Thursday, January 30, 2014
Dividend Increase: HCP
HCP, Inc. (HCP) is increasing its quarterly dividend by 3.8%, from $0.525 to $0.545 per share, putting the company on track for its 29th consecutive year of dividend growth (news release). Given that I own 115 shares of HCP, my quarterly dividend increases from $60.38 to $62.68 and my yield on cost becomes 5.50%. The extra $9.20 in annual dividend income raises my forward 12-month dividend total to $4,269.
Dividend Increase: CNI
Canadian National Railway (CNI) is increasing its quarterly dividend by 16.3%, from C$0.215 to C$0.25 per share, putting the company on track for its 18th consecutive year of dividend growth (news release). Given that I own 40 shares of CNI, my quarterly dividend (before tax withholding) increases from $8.60 to $10.00 and my yield on cost becomes 2.65%. The extra $4.76 in annual dividend income (after tax withholding) raises my forward 12-month dividend total to $4,259.
Wednesday, January 29, 2014
Dividend Increase: NVS
Novartis (NVS) is increasing its annual dividend by 6.5%, from CHF 2.30 to CHF 2.45 per share, putting the company on track for its 17th consecutive year of dividend growth in its home currency of Swiss francs (news release). Due to exchange rate fluctuations, it is difficult to determine the exact amount of the forthcoming dividend, which is usually paid in April. However, the exchange rate is better now than it was at this time last year (i.e., CHF is stronger), so the effective dividend increase in USD will likely be slightly higher than 6.5%.
Monday, January 27, 2014
Stock Bought: MCD
Today I bought shares of McDonald's (MCD), one of the largest restaurant chains in the world. My most recent previous purchase of MCD was in December 2013. The stock continues to be weighed down by sluggish sales growth, but I think the company is taking appropriate actions to address the issue, such as revamping its dollar menu to attract value-focused customers and renovating hundreds of restaurants to improve the dining experience. In addition, the company's sponsorship of the Winter Olympics and World Cup this year may give a short-term boost to sales.
I think MCD is slightly undervalued at the current price. It has a P/E of 17.0 (vs. a 5-year historical average of 16.8), P/S of 3.4 (vs. 3.3), P/B of 6.2 (vs. 5.7), and dividend yield of 3.4% (vs. 2.9%). Using a Dividend Discount Model with a dividend growth rate of 7% (lower than the 5-year historical rate) and a discount rate equal to the current yield plus the dividend growth rate, I calculate a fair value of $100.54. Morningstar gives a fair value of $105.00 and a 4-star rating. The average of those two estimates is $102.77, which implies an 8.6% margin of safety at my purchase price.
I bought 15 shares of MCD at the price of $93.96 per share plus commission, giving me a 3.43% yield on cost. At the current dividend rate, I can expect to receive quarterly dividends of $12.15 from this purchase, which will add a total of $48.60 to my annual dividend income. This purchase was made in my Roth IRA using rollover money and it reduced the cost basis of my MCD position in that account by 0.5%. I now have a total of 80 shares of MCD and I will receive combined quarterly dividends of $64.80. My forward 12-month dividend total increases to $4,255.
As I did with my previous purchase of MCD, I celebrated this investment with a Big Mac meal on my way home from work. :)
I have now invested all of the rollover money in my Roth IRA, which means my investing activity going forward will return to the normal level of one or two purchases per month. I just contributed $2,500 in new capital to my Roth IRA, with the goal of maxing it out for 2014 by the end of the first quarter. Once I achieve that goal, I will likely turn on Scottrade's flexible dividend reinvestment program for the remaining three quarters of the year and steer my dividend reinvestment toward whichever stock I deem to be attractively valued. I will then resume contributions of new capital to my taxable account.
I think MCD is slightly undervalued at the current price. It has a P/E of 17.0 (vs. a 5-year historical average of 16.8), P/S of 3.4 (vs. 3.3), P/B of 6.2 (vs. 5.7), and dividend yield of 3.4% (vs. 2.9%). Using a Dividend Discount Model with a dividend growth rate of 7% (lower than the 5-year historical rate) and a discount rate equal to the current yield plus the dividend growth rate, I calculate a fair value of $100.54. Morningstar gives a fair value of $105.00 and a 4-star rating. The average of those two estimates is $102.77, which implies an 8.6% margin of safety at my purchase price.
