Well, volatility continues to rule the market. One day, the euro zone is saved…the next day the collapse of the financial system as we know it is imminent. I don’t really pay too much attention to headlines. You know why? Dividends! No matter what the talking heads say, the companies that I invest in continue to pay out dividends which I use to reinvest so that I can compound my investments over time. When the newspapers say the end of the world is near, and the stock market takes a dip as a result, I use that as an opportunity to pounce on attractive investments. I did that again over the past week.
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.
The Dow Jones Industrial Average broke below 12,000 points this past Thursday. With all the volatility the markets were experiencing that day I decided to put my capital to work for me. I had a larger amount of capital to work with this month due to my recent sale of my Telefonica S.A. (TEF) (ADR) holdings.
For my first of three purchases this month, I purchased 35 shares of Illinois Tool Works Inc. (ITW) on 12/8/11 at $46.68 per share. I’m pretty happy with the value I received on the price I paid for my shares with ITW. This is a new position for me, and it’s been on my watch list for some time now. ITW has raised dividends for the past 48 years, with a 5-year dividend growth rate of 16.8%. This company has great fundamentals, with low debt. They produce boring, but necessary components in a variety of industries. I love boring companies! The entry yield on my purchase price is 3.08%. This holding will provide me with $50.40 in dividends over the course of the next year based on the current dividend payout. I purchased this stock at a P/E below 12 and I think it’s attractive as a long-term investment. ITW is down almost 12% on the year, handily underperforming the general market. As a value, and dividend growth, investor I look forward to purchasing a quality stock like ITW on weakness.
I also purchased 30 shares of Emerson Electric Co. (EMR) on 12/8/11 at $50.88 per share. This is also a new position for me, and another solid company that has been on my watch list for a while. I had been interested in purchasing EMR around $50 a share, as I think this is a pretty solid long-term value at these prices. EMR is down almost 10% YTD, vs. the S&P 500 at a break-even level. Another underperformer, and another purchase for my portfolio. EMR has been raising dividends for the past 55 years, which is huge. They have a 5-year DGR of 9.8%. Another company that produces boring, but necessary, products and has great fundamentals with low debt at a 0.4 debt/equity ratio. The entry yield on my purchase price is 3.14%. Based on the current dividend payout, I’ll receive $48.00 in dividends over the next year.
For my final purchase, I decided to buy 50 shares of AT&T Inc. (T) on 12/9/11 at $28.87 per share. This is another new position for me. T is an interesting choice. I think that capital gains in the form of share price increases will likely be minimal with this stock as it operates in a very competitive environment and one that is fairly saturated. However, the hefty dividend will provide the rest of my portfolio a little juice, as this holding increases my reinvestment capital availability. I don’t foresee T being a large holding of mine, but I do like the fundamentals of this company and view it as one of the stronger telecom plays available. After my recent Telefonica sale, I wanted something with a little higher yield to fill a little of the gap left behind by a large dividend payer, but something with much better fundamentals in terms of debt and management. T fills that role for now. The entry yield on my purchase is 5.95%. I just missed the 6% yield entry-point, but with T likely to raise the dividend soon, I’ll get my 6% YOC soon enough. I’ll receive $86.00 in dividends over the course of the next year based on current payouts.
Some analyst opinions on my purchases:
*Morningstar currently rates ITW as a 3/5 star valuation.
*S&P currently rates ITW as a 3-star Hold.
*Morningstar currently rates EMR as a 3/5 star valuation.
*S&P currently rates EMR as a 3-star Hold.
*Morningstar currently rates T as a 3/5 star valuation.
*S&P currently rates T as a 5-star Strong Buy.
I’ll update my Freedom Fund in early January to reflect my recent purchases.
What are you buying?
Thanks for reading.