Recent Buy

buyWhew! Feels good to be back in the game.

After not purchasing any stock with fresh capital last month for just the second time in more than four years I’m back to doing what I do best – regularly purchasing equity in high-quality businesses that reward me with rising dividends. Every share I purchase pushes me further away from the working class and one step closer to the investor class. And that’s a great transition, in my opinion, as being a member of the investor class means my money works for me, rather than me working for me. And my money doesn’t age, get tired, or get sick.

So I recently foreshadowed this most recent investment as I talked about a couple of stocks that were on my watch list for this month. And, as usual, I tend to put my money where my mouth is. I took a look at many opportunities elsewhere in the market, but kept coming around to this one particular stock. I think there’s a lot of value in following your gut, and I often follow my gut when purchasing stocks. Sometimes a stock purchase just “seems right” after performing a full analysis, and this case was no different. As such, I put some capital to work!

I purchased 15 shares of Baxter International Inc. (BAX) on 6/18/14 for $73.13 per share.

Overview

Baxter International is a global medical products and service company with product sales in more than 100 countries. It manufactures and markets medical products for hemophilia, immune disorders, kidney disease, infectious diseases and other conditions. They provide critical therapies and solutions to people with life-threatening and chronic conditions. They operate in two segments: BioScience (43% of 2013 sales on $5.8 billion in revenue) and Medical Products (57% on $9.4 billion).

This is the first time I’ve added to my position in Baxter in almost a year. And even though the stock price has appreciated quite a bit in the interim, I still think there’s some value in shares here.

A Planned Spin-Off

Now, if you follow Baxter you’ll notice the stock price shot up at the end of March, and this price action was on the heels of an announcement by the company that they will spin off the BioScience segment into a separate, stand-alone company in 2015. The company has laid out a compelling case for the split, where both companies will have diversified products with strong market positions. This should allow the two businesses to focus on their independent strengths.

The new medical products company, which will retain the Baxter name, will make full use of the $4 billion Gambro acquisition, as they currently have an approximate 33% market share of the $13 billion global dialysis product market, with an approximate 75% share of the at-home peritoneal dialysis. The new Baxter will retain the current CEO, Bob Parkinson.

The new biopharmaceuticals company, yet-to-be-named, has strong competitive advantages in the markets it serves. It’s been estimated the company has a ~45% market share of the global $6 billion hemophilia A market, with leading products in Advate and Recombinate. Ludwig Hantson, the current president of of the BioScience segment, will become CEO of this company.

This spin-off reminds me of a similar action Abbott Laboratories (ABT) performed when it separated its pharmaceutical business into a stand-alone company in Abbvie Inc. (ABBV). That move has worked out very well for shareholders, of which I was one at the time. I don’t know if the share price for the two independent stocks will appreciate like what we saw with ABT and ABBV, but I suspect BAX shareholders will end up with shares in two great healthcare companies when it’s all said and done.

Fundamentals

Reviewing the fundamentals of Baxter as a whole reveals impressive results over the last decade. Earnings per share are up from $0.62 in 2004 to $3.66 in 2013. That’s a compound annual growth rate of 21.81%, although that’s coming off a low base as Baxter had problems with competition in the hemophilia market and pricing pressure in plasma due to oversupply a decade ago. In addition, they were issuing equity to fund acquisitions. However, competition is lower now, Baxter is a more diversified company, and they’ve been aggressively buying back shares over the last five years. Revenue has grown from $9.509 billion to $15.259 billion during this same time frame, which is a CAGR of 5.4%.

Growth in global developing markets remains a key growth driver for Baxter : ~25% of sales are in emerging markets for the new Baxter, while only ~15% of sales are in these markets for what will be the new biopharmaceuticals company. This is a huge growth opportunity for the company. S&P Capital IQ predicts a 7% CAGR in EPS for Baxter over the next three years. Furthermore, the company is expected to earn $5.15 per share this year.

