Tuesday, November 15, 2011
I've been a bit greedy and aggressive lately. I don't know what's gotten into me. I dipped into my cash reserves this month to go a little heavy on the equity purchases. This is actually quite unusual for me, as I usually only do that when the markets experience precipitous drops. But, when I see an opportunity I strike fast. I seen a few things I liked and I decided to roll the dice and go a little strong this month. We'll see where that decision takes me in the future. What can I say? I'm addicted to dividends!
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 alluded to a purchase in my last Weekend Reading article, taking advantage of a large drop in the market on Wednesday, November 9. I was holding a little capital in my brokerage account, waiting for a drop. The market opened significantly lower on last Wednesday and I made a move.
I purchased 20 shares of General Dynamics Corporation (GD) on 11/9/11 at $63.22 a share. I think this is a solid entry price on this quality company. The entry yield on this purchase was 2.97%. Based on current payouts, this will provide me with $37.60 in dividends for the next year. I discussed some of the reasons I was interested in GD in my recent post where I asked my readers what they were buying. This company has low debt, and solid dividend growth behind it. It's trading at an attractive valuation and I'm happy with initiating a position with this company as a long-term holding.
The GD purchase was planned for the month of November. I planned for two purchases in November, and the first purchase was Medtronic, Inc. (MDT). The third purchase was not planned, but I like to take chances every once in a while. I purchased 50 shares of Vodafone Group PLC (VOD) (ADR) on 11/15/11 at $28.85 per share. VOD goes ex-dividend tomorrow, so I needed to purchase this stock today to become a shareholder of record in time to receive the next dividend payout. This stock is yielding 7.2% on my purchase price, which includes a special dividend payout from their Verizon Wireless stake. I think VOD is a solid complement to my small telecom holdings, as currently my only telecom is Telefonica S.A. (TEF) (ADR), which has vastly underperformed the market due to its exposure to Spain.
I wasn't planning on purchasing VOD, but it's been on and off my radar for a little while, and the dividend payout next year is going to be pretty significant. They are trading at a discount to AT&T (T), which was the other telecom I had been considering. They have a lower debt/equity ratio than T as well, and they have great exposure to emerging markets on a global scale. They also have exposure to the American market through their 45% ownership stake in Verizon Wireless. They have committed to a very shareholder friendly policy and have announced plans to increase their dividend by 7% annually going forward. That's more than the ~2% dividend growth that T is showing. One nice detail with VOD is that since it's a stock based in England, American shareholders don't have to pay a withholding tax on the dividend. I expect this holding to pay me $104.45 in dividends in 2012 based on the current payout. This will depend on currency fluctuations, which is one of the risks with VOD. Vodafone has grown their dividend in their native currency (Pound Sterling) since 2000. I look forward to this holding being a strong income stock to fuel growth in my portfolio.
Some analyst opinions on my purchases:
*Morningstar currently rates GD as a 4/5 star valuation.
*S&P currently rates GD as a 3-star Hold.
*Morningstar currently rates VOD as a 3/5 star valuation.
*S&P currently rates VOD as s 4-star Buy.
I'll update my Freedom Fund in early December to reflect my recent purchases.
What are you buying?
Thanks for reading.