Tuesday, April 10, 2012
So, the market have finally cooled down. The weakness we've experienced over the last week or so has been most welcome by many of us value seekers and dividend investors. I don't know if we're on the cusp of a major sell-off or if this weakness is just a quick cooling off period. The market did get a bit ahead of itself, in my opinion, so the drop across all sectors is not surprising. I was holding on to some capital waiting for a pullback and I got what I was waiting for. I may have jumped the gun, or I may have timed things perfectly. I don't know. What I do know is that I buy when I see attractive long-term opportunities, and I found a couple over the last couple of days. I'll share them below.
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 first purchased 60 shares of Southside Bancshares, Inc. (SBSI) on 4/9/12 for $21.63 per share. I first heard of this company by reading a Compound Income's recent report on the dividend increase by SBSI. I became intrigued after reading the short report and decided to take a deeper look and I liked what I saw. This is a risky play, that I'll admit. Not only is it a bank, but it's a very small bank. But, this purchase fulfilled a couple of criteria for my portfolio. First, I wanted small cap stock and I wanted a bank. I had neither. I now have both. I love diversification, and I think SBSI gives me some exposure in the financial sector through a small, but growing, bank. The P/E ratio is currently at 8.57, the P/B ratio is 1/3 and P/CF ratio is 4.7. The balance sheet is moderately weak, one of the few blemishes on this otherwise stellar stock. The yield on my purchase price is 3.70%, based on a $0.20 payout quarterly per share. This purchase will add $48.00 in yearly dividend income to my annual total.
SBSI is a holding company that owns 100% of Southside Bank. The bank has $3.3 billion in assets and operates 48 banking centers throughout Texas. This company has been very shareholder friendly with a 18-year track record of raising the dividend, with a 5-year dividend growth rate of 15.5%. It also has a track record of doing annual stock dividends and special dividends. This stock has already come down from where I purchased it at and if it goes down another 5% or so I would consider adding to my position. It's down 2.45%, compared to the +8% S&P 500 performance YTD. The payout ratio currently stands at 32.4%.
My second buy was purchasing 25 shares of Raytheon Company (RTN) on 4/10/12 for $51.16 per share. I've discussed my affinity for RTN a number of times on this blog, and I think it's a solid company and attractive at the current prices. I recently mentioned it was a company high on my immediate watch list and a company I was interested in, and I made good on that. It's currently trading for a P/E ratio of 9.65 and a P/B ratio of 2.1. The entry yield on my purchase is 3.90%, which is extremely attractive in the low-interest rate environment we currently find ourselves in. Although the anticipated slowdown in military spending has a number of defense companies trading at a discount, I feel some of these concerns are overblown. Global conflict is (unfortunately) a never-ending saga. The complex systems that Raytheon produces are as needed as ever. It's been a fairly strong performer on the year, up over 5.5%, but I still think it's attractive at its current price. Based on the $0.50 quarterly dividend per share, this stock will add $50.00 in yearly dividend income to my annual total.
RTN has a strong balance sheet with a history of rising earnings and revenues. The 5-year DGR is 12.1%, with an 8-year streak of rising dividends. The payout ratio is a lowly 37.8%, so even with a slowdown in earnings there is still room for the dividend to be raised.
With the recent purchases, I now have 27 positions in my portfolio.
Some analyst opinions on my purchases:
*Morningstar does not follow SBSI.
*S&P does not follow SBSI.
*Morningstar currently rates RTN as a 3/5 star valuation.
*S&P currently rates RTN a 3/5 star Hold.
I'll update my Freedom Fund in early May to reflect my recent purchases.
What are you buying?
Thanks for reading.