Dividend growth been very solid here, if still a bit unproven. The company has managed eight years of dividend growth, with a five-year dividend growth rate of 16.4%. The payout ratio currently stands at just 56.5%, and this ratio stands to lower significantly with 2014 earnings. Overall, BAX appears poised for strong dividend growth for the foreseeable future, but there is some lack of visibility here in terms of how the two independent companies will reward shareholders. In the past, however, Baxter has been anxious to return cash to shareholders, sending more than $1.9 billion shareholders’ way during 2013 – a little over $1 billion in dividends and just over $900 million in share repurchases.

Shares yield 2.84% on my cost, which is fairly attractive in this market. This is on a quarterly dividend of $0.52 per share.

Return on equity has oscillated between 21.6% and 33.8% over the last five years, which is strong. Net margin has averaged 14.89% over the last five years, finishing at 13.2% for 2013.

The balance sheet is solid, with a long-term debt/equity ratio of .96 and an interest coverage ratio of 17.4.

Qualitative Aspects

The company has many durable competitive advantages. Its renal care business is particularly strong, bolstered by the Gambro acquisition with gave it access to additional products to improve Baxter’s breadth, not to mention annual cost synergies of ~$300 million by 2017. As previously discussed, Baxter has a significant share of the global $13 billion dialysis market and $6 billion global hemophilia A market. In addition, they have significant offerings in biosurgery, hematology, fluid systems, and bio-therapeutics.

Healthcare is largely immune to economic cycles, and the company has plenty of growth opportunities here and abroad with demographic trends favoring them as humans live longer and demand for access to great healthcare grows. Penetration into developing markets should only bolster their future opportunities as many markets around the world are growing their middle classes which adds to Baxter’s potential client pool. They have significant economies of scale, great products, a strong history of solid performance, and a solid R&D pipeline with $1.25 billion spent on this budget in 2013. They have research and development activities spread throughout the world, with centers located in the US, Austria, Belgium, France, and Japan.

Risks

While there’s a lot to like with Baxter, risks remain. I think your primary risks when investing in a company like this are liability, regulation, competition, patent cliffs, and changes in technology. However, BAX has performed very well despite these challenges that are constant in their industry. Strong research and development and acquisitions that make sense should keep their economic moat strong and competition at bay.

Valuation

Shares are trading hands right now for a P/E ratio of almost exactly 20. However, looking at 2014 earnings, the forward P/E ratio drops to 14.33. So either we’ll see a P/E ratio compression over the next six months or we’ll see shares appreciate considerably. I’m willing to bet the latter with the spin-off acting as a catalyst and driving demand for BAX shares.

I valued shares using a Dividend Discount Model analysis with a 10% discount rate and a 7% growth rate. I used a slightly higher growth rate to value shares than I did last time because it’s in line with the predicted growth rate in earnings, but still far below Baxter’s own historical growth rate for both earnings and dividends over the last decade. This gives me a fair value on shares of $74.19. So shares appear pretty fairly valued here, with no real margin of safety. However, I still think there’s some value here with the upcoming split and some exciting growth that could happen due to two individual companies focusing on their independent businesses. I’ll be honest and admit I’d rather see the company stay whole as I view everything with a perspective of multiple decades, but history shows that these moves typically drive short-term appreciation.

This purchase adds $31.20 to my annual dividend income based on the current payout.

My portfolio still holds 47 positions, as this was an addition to an already existing investment.

I’m going to include current analyst valuation opinions below, as I use these to concentrate my reasonable valuation estimate:

*Morningstar rates BAX as a 4/5 star value, with a fair value estimate of $84.00
*S&P Capital IQ rates BAX as a 4/5 star Buy, with a fair value calculation of $83.00.

Full Disclosure: Long BAX.

What’s your opinion on BAX right now? Think it’s a good buy?

Thanks for reading.

