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.