Wednesday, October 28, 2015

Two Dividend Seeds I Planted For Long Term Income

I am incredibly lucky that I have been able to share my dividend investing journey with you over the past eight years. I am also very lucky that I have always maintained a frugal attitude to costs, which allows me to save money that I invest in dividend growth stocks every single month. Every action I make today helps me get closer to my goal of living off dividends after hitting the dividend crossover point. Each dividend check is used to buy more dividend stocks, that generate more dividend checks for me. This is the power of the dividend snowball in action.

One of my favorite sayings is the following:

“The best time to plant a tree was 20 years ago. The second best time is today”

I view each dividend investment as a small seed, which could snowball through the power of compounding into a mighty tree. When I decide to retire, I expect to live off the fruit from the seed I may have planted years or decades ago. With each $1000 investment, I increase the amount of dividend income I can generate. Every dollar I generate in dividend income is a dollar for which I do not have to spend 40 – 60 hours/week in the office. Every dollar allows me to buy my own time from an employer.



I managed to buy stakes in two quality dividend growth stocks over the past week. I like purchasing shares when they are on sale, particularly when I expect them to grow earnings and dividends over time. Those investments were in addition to the companies I had added to in October already.

V.F. Corporation (VFC) designs, manufactures, markets, and distributes branded lifestyle apparel, footwear, and accessories in the United States and Europe. VF Corporation is a dividend champion, which has managed to increase dividends for 43 years in a row. The company has managed to boost dividends by 15.50%/year over the past decade. Currently, it is selling for 20.40 times expected earnings and yields 2.30%. Check my last analysis of VF Corporation.

Target Corporation (TGT) operates as a general merchandise retailer in the United States Target is a dividend champion, which has managed to increase dividends for 48 years in a row. The company has managed to boost dividends by 20.30%/year over the past decade. Currently, it is selling for 15.70 times expected earnings and yields 3%. Check my last analysis of Target on Seeking Alpha.

What did you buy in the past month?

Thanks for reading.

Full Disclosure: Long VFC and TGT

Relevant Articles:

I bought the following dividend stocks in October
From zero to $15,000 in dividend income in 8 years
Should I buy Wal-Mart stock at current levels?
Expense Report - Last Four Months
Financial Independence Is Easier to Model with Dividends

22 comments:

  1. Unfortunately no real buys for me. I've done a few small purchases with accumulated dividends in my Loyal3 portfolio but that's about it. I really like VFC although I'd like it to come down more but the earnings related selloff brought the valuation down to a much better level.

    ReplyDelete
    Replies
    1. Hi PIP,

      VFC would be a good buy below $64 and especially below $59/share. I hear you on the availability of fresh capital – so many opportunities, so little capital

      Good luck in your passive income pursuit!

      DGI

      Delete
    2. VFC has already recovered most of its post earnings announcement loss and is selling at $67.52 with a yield back down to 1.9%

      I guess I lost the chance to jump in below $64/share :-(

      Delete
  2. Picked up some VZ on 10.01 at 42.90 and added to my position of KMI 27.71 on 10.26.

    DGI, thanks for your continued posts...informative and enjoyable.

    SAK

    ReplyDelete
    Replies
    1. Hi SAK,

      Those sound like good investments to me. If I didn’t own so much KMI already, I would have considered adding to it

      Thanks for stopping by!

      DGI

      Delete
  3. Target is a great one. Old economy to be sure but profitable and predictable. Near the money puts often pay better than 12% annualized as well.

    ReplyDelete
  4. I picked up VFC last Friday at $63.46. It's up over $3 already. Gotta love when people over react. This is a stock I have wanted to add, but the price was never inline with what I calculated as fair value. Note that I didn't just buy because it was cheap (your article last week), but because the growth is still very good and the decline was not warranted on the earnings miss IMO.

    ReplyDelete
    Replies
    1. Hi Keith,

      This sounds like a pretty good reasoning to add to a company. It is smart to not only buy at a “cheap” price, but also to have prospects for growth in earnings, dividends and
      intrinsic value. Otherwise, that cheap price could end up to be a value trap.

      VFC fits those characteristics

      Thanks for stopping by!

      DGI

      Delete
  5. Hi,

    Thank you for a great blog!

    You say that TGT sells at P/E 15.7 (per Oct 28, current price is ~$75). Looking at 4-traders, and eps 4.5 for 2016 I get P/E 16.6. What eps are you using?

    This is no criticism, I'm just starting to learn to invest and I'm curious how you did your calculation.

    ReplyDelete
    Replies
    1. Hi,

      I explicitly stated that I am talking about “forward earnings” – meaning the expected earnings for Fiscal Year 2016 – the one for the 52 weeks ending in January 2016. I cannot make it more clear unfortunately.

      Best Regards,

      DGI

      Delete
  6. I am brand new and looking to buy my first dividend company, DUK. I missed my chance today, will try again tomorrow. Great Yield, fair price, a little high on the p/e but p/b is below 2 so I don't feel too bad about paying up some. The news about DUK paying a 40% premium for Piedmont Gas has put selling pressure on it which if it holds tomorrow I'll get another opportunity to pick it up at an even better price. Any downside I should be aware of?

    ReplyDelete
    Replies
    1. Rich, I've owned DUK since April, 2009 and am happy with it's performance. Be aware that DUK, like most utilities, will react negatively to rising interest rates.

      SAK

      Delete
    2. Hi Rich,

      I have not looked at DUK. I only own shares in one utility.

      Best Regards,

      DGI

      SAK,

      Thanks for responding.

      DGI

      Delete
  7. Still need to post mine but I did manage to buy last month (finally saved up enough cash).

    ReplyDelete
    Replies
    1. DFG,
      You seem to be generating $300 - $400 in monthly dividend income. Do you Drip or accumulate dividends in cash for selective dividend reinvestment?
      DGI

      Delete
  8. Picked up some CMI after the earnings report sell-off. Facing a lot of head-winds but management is good and dividend is now above 3.5.

    ReplyDelete
    Replies
    1. I have not had a chance to analyze CMI. There’s a low P/E there, but I am not sure how sustainable current EPS is.

      Delete
  9. HI DGI and fellow dividend investors,

    I recently bought High Liner Foods (listed on the Toronto Stock Exchange). It is one of North America's largest providers of frozen seafood for commercial and retail use, based our of Nova Scotia (eastern Canada). It's stock price is down ~50% in the past year. This is due largely because of the low Canadian dollar which has negatively impacted their business. It's a solid dividend grower, and is currently yielding ~3.6%. It's 5 year average annual dividend growth rate is 23.07%.

    ReplyDelete
    Replies
    1. Hi James,

      I have never hear about this company, so I should put it on a list for future research. It looks like HLF.to has managed to boost dividends for 8 years in a row.

      Best Regards,

      DGI

      Delete
  10. Especially like the quote too!

    Mike

    ReplyDelete
    Replies
    1. The quote is jam packed with great actionable information!

      Delete
  11. You consistently put out good reads and this one is another one, so thank you. DGI all the way.

    So far this month I've bought ITC, EPD, and CMI. Looking at others as the market valuations allow.

    ReplyDelete

Questions or comments? You can reach out to me at my website address name at gmail dot com.

Popular Posts