Photo Credit: Stuart Miles/FreeDigitalPhotos.net

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84 Comments

  1. Hi Jason-

    I sensed you will be buying BAX, you have given enough hints recently on BAX. Have you looked into OXY and their spinoff coming soon?. I also own BAX, can’t go wrong in longterm. All the best.

  2. This blog is fantastic. I love investing and have very few people I can “talk stocks” with. I’ve started checking in every day on my lunch hour to see if there is anything new to read and I’m so glad that you post often.

    The analysis of BAX is well written and covers a lot of information in an easy to read format. Sounds like an interesting company. I’m definitely going to do my own research and see how I feel about it.

    It’s difficult to find new companies to invest in. Sometimes I feel like a get stuck in a research rut. Thanks for the new idea.

  3. I have been eyeing BAX as well recently. Problem is, I won’t have the funds to invest until some time next month. I am hoping for everyone to start hating stocks by then.

    I think the DM from 2034 will be very happy that the DM of 2014 took care of him by buying BAX.

    Best Regards,

    DGI

  4. Another great buy DM, you are $31.20 close to your financial freedom :d

    Baxter International Inc. (BAX) is great company and it is in my watch list along with Abbott Laboratories (ABT); however, I have just put off adding new positions for this year as I need some cash for down payment.

    Thank you for sharing your financial moves, really appreciated.

    Best Regards,

  5. BAX is definitely a solid pick for a dividend growth portfolio. I have to say that on a forward PE BAX looks really enticing too as you mention. As you know it is increasingly difficult finding “normal” priced stocks these days as PE’s for almost everything is sky high. I’ll be making purchases next week with a focus on some financial stocks among others. Thanks for sharing.

  6. Jason,
    I love BAX and have been considering adding to the position in my wife’s Roth IRA. You make a compelling argument that there is no time like the present to do so. Thanks for another great write-up (but you might want to fix the typo in the fundamentals section – $1.9 Billion returned to shareholders in 2013).
    KeithX

  7. just bought my first 30 shares myself last week at $73.29. Looking at the stock as you elaborately point out in this post seems to be a great pick up.

  8. I but you are glad to be back in the game! You were probably getting the shakes from withdraw 😉

    I too jumped on the Baxter Bandwagon. Last week I bought 30 shares @ $73.26.

  9. Balaji,

    I haven’t actually looked into OXY in a very long time. However, I’m already pretty fully loaded up on energy plays with BP, CVX, COP, KMI, PSX, RDS.B, and XOM. I remember OXY having some issues with executive compensation, but maybe I’ll take a look again sometime soon. Thanks for the suggestion!

    And glad to have you on board as a fellow shareholder. I believe it’s good to be in BAX here. 🙂

    Cheers.

  10. SR,

    Thanks for the very kind words! I also find it hard to talk this kind of stuff with anyone in my personal life. So it’s nice to be a part of a really great community.

    I think you’ll like what you see if you take a look at BAX, but I definitely recommend to do your own DD. Let me know what you think if you do. 🙂

    Best regards.

  11. DGI,

    I wish I had a time machine to travel to 2034 so that I can tell my future self “you’re welcome.” 🙂

    I’m also hoping stocks are cheaper next month. I’ve got less free capital than ever right now, so cheaper stocks would be very helpful.

    Thanks for stopping by!

    Best wishes.

  12. FinanceJourney,

    You’ve got it! More than $30 closer to financial independence. And every dollar counts. 🙂

    I wish you the best of luck with that new house. Looks like a good price considering the housing market up your way.

    Take care!

  13. DivHut,

    Hope you found some value in both the article and the stock. BAX’s P/E ratio is set to compress unless the price rises significantly, so we’ll see. And the separation of the biopharmaceuticals should only provide additional catalysts in the short term, so I’m glad to be on this train before it leaves the station.

    I hear you on having a hard time finding attractively valued stocks right now. I suppose I couldn’t have picked a better time to run low on fresh cash. 🙂

    Best regards.

  14. KeithX,

    Thanks for catching that typo! I fixed it.

