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.