I’m not sure if making purchases in this market is the most prudent move. I believe the market is a little strong right now and we may see a pullback this summer. But, what if we don’t? If we end the year with the DOW at 13,000, would you be better off holding cash and sitting on a historically terrible investment and all the while losing out on dividends and letting the dividend-growth machine start its magic? I believe in being prudent, but I also believe in making regular investments and keeping the contributions going. I love few things more than compound growth. The more I continue to invest, the larger that compound snowball gets.
I made two very recent moves. I decided to purchase 25 shares of HGIC at $31.92 a share on 4/19/2011. I have a large watch list of stocks that I monitor regularly. I believe the best watch list is one’s own portfolio. If an investor decides to pull the trigger and invest hard earned money in a company then due diligence has been presumably performed and obviously one must have convictions about that decision. When a company that I’ve invested in drops far below my cost basis I look at that holding strongly. If the fundamentals haven’t changed and the market has decided to punish a stock for one reason or another then I start to think investing a little more into that position and reducing my cost basis to be a prudent action. I may have entered HGIC at a richer valuation than I should have, but I believe it was worth my first entry point. I also believe that it’s an even better value at it’s current price. I don’t want this holding to become a focus of my portfolio going forward, but I do think adding a little on weakness is a smart decision. Entry yield right now is 4.53%. This company has had strong dividend growth, as I wrote about here.
My second move was purchasing 16 shares of PG on 4/21/11 at $63.10 per share. Procter and Gamble is a strong defensive play. Many dividend-growth investors feel PG is one of the true kings of dividend-growth with their now 55 year streak of growing dividends. I haven’t written an analysis on PG yet, but the analytics on this company are widespread. It’s a great company and you know what to expect. You can expect slow and steady growth and a likely 9% growth of dividend, annually. Their portfolio of products is heavily concentrated on household goods and health care products. They are extremely focused now, recently selling Pringles. I feel getting into PG at the low $60’s range is a fantastic value for a long-term holding. This one isn’t going to spike tomorrow but that’s not what I’m looking for. I’m looking for fantastic management, a great product lineup and slow, steady growth. The entry yield right now is 3.32%.
I was going to hold out on purchasing any securities during the march of April. But, as I stated at the beginning of this article the longer you hold cash the longer it takes to get that dividend-growth machine working for you. I don’t believe in buying low and selling high for capital gains. I believe in buying value and strength at fair prices and holding forever, as long as the fundamentals and reasons for purchase remain static.
Overall, I’m excited about my purchases. I purchased PG just before the ex-dividend date of 4/27/11, so I’ll receive the dividend on the recently purchased shares.
Thanks for reading.
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