Wednesday, December 19, 2012

Dividend Stocks I Purchased Over the Past Two Months

As I mentioned in my dividend retirement plan, I am an investor in the accumulation phase. I plan on being financially independent in a few years through my contributions of fresh capital into new or existing positions that are trading at attractive valuations. In addition, I also focus on strategic reinvestment of distributions into companies with whose stocks meet my entry criteria. While I do follow several strict criteria for initial screening, a large part of my asset allocation is invested based on qualitative characteristics and my own biases.

I also try to follow a strategy, where I stop contributing to an existing brokerage account, once my contributions reach $100,000. As I explained in an earlier article, the purpose behind this strategy is to ensure that I do not lose my whole nest egg if a broker fails and I have more than $500,000 invested there. I assume that over time, my $100,000 investment is going to produce capital gains that would eventually lead to my account balance exceeding $500,000. If stock prices rise by 7% annually in the future, I would likely exceed that account balance in over two decades from now.

I typically purchase somewhere between one to three investments each month. My lot size has increased over the past 3 years, as I no longer invest using brokers that offer free trades. As a result, it is much cheaper to spend $5 - $7/trade by investing $2000 at a time, rather than investing $1000 at a time. This means that if I purchase two securities on average every month, I might end up adding to an existing position approximately once an year, sometimes even less often. This is because my portfolio consists of over 45 individual stocks, although I find less than 30 or so to be worthy of my future investment dollars. The rest are holds either because they are overvalued right now ( Yum! Brands(YUM)), have slow or no dividend growth (Con Edison (ED)), or have an abnormally high weight in my portfolio (Phillip Morris International (PM)).

Over the past two months, I invested in the following companies:

Chevron Corporation (CVX), through its subsidiaries, engages in petroleum, chemicals, mining, power generation, and energy operations worldwide. This dividend champion has managed to boost distributions by 8.80%/year over the past decade. Chevron has raised dividends for 25 years in a row. The stock trades a t8.80 times earnings and yields 3.40%. Check my analysis of the stock.

Aflac Incorporated (AFL), through its subsidiary, American Family Life Assurance Company of Columbus, provides supplemental health and life insurance. This dividend champion has managed to boost distributions by 20.40%/year over the past decade. Aflac has raised dividends for 30 years in a row. The stock trades at 8.90 times earnings and yields 2.60%. Check my analysis of the stock.

Unilever PLC (UL) operates as a fast-moving consumer goods company in Asia, Africa, Europe, and the Americas. This dividend achiever has managed to boost distributions by 9.90%/year over the past decade. Unilever has raised dividends for 12 years in a row. The stock trades at 20.80 times earnings and yields 3.30%. Check my analysis of the stock.

Air Products and Chemicals, Inc. (APD) provides atmospheric gases, process and specialty gases, performance materials, equipment, and services worldwide. This dividend champion has managed to boost distributions by 11.10%/year over the past decade. Air Products and Chemicals has raised dividends for 30 years in a row. The stock trades at 15.30 times earnings and yields 3.10%. Check my analysis of the stock.

Abbott Laboratories (ABT) engages in the discovery, development, manufacture, and sale of health care products worldwide. his dividend champion has managed to boost distributions by 8.70%/year over the past decade. Abbott Laboratories has raised dividends for 40 years in a row.The stock trades at 16.20 times earnings and yields 3.10%. Check my analysis of the stock.

McDonald’s Corporation (MCD) franchises and operates McDonald's restaurants in the global restaurant industry. This dividend champion has managed to boost distributions by 27.40%/year over the past decade. McDonald’s has raised dividends for 36 years in a row. The stock trades at 16.90 times earnings and yields 3.50%. Check my analysis of the stock.

Enterprise Products Partners L.P. (EPD) provides midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, refined products, and petrochemicals in the United States and internationally. This dividend achiever has managed to boost distributions by 7.60%/year over the past decade. Enterprise Products Partners has raised distributions for 15 years in a row and yields 5.20%. Check my analysis of this master limited partnership.

In order to add to new or existing positions, I tend to look at valuation, portfolio weight and my outlook for the enterprise over the next few years. I am sometimes willing to add to my position in a stock, even if doing so would result in an above average weight for a short period of time, if shares are trading at a relatively low valuation.

Full Disclosure: Long CVX, AFL, UL, APD, ABT, MCD, ED, YUM, PM

Relevant Articles:

My Dividend Retirement Plan
Reinvest Dividends Selectively
Stress Testing Your Dividend Portfolio
A dividend portfolio for the long-term

6 comments:

  1. Just wanted to say "Hi" and tell you I've been reading your posts on dividend investing for a couple of years now. Love seeing your analyses. I'm following a similar strategy, aside from having made the choice to use DRIP reinvesting on my positions, rather than accumulating dividends and investing them in something else. Just lazy that way.

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  2. Thanks for your blog, in the past 6 months I have purchased Chevron at 100.65, MCD at 87.52, and I already own APD, Enterprise Products and a few other dividend growth stocks that I began purchasing in late 2009 and early 2010. Thanks again for your blog, very helpful.

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  3. I wish I had bought some CVX the last time it dipped down below $103 but I'm sure that chance will come again. I try to add to positions when I get the chance but some of the positions that I'd really like to add to just haven't had the pullbacks giving good valuations.

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  4. Love your blog. Just number crunching, if you are planning on a few $$million to sustain your dividend goal, you will need a number of brokerage firms to 'spread the wealth' if you stop each one at $100k. How many do you have, how many do you expect to need and can you rank the best 1-10 in your opinion based on customer service, service levels and fees?

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  5. In my view, all of these are good buys.

    I think MCD, AFL, and CVX were particularly good long term plays.

    Generally, I invest less frequently than 1-3 times per month, since my lot size is usually 100 shares (or multiples of 100 shares if the stock price is low). I make exceptions for highly priced shares such as IBM.

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  6. DGI,

    Nice moves here and I appreciate you laying out some of your strategy. Really good stuff, and I'm on the same wavelength as you.

    I agree with Matt. AFL, CVX and MCD all represent pretty good opportunities here on a valuation and growth basis.

    Best wishes!

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