upcoming announces than 10-20% we are used to seeing. Even in this case, it is pretty good in comparison with other dividend growers.

So, I decided to nibble on shares of TGT, and be paid to wait for them to get everything together.
I purchased 10 shares since the start of February 2017 to add to my current position, adding $24 in forward 12-month dividend income.

That being said, diversification is important to me as well, and because I am so heavy in TGT, I may build up my other positions going forward to balance it out, before returning to the TGT well.

VF Corporation (VFC) - For the longest, I had been wary of investing in apparel companies, mainly because of the perception of apparel popularity being short-lived, and a perceived lack of brand loyalty. As the VFC valuation became more attractive (P/E under 20, 3+% yield, etc), however, I gave them a second look. I learned that many of their quality brands have a loyal following, and have had that for 40+ years, all the while increasing their dividend every year for just as long. I see their product as less susceptible to the all too common retail narrative these days (ie, that all retail sucks). It is clothing, and to some degree, the "try-on" is still a useful part of the shopping experience, and if people still want to purchase the clothing online, it can be purchased online.

I have recently been paying more attention to the dividend growth rate, and VFC has an impressive 3 yr annual DGR of 18.7%.

Since the start of February 2017, I have purchased 19 shares of VFC to add $31.92 in forward 12-month dividend income.

T. Rowe Price (TROW) - After putting away a little over $100 each week to my Roth IRA account, I had enough this past week to purchase shares (For this account, the commission fee was $6.95, and I like to have $1000 on hand before purchasing shares with that commission fee). I was quite torn among a few choices for this account. I was looking at CVS, TROW, and the REIT WPC.

CVS has an attractive valuation, but some doubts have arisen about them, due to business being lost to Walgreens. I decided to wait and see on CVS.

TROW also had an attractive valuation as well, and has coverage in the financial sector, where I am pretty light with my portfolio. It is a well-respected name in investments, plus the balance sheet is very good, with very little debt.

I had been hearing good things in the REIT community about WPC (WP Carey). What is appealing is that among other REITs, they have very good diversification among different types of real estate. What gave me pause was my own lack of understanding about REIT valuation, and this investment class in general. I feel I will need more research on these types of investments to learn what makes a good investment, as opposed to just blindly following the words of a few experts.

In the end, I was most comfortable with TROW, so I decided to purchase 14 shares to add $31.92 in forward 12-month dividend income.

So 3 purchases made in February and March, resulting in a total of $87.84 in forward 12-month dividend income. Not too bad!

I look forward to future dividend payouts, especially when the dividends are raised down the road.

I also look forward to adding more to my accounts, and thus adding more to my dividend income. I will build on this over and over, until I reach financial independence.

What did you buy recently? Let me know in this comments!

4 comments:

  1. $TGT has certainly been on sale reticently. Im a fan of the company and think they will turn it around. I bought some awhile, but have contemplating taking another bite to dollar average down.

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  2. Thanks Predictable Snowball for the comment. I am optimistic about Target as well. I just think people need to be a little patient. It will be a challenge, but I like management's recognition that changes were needed, and not just offering up a bunch of cliches, like I hear on some other earnings calls.

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  3. I actually tool positions in TROW, ORI AND VFC this month. TGT is on my list but I don't be picking them up till 50$ hit

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    Replies
    1. Thanks for stopping by DD, I have been eyeing ORI as well, but it's trading right now above my fair value calculation. TGT is looking attractive, by looking at the ratios, but I am already too heavy in TGT, and not comfortable adding more at this point.

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