I bought 15 shares of MCD at the price of $93.96 per share plus commission, giving me a 3.43% yield on cost. At the current dividend rate, I can expect to receive quarterly dividends of $12.15 from this purchase, which will add a total of $48.60 to my annual dividend income. This purchase was made in my Roth IRA using rollover money and it reduced the cost basis of my MCD position in that account by 0.5%. I now have a total of 80 shares of MCD and I will receive combined quarterly dividends of $64.80. My forward 12-month dividend total increases to $4,255.
As I did with my previous purchase of MCD, I celebrated this investment with a Big Mac meal on my way home from work. :)
I have now invested all of the rollover money in my Roth IRA, which means my investing activity going forward will return to the normal level of one or two purchases per month. I just contributed $2,500 in new capital to my Roth IRA, with the goal of maxing it out for 2014 by the end of the first quarter. Once I achieve that goal, I will likely turn on Scottrade's flexible dividend reinvestment program for the remaining three quarters of the year and steer my dividend reinvestment toward whichever stock I deem to be attractively valued. I will then resume contributions of new capital to my taxable account.
Saturday, January 25, 2014
Stock Bought: PM
My third (and final) purchase during this past week occurred mid-afternoon on Friday, when I bought shares of Philip Morris International (PM), one of the largest tobacco companies in the world. My most recent previous purchase of PM was over two years ago (October 2011), before I had started this blog.
I think PM is slightly undervalued at the current price. It has a P/E of 15.9 (vs. a 5-year historical average of 15.1), P/S of 4.3 (vs. 1.6), and dividend yield of 4.6% (vs. 4.0%). Using a Dividend Discount Model with a dividend growth rate of 7% (lower than the 5-year historical rate) and a discount rate equal to the current yield plus the dividend growth rate, I calculate a fair value of $87.47. Morningstar gives a fair value of $93.00 and a 4-star rating. The average of those two estimates is $90.24, which implies a 9.4% margin of safety at my purchase price.
Josh Peters, Editor of Morningstar's DividendInvestor newsletter, considers PM to be a "top pick" for this year. The stock is profiled in the latest issue of the monthly newsletter, where it is acknowledged that 2014 will be a tough year for the company. However, Peters thinks the short-term slowdown in growth is already reflected in the stock's price, resulting in an excellent buying opportunity. Coincidentally, I had independently reached the same conclusion before reading the newsletter article.
I bought 20 shares of PM at the price of $81.75 per share plus commission, giving me a 4.58% yield on cost. At the current dividend rate, I can expect to receive quarterly dividends of $18.80 from this purchase, which will add a total of $75.20 to my annual dividend income. This purchase was made in my Roth IRA using rollover money. I now have a total of 70 shares of PM and I will receive combined quarterly dividends of $65.80. My forward 12-month dividend total increases to $4,206.
I think PM is slightly undervalued at the current price. It has a P/E of 15.9 (vs. a 5-year historical average of 15.1), P/S of 4.3 (vs. 1.6), and dividend yield of 4.6% (vs. 4.0%). Using a Dividend Discount Model with a dividend growth rate of 7% (lower than the 5-year historical rate) and a discount rate equal to the current yield plus the dividend growth rate, I calculate a fair value of $87.47. Morningstar gives a fair value of $93.00 and a 4-star rating. The average of those two estimates is $90.24, which implies a 9.4% margin of safety at my purchase price.
Josh Peters, Editor of Morningstar's DividendInvestor newsletter, considers PM to be a "top pick" for this year. The stock is profiled in the latest issue of the monthly newsletter, where it is acknowledged that 2014 will be a tough year for the company. However, Peters thinks the short-term slowdown in growth is already reflected in the stock's price, resulting in an excellent buying opportunity. Coincidentally, I had independently reached the same conclusion before reading the newsletter article.
I bought 20 shares of PM at the price of $81.75 per share plus commission, giving me a 4.58% yield on cost. At the current dividend rate, I can expect to receive quarterly dividends of $18.80 from this purchase, which will add a total of $75.20 to my annual dividend income. This purchase was made in my Roth IRA using rollover money. I now have a total of 70 shares of PM and I will receive combined quarterly dividends of $65.80. My forward 12-month dividend total increases to $4,206.
Stock Bought: CVX (Again)
My second purchase during this past week occurred on Friday, when I bought shares of Chevron (CVX), one of the largest integrated oil and gas companies in the world. My most recent previous purchase of CVX was just two weeks ago. A further decline in the stock price motivated me to make another purchase.
