In the past month, I bought shares in four dividend paying companies. Those purchases are in addition to the automatic dividend reinvestment I do in my tax-deferred accounts. The first two purchases were to existing positions, while the other two were for new positions. As I have mentioned before, I like to monitor companies by initiating a small position, and then add back when there is a better valuation.
I didn’t add to the dividend stocks that I had on my watchlist, because I saw other opportunities for investment. For example, it made sense to purchase shares in Yum Brands and United Technologies on the dip, rather than buy more shares of Exxon Mobil which bounced back by 20% from its lows in August.
The companies I purchased in October include:
YUM! Brands, Inc. (YUM), together with its subsidiaries, operates quick service restaurants. It operates in five segments: YUM China, YUM India, the KFC Division, the Pizza Hut Division, and the Taco Bell Division. Yum! is a dividend achiever which has managed to boost dividends for 12 years in a row. The ten year dividend growth rate is 22.90%/year. The company recently raised quarterly dividends by 12.20% to 46 cents/share. I would estimate that the annual dividend growth over the past decade will be below 10%/year, which is still a very good growth. The company is selling for a little over 21 times estimates year 2015 earnings and yields 2.60%. When I bought the stock on October 7, the forward earnings had not been revised as low as they are today. My next purchase should be below $64/share in 2015 but below $72 for 2016 assuming 20 times earnings. I last analyzed Yum!Brands a couple years ago. I should probably post a refreshed analysis soon.
United Technologies Corporation (UTX) provides technology products and services to building systems and aerospace industries worldwide. This dividend achiever has managed to reward shareholders with a dividend raise for 22 number of years in a row. The ten year dividend growth is 12.90%/year. I added to my position immediately after the company announced a new $12 billion share repurchase program. The company expects to repurchase $16 billion in stock through 2017. The stock is selling at 15.70 times expected 2015 earnings and yields 2.60%. Check my analysis of United Technologies.
Monsanto Company (MON), together with its subsidiaries, provides agricultural products for farmers worldwide. It operates in two segments, Seeds and Genomics, and Agricultural Productivity. The company has managed to increase dividends for 15 years in a row. In the past decade, Monsanto has managed to boost dividends by 20.50%/year. The stock is selling for 16.90 times expected earnings and yields 2.40%. I will be posting an analysis of the stock in the next couple of weeks. I initiated a small position in the stock, though I would be interested in adding on further weakness.
McGraw Hill Financial, Inc. (MHFI) provides benchmarks and ratings, analytics, data, and research services for the capital, commodities, and commercial markets worldwide. It operates in four segments: Standard & Poor’s Ratings Services (S&P Ratings), S&P Capital IQ, S&P Dow Jones Indices (S&P DJ Indices), and Commodities & Commercial (C&C). This dividend champion has managed to increase dividends for 42 years in a row. In the past decade, McGraw Hill Financial has managed to boost dividends by 7.20%/year. The stock is selling for 20.90 times expected earnings and yields 1.40%. I will be posting an analysis of the stock in the next couple of weeks. I initiated a small position in the stock, mostly as an easier way for me to monitor the company. I would be more interested in building out a substantial position if the stock is cheaper and yields more.
I have also been busy with tax loss harvesting on many of my beaten down energy related positions such as ONEOK (OKE), Chevron (CVX), Royal Dutch (RDS.B) and Eaton (ETN). Since I end up temporarily doubling up my positions in companies where I do tax-loss harvesting, I end up using a fair chunk of my margin balance. The opportunity to save $150 - $250 in taxes on each $1,000 in capital losses harvested, while also retaining my exposure to the company, is very valuable and worth it.
Full Disclosure: Long all stocks listed above
- Tax Loss Harvesting for Dividend Investors
- The Only Reason for Automatic Dividend Reinvestment
- Reinvest Dividends Selectively
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