Recent Buy

Well, I’ve decided to make a move in this volatile market. I believe in dollar cost averaging, and my take on that strategy is to purchase high quality equities that are fairly valued or undervalued every single month, no matter what the market is doing. I do try, however, to purchase less when the market is up and more when the market is down, but ultimately I believe in accumulating assets that pay me to own them when I have the capital available to do so. If I wait for the “perfect” time to buy stocks, I’ll be a lonely, old man.

As part of my Recent Buy series, I try to let my readers know of any equities I purchase soon after the transaction is completed. This is just one way I try to document my progress toward early retirement and financial independence.

I purchased 37 shares of Medtronic, Inc. (MDT) on 11/4/11 at $34.41 per share. All things considered, I’m happy with this purchase. This is a high quality company that has been near the top of my watchlist for some time now. I would have liked to get it closer to $32 per share, but at the time of purchase MDT is down 7.3% on the year.

I wrote about some of the reasons why I was interested in MDT recently, as it made my list of four stocks I was interested in purchasing this month. It’s a solid play in the health care field, and one of the largest medical devices company in the world. It’s a leader in its space and it’s trying to grow in key emerging markets. My entry yield on my purchase is 2.79%. This is backed by 34 years of dividend growth, so I strongly believe this is going to continue. I feel I got a pretty good value on my purchase. Based on the current payout, I’ll be receiving $35.52 in yearly dividend income from this purchase.

I still have enough capital to make one more purchase this month. I’m currently interested in Raytheon Company (RTN), Becton, Dickinson and Co. (BDX), TEVA Pharmaceutical Industries Ltd. (TEVA) (ADR), General Dynamics Corporation (GD), Lockheed Martin Corporation (LMT) and Emerson Electric Co. (EMR). I’m going to be strongly watching these six names over the next week or so.

Some analyst opinions on MDT:

*Morningstar currently rates MDT as a 4/5 star valuation.
*S&P currently rates MDT as a 3-star Hold.

I’ll update my Freedom Fund in early December to reflect my recent purchase.

What are you buying?

Thanks for reading.

Comments

  1. says

    cashflowmantra,

    Gotta love that yield! Looks sustainable based on earnings, but they haven’t had a long enough dividend history for me to tell if it’s in the company culture yet.

    An interesting note, I just quoted them on Morningstar, and it shows them down 28% after hours at $25 per share. That must be an error?! That is live, if you read this comment soon.

    Best wishes!

  2. deedubs says

    I think MDT is a good long-term investment. I bought 55 shares back in late September at $32.14, giving me a yield on cost of 3.02%. At the current price, I also have a nice capital gain of over 8%.

  3. says

    Congrats! MDT is a cash machine and very diversified. Congratulations on having it as one of the gears in your dividend portfolio machine. A nice growth rocket. I’m looking to buy some more too, myself. People always think about getting nice current yields, but I believe that part of the deferred gratification of dividend growth investing is also getting those low yield, high dividende growth stocks. Imagine, every couple of years, the dividend doubles. While you are sipping margaritas in Costa Rica in 12 years, those high raises will start looking pretty nice.

  4. William says

    What am I buying?

    Not a damn thing until the debt is purged from the system! I am aiming for early retirement as well, but it looks like I will be that lonely old man, because I simply cannot buy stocks in today’s blatantly manipulated HFT drone filled stock market.

    I practice the permanent portfolio for the most part, but would like to start building a second portfolio of dividend stocks to help boost my income. The only problem is that I simply cannot bring myself to buy anything when I know that we are broke, Europe is broke and our only idea for fixing anything is more debt! How can anyone see this ending well? Isn’t it obvious that the whole thing is being held together by wishful thinking and a hearty dose of fear? Well it is to me and so I sit on the sidelines, scouting stocks and taking notes for the day that the can can’t be kicked anymore, and the exponential math forces a day of reckoning.

    It won’t be long.

  5. says

    deedubs,

    Nice move! You got in at a great price. I feel I got in at a slight premium, but there is still limited downside and a pretty decent upside in my opinion.

    Good luck to a fellow MDT shareholder!

  6. says

    Joe,

    Thanks for stopping by.

    I certainly hope that they can keep up the dividend growth, as I’m sure you do as well. Even without huge growth, the entry yield isn’t bad and the YOC will reach pretty respectable levels in a short period of time. I’m glad to have this holding part of the DG machine!

    Take care buddy.

  7. says

    Henry,

    There are a lot of fans of the PP out there. My distaste for gold and bonds is what keeps me away from that. I think equities are pricey right now, but I see no better alternative, other than just holding cash for dips. Treasuries are not worth it to me, and I’ve voiced my concerns about gold before. I wouldn’t mind having a small percentage of my net worth in gold (under 5%), but I believe PP is 25% gold, no?

