Three are three legs to the DGI tripod:
- Dividend Increases
- Reinvesting Dividends
- New Capital Investments
Today I would like to focus on the third leg of the tripod–new capital investments.
I recently made a few purchases and added approximately $3,400 of new capital to my DGI portfolio. Overall, I am really pleased with the construction of my dividend portfolio; therefore, these purchases were focused on adding to existing positions.
My position in Starbucks was opened in late June, shortly after the significant beating that SBUX had taken after announcing that they would be closing more US stores than normal and that same store growth was slowing.
Please refer to my first purchase of Starbucks stock for more details on the rationale for why I felt it was a good investment at that time.
With continued price pressure, and given that I still believe my original rationale to be valid, I took an opportunity to add another 20 shares of SBUX at a slightly lower price. On the positive side, this transaction has lowered my cost basis slightly and will add a boost to my forward dividend income.
Here is a snapshot of my most recent SBUX purchase:
Like the original purchase, the 20 new shares will add $28.80 in forward dividend income. The Divvy Dad Portfolio now holds 40 shares of SBUX with a forward dividend income of $57.60.
While I missed the chance to add more when the price dipped below $50/share, I am still pleased with adding more shares at $50.25/share.
Based on the F.A.S.T Graphs chart shared below, you can see SBUX has been trading well below the normal P/E ratio thus representing it being undervalued (although I know some may argue that as growth begins to slow).
When initially building my DGI portfolio, I had added AFLAC (AFL) but it was a much smaller position than most others and has been underweight. The stock has been down slightly since my original purchase at $44.55/share and I’ve been keeping an eye on the movement with a desire to add more.
As the stock price moved on Friday, I entered my limit buy at $43.00/share and fortunately the afternoon movement brought the price down enough to trigger my buy.
Here is a snapshot of my most recent AFL purchase:
The additional 34 shares will add $35.36 in forward dividend income and brings the Divvy Dad Portfolio to a total of 45 shares with a forward dividend income of $46.80.
AFLAC has a lengthy track record of increasing their dividend–36 years for those interested, and with the stock trading around a P/E ratio of 11 for the last 10 years it looked like a good time to add more with it being fairly valued right now.
With a 2.4% dividend yield, I would like to see a little more growth but AFLAC has been fairly consistent with a dividend annual growth rate in the 5.0% – 5.5% range over the last one, three, and five year periods. While that may not be dazzling, I consider AFLAC to be one of the steady stalwarts that will continue to pay a consistent dividend with modest increases.
Johnson & Johnson Purchase
Much like AFLAC, I’ve been watching JNJ since establishing my initial position–and similar to Starbucks, I missed out on the dip that they had that took the price below $120/share.
But after a very solid earnings report, JNJ stock had run back up near $130/share and I thought that I may have missed my opportunity to add more. However, due to concerns surrounding the multiple lawsuits related to their talcum powder, they’ve had some recent downward movement that gave me another buying opportunity.
Here is a snapshot of my most recent JNJ purchase:
The additional 8 shares will add $28.80 in forward dividend income and brings the Divvy Dad Portfolio to a total of 16.058 shares with a forward dividend income of $57.81.
JNJ shares a lot of similarities with AFLAC in that the dividend yield and dividend growth rate are not going to knock your socks off. However, with a 56-year track record of increasing dividends and no signs of that changing in the near future it represents another steady stalwart for a dividend portfolio.
At the time of purchase, JNJ was trading just a share over their normal P/E ratio and in my mind picking it up around $125/share was a fair value. With a dividend growth rate slightly better than that of AFLAC, I am happy to add shares of Johnson & Johnson at these levels.
While at least two of these three purchases may not be the flashiest of buys, one of the things that makes dividend investing so appealing to me is that you don’t have to invest in flashy companies to reap the rewards of steadily increasing dividends.
Overall, these three purchases have added $92.96 in forward dividend income to my portfolio.
Part of my approach with these purchases was to review my portfolio for underweight positions and then find which of those looked the most attractive right now. Based on my analysis, each of these purchases fit my criteria and offered a good opportunity to add more shares of solid companies at attractive prices.
What do you think about these purchases?
What are you looking to add to your portfolio?