Tuesday, August 25, 2015

Weekly Purchase 1


 
The market is down. The market is up. I have no idea if the market will go south, or recover like last November.


What is clear is that I need to continue to invest in high quality dividend stocks - one or two positions weekly while trying to keep within my 0.5% fee threshold. After one year of DGI investing, it is also clear that I am lousy at timing the market.


So, I've started using sharebuilder plan from Capital One where you can invest regularly with lower fees. The drawback is that you need to make sure purchase decision the previous business day.



Using my screener and portfolio as a guide, I've built my wish list for the next few weeks. I will add to my existing positions that are under exposed. Eg 1-2 positions.


With everything close to fair value and less, the portfolio building process is easier this week.


My first weekly purchase is JNJ. Unfortunately, my capital is low this month - so only one purchase this week.


Date
Action
Security
Price
Quantity
Amount
8/25/2015
Buy
JNJ
94.36
8.4367
$796.05


My criteria table is shown below.


JNJ 8/2015
Area
Criteria
CheckList
Comment
Quality Company
Dividend Growth
>5 years
Yes
53 Years
ROE/Op Margin
Stable
Yes
Stable
Long term Avg Growth
Stable
Yes
Stable
FCF over Dividends
Yes
Yes
FCF covers Dividends
M* Moat
Wide Moat
Yes
Wide
M* & S&P
Credit Rating
> BBB+
Yes
AAA
Cash to Debt & Interest Coverage, Debt to Equity
Cash Debt >1 or Interest Coverage > 5
Yes
Cash to Debt
Interest Coverage
Debt to Equity 27.14
M* & S&P Stars
> 3 Stars for both
Yes
M* 4 Stars
S&P CapIQ 4 Stars A+
Payout Ratio
<60%
Yes
50.00%
Dividend Growth
& Yield
Dividend Yield
>3%
No
3.10%
Dividend Growth
>5%
Yes
7.30%
Chowder
>12%
No
10.40%
Valuation
Yield/Avg Yield
>1.1
No
0.97
Dividend Yield Theory Mid Point
Below Mid Point
No
Mid Point 93.16
Low Point 78
P/E
Below Mid Point
Yes
Median 17.66 Current 15.99
DRRM
~10%
Yes
Assuming 6.5% growth; projected return=10.92%
M* Estimate
<M* est
Yes
M* 99
S&P Estimate
< S&P cap IQ est
Yes
S&P Cap IQ 120


I think JNJ is fair at around 95-100. So my purchase is close to fair value. The drop at the end of the day brings the price close to low 90s - so it is clear the market is very volatile.

The purchase increased my estimated yearly dividend income by $25.31


With this approach, I am caring less about the market swings. It is not optimal (eg I missed yesterday's black Monday, as well as the today's last hour drop), but then I am finding that it actually doesn't matter if my focus is on dividend income & growth. For sure, a 10% drop in the market affects the portfolio total but the impact to income is minimal (assuming I've picked quality companies with excellent dividend growth.)


Do you invest regularly using Capital One Sharebuilder plan?


D4s

4 comments:

  1. Great purchase, Div4Son. Really cant go wrong buying JNJ - esp when its 3%+ yield.

    cheers
    R2R

    ReplyDelete
    Replies
    1. R2R,
      I agree. Its good to load up when you can.
      D4s

      Delete
  2. Congrats on the purchase D4s! I have already seen 5 other bloggers post JNJ buys this week. Looks like a hot stock and what a great company to own. Nice work!

    ReplyDelete
    Replies
    1. Adam, thanks. I didn't get it in the 80s, but I will just continue to invest.
      Eventually, it will even out.
      D4s

      Delete