Monday, September 21, 2015

Dividend Stocks I Purchased In the Past Month

I like to keep my investing simple. I purchase shares in companies I believe to be attractively valued, when I see a track record of raising dividends and having the fundamentals to support further dividend increases. For each dollar that I invest in, I end up earning anywhere between 2 to 4 cents per year in dividend income alone. The initial amount will then grow above the rate of inflation over time. It is that simple – for each dollar I put to work today, I earn an average lifetime income of 3 cents right from the start. To reach financial independence, I need to both cut costs and increase the level of passive dividend income to meet those expenses.

I have been on this journey for eight years now. It is becoming a second nature by now:

1) Earn money,

2) Think of ways to earn more money,

3) Save Money

4) Think of ways to save more/cut expenses

5) Invest those savings wisely

6) Keep thinking how to be a more impactful investor

7) Reinvest dividends during accumulation stage



For example, if I spend $1,200/year on cable, I would need something like $40,000 invested in dividend growth stocks today. If I earn $20/hour, work 2,000 hours per year, and save 50% of my income, it would take me approximately 2 years of savings in order to accumulate $40,000. If I completely eliminate this expense however, I would be two years closer to retirement.

If my income goes up by 50% to $30/hour, and I maintain my spending at $20,000/year, I would be able to save the $40,000 within one year.

Alternatively, if I find a way to generate 6% on my capital in a sustainable way that will also maintain its purchasing power, I am also going to be able to “retire” earlier.

Saving and investing for financial independence is fun, isn’t it?

In the past month, I managed to purchase shares in the following companies.

ACE Limited (ACE), through its subsidiaries, provides a range of property and casualty insurance and reinsurance products worldwide. ACE Limited has managed to increase dividends for 23 years in a row. Over the past decade, the company has managed to boost its annual dividends by 12.30%/year. The stock currently trades at 10.90 times expected earnings and yields 2.60%. ACE will be acquiring Chubb in the near future for cash and stock. I invested the amount of cash I expect to receive for ACE shares. I would not be opposed to add to my position later in 2015. Check my analysis of ACE Limited for more information.

Diageo plc (DEO) produces, markets, and sells alcoholic beverages worldwide. Diageo has managed to increase dividends for 15 years in a row. Over the past decade, the company has managed to boost its dividends by 5.80%/year. The stock currently trades at 19.60 times expected earnings and yields 3.20%.  At this time of turbulence, it is rare to find shares in a consumer defensive company that are not overvalued. I like the company and I will likely keep adding to it slowly. Check my analysis of Diageo for more detail.

Ameriprise Financial, Inc. (AMP), through its subsidiaries, provides various financial products and services to individual and institutional clients in the United States and internationally. Ameriprise Financial has managed to increase dividends for 11 years in a row. Over the past decade, the company has managed to boost its quarterly dividends by 19.80%/year. The stock currently trades at 11.60 times expected earnings and yields 2.40%.  If the stock market falls down further, it is very likely that earnings projections and the intrinsic value could decline temporarily. This would be a good time to buy more. Check my analysis of Ameriprise Financial for more information.

The Walt Disney Company (DIS), together with its subsidiaries, operates as an entertainment company worldwide. The company operates in five segments: Media Networks, Parks and Resorts, Studio Entertainment, Consumer Products, and Interactive. I analyzed the company in 2014, and finally managed to initiate a small position in it.  The stock currently trades at 20.50 times expected earnings and yields 1.30%. I would be interested in the stock if it goes down further below $100.

Full Disclosure: Long ACE, DEO, AMP, DIS

Relevant Articles:

Coca-Cola: A wide-moat dividend growth stock to buy and hold
Dividend Growth Investing – a great strategy for long-term investors
How much money do you really need to achieve financial independence?
Is time spent learning dividend investing worth it?
Am I a successful dividend investor?

12 comments:

  1. Well done :-)

    Is Cummins (CMI) on your shortlist? If not, you might be interested in researching it.

    ReplyDelete
    Replies
    1. I added it to the list when it raised dividends by a lot a few weeks ago. Not sure when an analysis will be posted here.

      Delete
  2. Sounds like you relaxed your standards to grab some Disney? I think this is reasonable.

    I'm with you on Diageo. As for the other two I need to spend more time studying finance / insurance companies. I don't understand the moat very well.

    Do you use GTC limit orders to grab share if there is a crash? I was lucky to be watching the screen during the last one and grabbed JNJ at 85.

    -Jeff

    ReplyDelete
    Replies
    1. Jeff,

      Disney is a very high quality company, with strong brand names, and strong competitive advantages. If you check the archives ( have you?) have purchased assets that are not "perfect" in the past, but kept a lower than average position size.

      I don't use GTC orders. I also do not spend time staring at stock quotes either.

      DGI



      Delete
  3. We only have DIS in the portfolio, and I added 35% to the number of shares when the price came down close to $100 per share. Would have added more, but ran out of funds.

    ReplyDelete
    Replies
    1. DIS is a great company. I would love to own more of it at 15 times earnings, though I strongly doubt we would see such a strong decline in the next year.

      Delete
  4. OHI and JNJ were my two positions I added to in September. I plan on adding more to AMP or TROW next month, as I believe they continue to offer significant value.

    I'm torn between TRV and ACE for insurance plays, I'll probably only have enough capital to make a play on one stock next month.

    Thanks for the blog and continued posts, please keep up the good work.

    J

    ReplyDelete
    Replies
    1. Hi J, those seem like good ideas.

      I own too much JNJ unfortunately...

      The REITs do look interesting. I have looked at HCP and WPC too. The FED can raise rates to 3%, but REITs should do fine as they grow FFO. The investor should do well in a decline, since they will reinvest dividends at much better rates of return.

      I have not looked at TRV before (maybe I need to look at it), but liked ACE ( please check analysis before)

      Delete
  5. Nice purchases, DGI. I havent jumped into ACE yet, but I had CB on my watchlist for a long time. I will have to check out your analysis and take a look at the financials/overall business. I have a couple of other insurance companies on my watchlist too - but dont have enough capital to deploy at the moment.

    Best
    R2R

    ReplyDelete
    Replies
    1. I really like CB. A part of me would be happy if CB is not acquired and continues on as an independent company ( even if that would mean losing 1/3rd of its value over night). So I will have to settle for ACE

      Delete
  6. DGI,

    Nice list there. Great companies.

    I also recently initiated a stake in ACE after taking a good look at what they're doing. They're a quality insurer all by themselves, but adding CB to the mix really elevates them, in my view. Would have loved to see the legacy CB stay independent, but the newly combined company looks really solid here. We'll see.

    Cheers!

    ReplyDelete
    Replies
    1. DM,

      Thx for stopping by. I would have loved for CB to remain independent (or for me to have owned more). I agree that ACE seems like a well run insurance company, which could provide higher dividends to us for years to come. The combination of both companies should be great for ACE and shareholders!

      Good luck in your investing journey!

      DGI

      Delete

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