Category: Stocks

I recently became aware of what a good deal Viacom, Inc. is for a dividend stock. Viacom is an “entertainment content company” and produces, finances, and distributes content in television and film. They work with Disney, MTV, Paramount, Nickelodeon, and more.

Recently, I bought 20 shares of VIA at $48.36 per share, and then after the price dipped, I bought another 22 shares at $44.20.

Currently, Viacom’s PE Ratio is around 8, which is an insane deal considering the dividend yield is over 3.5%. Their dividend growth history only goes back about 6 years, but it has been growing about 20% every year, and with a payout ratio of only 28%, it seems like that will continue.

This puts me at $703.32/$600.00 for my annual passive income goal for 2016, and $58.61/$100.00 for my average monthly passive income long term goal. It seems that I neglected to do the math on my annual dividend income after the last couple of purchases, and didn’t realize that I REACHED MY GOAL FOR 2016!!! I will probably do a mid year review of my 2016 goals soon, it’s exciting to have one of those completed.

Today, I bought 19 shares of SBUX at $57.17 per share.

Their PE ratio is higher than my preference at about 33. Their entry yield is only 1.4%, and their dividend growth history doesn’t even reach back 10 years.

So you’re probably asking “Why did you buy it then? SBUX doesn’t meet your criteria.” The answer: I’m an opportunist. There’s nothing better than when investors freak out about good news because it wasn’t as good as they’d hoped. Starbucks’ payout ratio is about 49%, and their dividend growth rate is very impressive, it grew 25% last year. This is far more of a growth investment than an income investment.

Starbucks is a staple in our culture, many people can’t start their day without Starbucks coffee (my wife included). The company is not afraid to try new things, such as instant coffee, home coffee makers, and even potentially wine and spirit bars. Starbucks has a great history and a great future, so being able to grab some shares on a dip is a nice opportunity.

I’ve had my eye on Wells Fargo for a long time as a potential buy. The main reason, is Warren Buffett buys more shares of this company any chance he gets.

Today, I bought 20 shares of WFC at $50.18 per share.

At the time I made this purchase, their PE Ratio was about 12.36. Which is very attractive. Their entry yield is over 3%. Their payout ratio is around 36%, which is pretty low and leaves a lot of room for dividend growth.

This puts me at $544.72/$600.00 for my annual passive income goal for 2016, and $45.39/$100.00 for my average monthly passive income long term goal.

To achieve my goal of investing $15,000 this year, I’ll need to invest at least $1250 each month (on average). So let’s start this year with a bang! I was able to invest $2000 for January. The 3 stocks I was considering were IBM, MMM, and WFC. So I thought I’d share with you my decision making process for this process.

First of all, These 3 companies each match my basic criteria of a solid history of dividend growth, a PE ratio under 20, a payout ratio under 60%, and a yield over 2.5%. All three are also in short term dips (or long term in the case of IBM).

Next, let’s look at past performance and dividend growth history. 10 years ago, $1000 invested in IBM would be worth $2334 today, in MMM would be worth $3288, and in WFC would be worth $2925. IBM’s dividend grew 18% last year, and on average it grows 23% per year. MMM’s dividend grew 19% last year, and on average grows 9% per year. WFC’s dividend grew 7% last year, and on average it grows 4% per year.

In terms of price growth, they each have grown an average of about 8 to 10% each year in the past. However, the price of MMM and IBM went down 7% last year, where WFC grew 4%. Price trends usually don’t affect my long term investment decisions, but it’s interesting to note the similarities.

Right now, the thing that appeals to me most is the dividend growth potential. So I went with IBM and MMM.

I bought 7 shares of IBM at $135.29 adding $36.40 to my yearly dividend income
and 7 shares of MMM at $144.35 adding $28.70 to my yearly dividend income.

This puts me at $485.94/$600.00 for my annual passive income goal for 2016, and $40.50/$100.00 for my average monthly passive income long term goal.

I’m excited to be doing some serious damage on my goals at the start of the year.

The market has been pretty volatile over the last few months. A good number of companies have come back to equilibrium, but there are still a few depressed companies that I have my eyes on. These stocks have had a rough year, and as I’m starting to have more investing opportunities, it’s good to have a plan.

IBM

IBM has seen a few choppy years recently while trending down. However, their dividend growth has been maintained, as well as a healthy payout ratio. At the current valuation, IBM has a PE ratio of 9.2 and a yield of 3.85% which is beautiful. It’s not especially popular with 12 quarters of lower revenue. However, Warren Buffett is stockpiling IBM shares right now, which makes me think he knows something we don’t.

WMT

Walmart recently announced a bleak future for the company’s earnings in 2016 and 2017, in combination with their performance, this means WMT is down 30% for the year. This puts the PE ratio at a very attractive 12.6, and the dividend yield around 3.2%. The earnings growth potential over these next couple years isn’t going to be great, but if the price gets depressed further, the dividends will be reinvested at a discount. I’m liking the idea of stockpiling WMT over the next couple years to make bank when they recover and return to growth.