    I wish you the best of luck with that. I remember seeing charts and studies that show PP was an outstanding performer over a number of different time periods. Sounds like a great choice given your risk tolerance.

    Best wishes!

  8. says

    Mantra,

    I think you made a good purchase with MDT. People always need health care and medical devices. The yield is on the low side for me but they have a good track record of dividend growth. I recently purchased 100 shares of EPD and sold AGNC. My portfolio was overweight in mortgage reits and although the yield was insanely good I didn’t want to risk it any further and sold with a small 5% gain.

    I used to comment under Income Pirate, but recently re-branded to a more keyword friendly website.

    Nice article and keep up the good work…

    DPS

  9. says

    Hey DM,

    I know we’ve had this friendly debate before, but I’m still not convinced adding fresh capital to whichever security you feel is most undervalued at the moment is DCAing. Let me give you an example:

    If you purchase MMM and open up your position at $76.00, then let it sit in your portfolio for another year as it climbs into the mid $90s to only purchase it again when it hits $76, in my humble opinion, that’s market timing. DCAing would be placing regular intervals into MMM at whatever price it happens to be on a frequent time line regardless of price.

    On the other hand, I’ll certainly agree that you’re DCAing your flow of fresh capital, but surely you must agree with me on some level that what you’re attempting is market timing to some degree.

    Again, I don’t want to harp on your methods, simply because I use the same one, but I still believe buying securities when you believe they are properly valued is market timing, albeit a fairly safe way of doing so when choosing dividend-paying stocks with a long history of raising EPS and dividends.

    Just my $0.02

  10. says

    Pey,

    I appreciate you stopping by and commenting. I always enjoy discussing this stuff!

    I can understand what you’re saying. I guess I don’t have a better “definition” for what I’m doing. I can agree with you that I am dollar cost averaging my capital by not just investing in $20k chunks. However, it is true I don’t DCA into just one security. I try to average my yearly investment capital in at a monthly rate and purchase what I feel is best for my portfolio.

    What would be a better definition? I don’t have a way to DCA into multiple stocks, or all my positions, as I pay $7 per transaction. It would be ludicrous to try to DCA my entire portfolio and simply wouldn’t make financial sense.

    I guess I extrapolated the true definition of dollar cost averaging by referring to my propensity to invest monthly no matter what the market is doing. So I “DCA” my capital in high and low markets and try to invest less when the market is up, and more when the market is down…which is a hallmark of that strategy. In that sense I do not try to engage in market timing.

    I hope this clears it up a little bit.

    Take care!

  11. says

    Hmmm… yeah, since you’re not reinvesting your dividends, I can’t really think of a true definition of what you’re attempting with your strategy.

    Suffice to say, you’re DCAing into your retirement by purchasing stocks on a regular basis.

    And there’s nothing wrong with that, it’s truly a great strategy. Keep it up, man!

  12. says

    Pey,

    I can’t think of one either. Maybe we should come up with a definition! :)

    Just to be clear…I am reinvesting my dividends of course. I’m just not participating in a DRIP that automatically reinvests the dividends back into the company that paid them. I selectively reinvest the dividends due to valuation fluctuations..and that reinvestment may occur with the company that paid the dividend and it may not. Again, it comes down to valuation and also equity allocation. My dividends never collect for more than a few weeks at a time. They sweep into the cash side of my brokerage account and then I add fresh capital to the mix and make a buy.

    You keep it up on your end too! It’s always good to hear from you.

    Best regards.

  13. says

    Pey,

    I guess I answered my own question. I guess the only way for me to truly DCA is to participate in a DRIP. I just don’t believe that’s the best way to compound dividends..as the company paying the dividend may or may not be the most attractive opportunity at time of reinvestment.

    So…you are right. I’m not truly dollar cost averaging by the definition of the strategy, but I am dollar cost averaging my available investment capital (which includes reinvesting dividends) with the most attractively valued (in my opinion) equity available at time of reinvestment.

    Take care!

  14. says

    DPS,

    Sorry your comment got moved by accident.

    MDT certainly isn’t in the “high yield” territory now, but with their historical growth it could certainly be at 5%+ YOC within just a few years. I love to have a great entry yield, but I also look at fundamentals, the company’s story, growth potential and the products. I think MDT scores high in terms of those metrics and although it’s probably not a “steal” at current prices I think that this stock will offer pretty solid returns long-term.

    I find that high yield (6%+) usually means higher risk and I like to keep my beta and risk low, if possible, while seeking alpha.

    Best wishes!

  15. says

    Hi,

    Just wanted to say that I love your blog and will be very happy if you continue doing this. It is nice to have a goal and work towards it.

    Congratulations and keep updating.

    Regards,

Join The Discussion!