Recent Buy

The last month has seen round after round of headline news about slower growth, a “new normal” economy, Greece, eurozone debt problems and the like. All that talk and the S&P 500 is down 2.9% over the last 30 days. Not what most people like to see, unless, of course, you’re a net buyer of stocks and accumulating assets for long-term investments at the cheapest price possible. Since that’s exactly what I am, I’m buying.

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 15 shares of Chevron Corporation (CVX) on 5/15/12 for $102.06 per share. I have been watching CVX lately after the recent 11% dividend raise, increasing the quarterly payout from $0.81 per share to $0.90 per share. This was the second dividend increase in 6 months and the 25th consecutive year of increasing dividends. I was hoping to see CVX closer to $100 or lower after the recent weakness in oil, but I did want to purchase CVX before it goes ex-dividend on 5/16/12, so I purchased just in time. I don’t try to time my stocks, but I do try to get an attractive long-term entry point. It may draft lower from here with weak oil, and if it does that gives an excellent opportunity to increase ownership in a fantastic integrated oil company.

Chevron is the second largest oil company in the U.S. They have worldwide exploration, production and refining operations.

CVX is a wonderful dividend growth stock. It’s currently attractively priced at P/E ratio of 7.41 and P/B ratio of 1.6. With 25 years of dividend growth behind it, I see no reason this won’t continue. I’m no genius, but I do know that 10 years from now people will still have to fill up their vehicles with gasoline and engines will still need lubricating. The entry yield on my purchase is 3.53% and this addition will add $54.00 in yearly dividend income to my annual total. CVX has a wonderful balance sheet with extremely low debt and the payout ratio is only 26.5%.

I’m not sure if I’ll make another purchase in May. I still have a little capital left over, but I may keep a small cash position as I look forward to June. EMR, JNJ, MCD and PM are all on my shopping list if I do decide to buy more equities this month.

With this recent buy I still have 27 positions in my portfolio.

Some analyst opinions on my purchase:

Morningstar currently rates CVX as a 4/5 star valuation.
S&P currently rates CVX as a 5/5 star Strong Buy.

I’ll update my Freedom Fund in early June to reflect my recent addition.

What are you buying?

Thanks for reading.

Comments

  1. says

    Looks good DM, I like the direction the market is heading.

    Right now there are a lot of companies that look attractive to me. EMR, GD, OMI, MCD, APD, oil stocks. Maybe PM.

    Even AAPL took a tumble! Funny how things change so quickly.

    • says

      Compounding Income,

      I agree. I also like the direction the market is heading. This bodes well for asset accumulators like you and I.

      I like your shopping list. EMR and MCD are near the top of my list, along with PM. I haven’t had my eye on GD, but it is attractive now that it crossed over the 3% yield mark again.

      I hope things continue like this!

      Best wishes.

  2. Dividend Dude says

    Great purchase, I’m just about ready to pounce on CVX. Great dividend raise and management has indicated they will continue with more strong dividend raises. I hope to buy soon!

    • says

      Dividend Dude,

      If you buy, you’d be getting a better price than I did. I agree with you; management has been extremely shareholder friendly.

      Stay in touch.

      Best wishes!

  3. says

    Dividend Mantra, nice purchase on CVX. CVX was one of the first stocks I purchased for my dividend growth portfolio and I have been happy with the performance so far. The dividend increases are nice and I suspect they will keep coming.

    Energy companies like CVX and XOM have a lot of money on their books and a lot of room to give back to their shareholders. I want a slice of that pie!

    Good luck!

    • says

      Dividend Fool,

      Thanks for stopping by! I’ve purchased CVX a few times now, but I unfortunately did not purchase it when I purchased other oil stocks back in the summer of 2010. I missed CVX back when it was really cheap…but of course I was buying other cheap DG stocks instead.

      I want a slice of that cash pie as well. Mmm…cash. Yummy.

      Take care!

  4. says

    Nice purchase! I have been very tempted to buy some CVX myself and if I had more money at the moment I probably would. Maybe, just maybe, the market will be kind to me and keep CVX at these prices until I have more capital. :)

    • says

      Deedubs,

      CVX would make a fine purchase at current levels, in my opinion. But, of course, there are a number of fine purchases available currently. You made a strong move with MCD and there is plenty of opportunity for you.

      I hope you have fun!

      Best wishes.

  5. says

    Great buy, DM. CVX is one of my personal favorites. The dividend increases are awesome, it’s a stable company, and the current price is attractive. Great addition to your portfolio, and thanks for sharing. I look forward to reading every post on your blog, keep up the great work!
    All the best,
    Ian

    • says

      Ian,

      Thanks for stopping by!

      CVX is definitely a strong company. Although its earnings are based on the underlying price of oil, it still operates with a ton of profits and is more than willing to share the wealth. I like that!

      Thanks for supporting the blog.

      Best wishes!

  6. says

    I recently purchased some more LO, I want to buy more on further weakness.

    Regarding CVX, this one was recommended by my morningstar newsletter as a buy right now. I’m comparing it to BP. Given the problems of BP, it really isn’t at that much of a discount to CVX (P/E 5 versus 7).

    CVX has a higher dividend than XOM because the stock is cheaper. The payout ratio is the same.

    • says

      SFI,

      I agree with you on the comparison between CVX and BP. Big Oil in general is cheap, so I don’t feel comfortable with BP at current levels. If I wanted a slightly higher yield I’d go with COP. If I wanted a foreign oil company with a high yield I could go with TOT (which I own). TOT’s yield is even higher than BP, although it’s not a traditional dividend growth play.

      Take care.

  7. Chad says

    Good buy on CVX. Like you I also like JNJ and MCD at these prices. Looking to possibly add one of these before the month is up.

    • says

      Chad,

      There are a number of strong opportunities currently on the market after the recent pullback. JNJ and MCD are both stalwarts that are a little cheaper than they were just recently. JNJ hasn’t moved as much, but I think once the recall troubles pass and earnings rise once again this will be a steady stock to own once more.

      Best wishes!

  8. says

    Yes Chevron is the best one yet from largest 10 of US stocks that I have researched. Very balanced cash flow distribution and other ratios. I would purchase this share if I would have some capital for that at the first place. Then probably Intel.

    • says

      Financial analysis,

      I like the way you think! I just purchased INTC recently and of course now CVX. I guess we like the same companies. Of course that’s probably because they are both very strong companies with great balance sheets, offering rising dividends and trading at attractive valuations. It’s like shooting fish in a barrel.

      Best wishes!

  9. says

    Over the last few months I’ve been fairly conservative with my purchases, picking up shares of SYY and EXC for the long haul, so this month I took the opposite side of the spectrum and added to my position in SuperValu (SVU).

    With a dividend yield of 6.8% and a debt reduction plan in action, I think they just might be able to turn things around over the next five years or so. If they do (I have my fingers and toes crossed right now), I’ll be sitting on a rather decent capital appreciation gain and a monster dividend yield. Many analysts — though I’m not really one to take their advice generally — are calling for a $10.00 price within the near future.

    Guess we’ll have to wait and see. Here’s to hoping!

    • says

      Pey,

      SVU should be exciting, almost as exciting as the Law & Order TV show! :)

      Hey, you gotta live a little…right?

      I wish you the best of luck with your recent buys. SYY and EXC seem to be pretty decent value plays right now. EXC has been cheap for a bit, allowing you to really build your position.

      Best wishes!

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