These are the opportunities I have my eyes on currently. I’m also watching Starbucks (SBUX), Yum Brands (YUM), and Whole Foods Market (WFM). How about you, what companies are on your watch list?

This is a bit of a belated post. A couple weeks ago, I purchased 22 shares of VZ at $46.39

At the time, the PE ratio was 18.4 and the dividend yield was 4.8%. Since then, the price has come down, and it is currently yielding over 5%, so maybe you can capitalize on my lack of patience. This investment adds $49.28 to my yearly dividend income, and $4.10 to my average monthly income.

Putting me at $414.44/$500.00 for the annual passive income goal and $34.54/$100.00 for the monthly passive income goal. These numbers are probably a little off due to dividend reinvestment, but I’m getting really close to my $500 per year goal.

I’ve written before about why I like Verizon. You can check it out here.

I’ve owned Johnson and Johnson (JNJ) in my personal account for some time. Recently, there has been a nice price dip in the company and I’ve been able to pick it up for my Joint account that I disclose to all of you.

Back in September, I bought 10 shares of Johnson and Johnson (JNJ). I regret not being able to post about it at the time, but I want to rectify that by sharing it now. I bought those 10 shares at $91.28, which is a better deal than you can get today, but I think it’s still a good buy today as well if you’re looking.

Today, JNJ’s P/E ratio is 16.54, and the dividend yield is 3.19%. This investment adds $30.00 to my yearly dividend income, and $2.50 to my average monthly income. JNJ is also a Dividend King and has raised their dividend every year for 53 years! That’s the kind of history I can get behind.

Putting me at $335.22/$500.00 for the annual passive income goal and $27.93/$100.00 for the monthly passive income goal.

This purchase doesn’t bring me to any major milestone, but it is the first stock in this portfolio that will pay a dividend in February, May, August, and November. So those months will no longer be $0 dividend months for me, and I’ll now be getting dividends every month of the calendar year. So that’s cool!

Last week, I bought 25 shares of Coca Cola (KO) for $42.04 per share. I covered some of the reasons that I love Coke in another article (Taking a sip of Coke). At the time of this purchase, the PE ratio was over 23, the payout ratio was over 68%, and the yield was 2.9%. These statistics might seem unfavorable based on my usual entry criteria. However, this is a company that we miss having in our portfolio, and technical indicators on its stock chart are not indicating the price will get much lower in the near future. The reason these stats look this way is their EPS is lower than when I wrote the previous article ($1.93). I have no reason not to expect growth next year.

This is a case where I would rather buy a wonderful company at a mediocre price than a mediocre company at a wonderful price. Additionally, its dividend is poised to be raised next year, which should push the entry yield for this purchase over 3%.

It’s also important to keep track of where this purchase puts me in terms of my goals.

This is one more company on the path to 10 companies, putting me at 4/10 for that goal.

This is (at current yield) $30.50 per year, putting me at $226.42/$500.00 for the annual passive income goal. Almost half way there!

It also works out to $2.54 per month, which certainly isn’t much, but every little bit adds up. It puts me at an average of $18.86 per month, almost 20% of the way to my $100/month goal.

As 2014 is coming to an end, now is an excellent time to take a good look at our current status and our goals for next year. In a recent article, I said I was going to rededicate myself to transparency. So I’m going to take this opportunity to share the current holdings in the account I track on this blog.

This is my joint account with my wife, and we’re hoping to use the dividends from this account to become financially independent. This is what it looks like (Ticker – shares – annual dividends paid):

BP – 50 shares – $120.00 per year
CVX – 9 shares – $38.52 per year
MCD – 11 shares – $37.40 per year

My goal going forward is to share the new stock purchases I make as I make them.

I had some yearly goals for 2014 that I will talk about in another post closer to New Years Eve. However, there are some other goals I want to start tracking here for both short and long term. These are kind of milestones, but could also be though of as achievements in a video game.

Goals:

– Save 50% of our joint income for at least one month (in other words, keeping our expenses below 50%).
– $500 forward annual dividend income
– $1200 forward annual dividend income ($100 per month average)
– Own 10 companies
– Own 20 companies

These goals are obviously not massive in scope, but they are the targets I want to achieve on my way to financial independence. It’s unlikely I will achieve all of them in the coming year, so these goals do not have deadlines. However, it will keep me on track to how how much closer to each goal I am with each purchase that I track here.

The dividend growth investor loves to see high quality businesses trading at a discount. The problem is that the “good deals” are hard to find these days. The overall market is up, real estate is recovering, and nobody seems to be flailing their arms and desperately selling their shares. Times are good, but that means opportunity is limited.

If we turn the clock back to 2011 or 2008, great deals on dividend stocks were easy to find because there was panic in the streets. Stock prices were falling, which created more panicked selling which lead to even lower prices. If you weren’t viewing stocks as dividend engines, you’d be freaking out that your portfolio was plummeting. These were huge opportunities for dividend investors to pick up some great deals.

I had not found my strategy yet when those price dips came around. So now, I’m hoping for another chance to get in on the ground floor. I’m hoping, people panic.