Today I bought more shares of Exxon Mobil (XOM), the largest publicly traded oil and gas company in the world. Last week I published an article about XOM on Seeking Alpha that summarized some information gathered during my research.
I bought 15 shares of XOM at the price of $85.90 per share plus commission, giving me a 2.92% yield on cost. At the current dividend rate, I can expect to receive quarterly dividends of $9.45 from this purchase, which will add a total of $37.80 to my annual dividend income. My forward 12-month dividend total increases to $2,852. This purchase was made in my Roth IRA with new capital that maxed out my contribution for 2013. I now have a total of 30 shares of XOM (15 in my taxable account and 15 in my Roth IRA) and I will receive combined quarterly dividends of $18.90.
When my monthly paycheck hit my bank account yesterday, I determined how much money could be allocated toward investments and transferred $2,800 in new capital to my brokerage, of which $1,235 went into my Roth IRA and $1,565 went into my taxable account. When I looked at my watch list today, I saw that XOM was trading slightly lower than where I had purchased it last week, so I decided to go ahead and double my position. I am now satisfied with the overall size of my XOM position, which is about equal weight (in terms of both market value and dividends) with my CVX position.
I also noticed that another stock on my watch list had reached my target price, so I made a second purchase today, using the new capital in my taxable account. It is a new position in my portfolio and I plan to write an article about it soon for Seeking Alpha. In the meantime, can you guess what stock it is?
Update: A few readers guessed correctly that I started a position in WMT. I just finished submitting an article about WMT to Seeking Alpha that will hopefully be published in the next day or two.
Was it BAX?ReplyDelete
A good guess, but no. However, I've noticed that a few other dividend growth investors have been buying BAX lately.Delete
Nice XOM purchases and I'm guessing you also nibbled on WMT. Maybe KO.ReplyDelete
Not sure what I'll purchase this month, but TGT, WMT, and XOM top my list at the moment.
Congratulations, you were the first to guess correctly -- I did indeed buy shares of WMT. Incidentally, KO and TGT are also high up on my watch list.Delete
My guess is OReplyDelete
Another good guess. I'm still watching O and I hope to start a position in the near future. However, given that I've maxed out my Roth IRA for the year, I might wait until 2014. (I prefer to hold REITs in my Roth.)Delete
Ok its got to be one of these WMT, KO, MCD, O, PMReplyDelete
I will exclude MCD as you had indicated that you would add at $95.
(educated guess based on your articles from last month review)
But I got to pick only one guess - its likely WMT
Yep, it was WMT. The others you mentioned are on my watch list.Delete
Great job here. Hard to go wrong owning a piece of XOM over the long haul.
Interested to know what your other purchase was. Tough to guess. Some retailers look attractive (WMT, TGT), as do some REITs. I recently purchased BAX, so that's at the top of my mind as well. Looking forward to the SA post.
DM: Some retailers do indeed look attractive. I looked at both WMT and TGT, then decided to go with WMT. However, TGT remains on my watch list and I wouldn't mind starting a position in it, too.Delete
I'm guessing TGTReplyDelete
It was WMT rather than TGT, but as mentioned above, TGT remains an investment candidate for the future.Delete
My guess it's OHI or WMTReplyDelete
My investment in HCP has satisfied my allocation in healthcare REITs, so I didn't buy OHI, but your guess of WMT was right on the mark!Delete
My guess is TGT as well. It has fallen the most recently of all my DGI watchlist stocks.ReplyDelete
I have had XOM on my watch list for a while, but can't bring myself to pull the trigger on it as it has returned -3.7% in the past year while the SPY is ~20%. I know its a great company, but I wonder if it is a great investment.
Another good guess of TGT.Delete
Regarding your take on XOM, it's important to remember that past performance is no guarantee of future results. For example, this year's "losers" might be next year's "winners" and vice versa. Indeed, the decline in XOM's price has made it a better value than many other stocks out there, which could attract some buyers and result in a good return going forward. However, I try not to get caught up in stock price trends; instead, I prefer to focus on the dividend stream and its growth from year to year, which is an area where XOM has done well lately.
I have read some of your articles and appreciate your style of investing in dividend growth stocks. My concern really is that lot of these blue chip companies have relatively lower future growth potential and the dividend they send are liable to taxes if you especially own them in your taxable account. This erodes the overall returns further. While picking strong companies seems like fun, considering that everyone invests to maximize their returns, I just want to hear your take on why you shouldn't consider companies that have potential for higher revenue/profit growth while giving out increasing dividends (if not as much as the current blue chip companies).Delete
Anonymous: Thanks for your feedback. A major consideration in my investing decisions is whether a company is likely to continue increasing its dividend for several more years. Blue-chip companies with established records of dividend growth are likely to do so, even though their revenue and earnings growth rates might be modest.Delete
However, I do not exclude investment in companies with higher growth rates. Examples of higher-growth companies in which I'm invested are CMI, ROST, UNP, and VFC. A few others are on my watch list but not in my portfolio mainly due to concerns about valuation. I find it challenging to make valuation judgments for companies with above-average growth rates, in part because I don't want to pay too much for that growth.
Regarding taxes on dividends, it is true that they have a negative impact on overall returns. However, given that I'm paying taxes on a growing income stream that I wouldn't otherwise have, they aren't that big of a deal to me. Moreover, I've started to minimize the tax burden by holding some stocks in a Roth IRA.