I think CVX is slightly undervalued at the current price. It has a P/E of 9.6 (vs. a 5-year historical average of 9.3), P/S of 1.1 (vs. 0.8), P/B of 1.6 (vs. 1.7), and dividend yield of 3.4% (vs. 3.2%). Using a Dividend Discount Model with a dividend growth rate of 8.5% (slightly lower than recent dividend increases) and a discount rate equal to the current yield plus the dividend growth rate, I calculate a fair value of $127.10. Morningstar gives a fair value of $130.00 and a 4-star rating. The average of those two estimates is $128.55, which implies an 8.9% margin of safety at my purchase price.
I bought 15 shares of CVX at the price of $117.14 per share plus commission, giving me a 3.40% yield on cost. At the current dividend rate, I can expect to receive quarterly dividends of $15.00 from this purchase, which will add a total of $60.00 to my annual dividend income. This purchase was made in my Roth IRA using rollover money and it reduced the cost basis for my CVX position in that account by 1.5%. I now have a total of 70 shares of CVX and I will receive combined quarterly dividends of $70.00. My forward 12-month dividend total increases to $4,131.
I think CVX is slightly undervalued at the current price. It has a P/E of 9.6 (vs. a 5-year historical average of 9.3), P/S of 1.1 (vs. 0.8), P/B of 1.6 (vs. 1.7), and dividend yield of 3.4% (vs. 3.2%). Using a Dividend Discount Model with a dividend growth rate of 8.5% (slightly lower than recent dividend increases) and a discount rate equal to the current yield plus the dividend growth rate, I calculate a fair value of $127.10. Morningstar gives a fair value of $130.00 and a 4-star rating. The average of those two estimates is $128.55, which implies an 8.9% margin of safety at my purchase price.
I bought 15 shares of CVX at the price of $117.14 per share plus commission, giving me a 3.40% yield on cost. At the current dividend rate, I can expect to receive quarterly dividends of $15.00 from this purchase, which will add a total of $60.00 to my annual dividend income. This purchase was made in my Roth IRA using rollover money and it reduced the cost basis for my CVX position in that account by 1.5%. I now have a total of 70 shares of CVX and I will receive combined quarterly dividends of $70.00. My forward 12-month dividend total increases to $4,131.
Stock Bought: WMT
I made three purchases during this past week. My first purchase occurred on Tuesday, when I bought shares of Wal-Mart Stores (WMT), the largest retailer in the world by revenue. My most recent previous purchase of WMT was in October 2013 and I wrote an article about it for Seeking Alpha at that time.
I think WMT is fairly valued to slightly undervalued at the current price. It has a P/E of 14.5 (vs. a 5-year historical average of 14.5), P/S of 0.5 (vs. 0.5), P/B of 3.3 (vs. 3.1), and dividend yield of 2.5% (vs. 2.1%). Using a Dividend Discount Model with a dividend growth rate of 10% (lower than the 5-year historical rate) and a discount rate equal to the current yield plus the dividend growth rate, I calculate a fair value of $83.16. Morningstar gives a fair value of $80.00 and a 4-star rating. The average of those two estimates is $81.58, which implies a 7.3% margin of safety at my purchase price.
I bought 20 shares of WMT at the price of $75.60 per share plus commission, giving me a 2.48% yield on cost. At the current dividend rate, I can expect to receive quarterly dividends of $9.40 from this purchase, which will add a total of $37.60 to my annual dividend income. This purchase was made in my Roth IRA using rollover money. I now have a total of 45 shares of WMT and I will receive combined quarterly dividends of $21.15. My forward 12-month dividend total increases to $4,071.
I think WMT is fairly valued to slightly undervalued at the current price. It has a P/E of 14.5 (vs. a 5-year historical average of 14.5), P/S of 0.5 (vs. 0.5), P/B of 3.3 (vs. 3.1), and dividend yield of 2.5% (vs. 2.1%). Using a Dividend Discount Model with a dividend growth rate of 10% (lower than the 5-year historical rate) and a discount rate equal to the current yield plus the dividend growth rate, I calculate a fair value of $83.16. Morningstar gives a fair value of $80.00 and a 4-star rating. The average of those two estimates is $81.58, which implies a 7.3% margin of safety at my purchase price.
I bought 20 shares of WMT at the price of $75.60 per share plus commission, giving me a 2.48% yield on cost. At the current dividend rate, I can expect to receive quarterly dividends of $9.40 from this purchase, which will add a total of $37.60 to my annual dividend income. This purchase was made in my Roth IRA using rollover money. I now have a total of 45 shares of WMT and I will receive combined quarterly dividends of $21.15. My forward 12-month dividend total increases to $4,071.
Subscribe to:
Posts (Atom)