Sunday, December 30, 2012
It felt great to get some time off from work! I'm back in Florida from a well-needed holiday break. I spent the last 8 days in Michigan with my entire family. We exchanged gifts, sang karaoke, played games and did other crazy family stuff. It was great!
However, that doesn't mean I'm not still focused on the long-term journey. I've been a bit busy with the aforementioned family activities, so I'm back now to post about a transaction I made just before Christmas. I've been watching the stock market here and there to varying degrees during the holiday, but overall I've been content to see what 2013 brings us and sit on what cash I still have. I'm happy with the addition to my Intel Corporation (INTC) position I made earlier in the month, and I'm just as happy to add to my largest position as you can read about 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 purchased 20 shares of Philip Morris International, Inc. (PM) on 12/20/12 for $84.67 per share. Any long-time readers of this blog know that I'm a big fan of this business. They are the world's second largest tobacco company, manufacturing and selling their flagship brand of Marlboro cigarettes among other brands. They are the #1 or #2 player in almost every market they compete in. And while regulations are an ever-present risk to tobacco companies, PM is able to spread and diversify this risk across the globe. I think Philip Morris International will be a big winner over the next decade or so, as the addictive nature of their products and global scale of their operations give them a wide economic moat against competitors.
This purchase adds to what is already my largest position by far. Due to this, with PM now being a round lot of 100 shares, I'll most likely not add to this position until the rest of my portfolio catches up to it. Although I'm a believer in the medium-term to long-term success of this company, I believe in diversification as a key tool to reduce risk.
I believe PM is attractively valued here, currently trading hands with a P/E ratio of 16.52 and strong growth prospects going forward. I purchased my shares with an entry yield of 4.01%. While a strong entry yield by itself, that high yield is backed by a history of outstanding dividend growth. Previously part of Altria Group Inc. (MO), PM has raised its dividend heftily since operating as in independent company. They raised it over 20% in 2011 and increased the annual dividend payout slightly over 10% in 2012. I anticipate a low double-digit annual dividend growth rate for at least the next 5 years. The payout ratio currently sits at 68%, which while high is pretty consistent with other tobacco companies. This purchase adds $68.00 to my annual dividend payout, based on the quarterly dividend of $0.85 per share.
Although PM is currently trading for a slightly lower price than I paid, I purchased my shares with the right to receive the next quarterly dividend payout of $0.85 as PM had an ex-dividend date of 12/24/12. So, the difference is pretty negligible.
I anticipate this being my last stock purchase of 2012. Even though I have enough cash to still make one more sizable purchase, I'll likely carry this cash over to 2013 and see what the new year brings us!
With this addition I still have 29 positions in my portfolio.
Some analyst opinions on my recent purchase:
*Morningstar currently rates PM as a 3/5 star valuation.
*S&P currently rates PM as a 5/5 star Strong Buy.
I'll update my Freedom Fund in early January to reflect my recent addition.
Full Disclosure: Long PM, MO
What are you buying?
Thanks for reading.