    Glad you liked the article. I think BAX is definitely compelling here. The future is really bright with this company.

    Cheers!

  15. Brian,

    Nice purchase there! Wish I could have also picked up 30, but I’m a bit tight on capital right now.

    Glad to be a fellow shareholder. I think BAX will serve us well over the long haul. Not really much to dislike other than perhaps the price, but I think the price only goes up from here.

    Best wishes.

  16. Rob,

    Haha. I was definitely getting the shakes. I need my fix. 🙂

    Another buyer of 30 shares? Nice! I wish I could have joined you guys with double the shares. Unfortunately, I have to be extra careful right now with capital deployment. But I do hope to maybe eke out one more buy with BAX before it runs away from me.

    Cheers!

  17. I am new to investing and am a little confused to ex dividend and record date.
    If I sell a stock on the ex dividend date, will I get paid the dividend or do I need to hold until the record date?

    Thanks in advance for your help

  18. Good buy by the looks of it! And another tiny step towards your financial freedom – more dividends toy add to the pot 🙂 Great post, as always.

  19. Good pick, DM. I have BAX on my watchlist as well. I should have picked it up last year when it dropped and every other dividend growth investor was picking the stock up at $65 level. I missed that boat…but theres still an opportunity here albeit a wee bit expensive.

    Congrats on yet again increasing your dividend income going forward.

    Happy investing!
    R2R

  20. DM,

    I’ve liked Baxter for a long time now, but never pulled the trigger. I am well aware of their products mainly the IV fluid business.

    I am thinking of adding COH to my portfolio soon after the way they got crushed the last couple days and revenue warning/store closures today. As long as I feel get paid a fair amount to wait and that management will be able to turn the company around long term.

  21. BAX is a good buy, and was one I added to my portfolio when I dove head first into dividend investing back in February/March.

    I will also be making a contribution, which I do quarterly, in the next few days, likely Monday. I kicked around the idea of adding to my position in TGT with their attractive current valuation and recent dividend hike. But with a desire to bring my weights up in the utility and materials sectors I have decided that I will add to my postion in Consolidated Edison (ED), and will initiate a position in Hi-Crush Partners (HCLP).

    After reading your article on “Stage 1” stocks, I decided ED fits here nicely for me and provides good current income as I continue to fertilize my Dividend Tree. I find ED attractive as a very safe pick, supplying power to the nation’s largest Metropolitan market despite its marginal dividend growth rate.

    HCLP is more of a speculative play for me, that I think could have exciting upside as they play a vital role in the oil boom going on here in North Dakota. Living near the Bakken Formation, I get to see daily the impact of the current energy boom here and feel this is a chance to capitalize.

    As always, keep up the good work!

  22. Congrats on the purchase. I purchased 25 shares early this week at 73.50 and it was my first purchase of BAX. Hopefully, the company is able to deliver increased EPS and the spinoff creates additional value thus increasing dividends even more.

  23. You need to own the stock one business day BEFORE the Ex-Dividend date to receive the dividend.

  24. Hi DM,

    Great buy! I had Baxter in my watch list for a while but I have to admit I stopped looking at it when the price jumped due to the spin-off. Considering the P/E is still around 20, it might be a very interesting option as looking at your analysis it seems to present an opportunity for significant yearly growth.

    Great purchase and great analysis, thank you!

    Best Wishes,
    Dividend Venture

  25. Nice buy DM. I bought some shares a couple of weeks ago also. I wish I had been buying Baxter all year. I think I got on the wrong horse accumulating shares of Pfizer…..oh well live and learn.

    MDP

  26. Dont get upset here. I aint like the rest of the crowd who just tells you what you want to hear. I aint into that liberal PC BS and patting each other on the back all the time. Sorry. Hope you dont delete me cause this is america not Russia and we have freedom. Remember I told you you had some good stuff going on with buying stocks. I like a lot of stuff you do with stocks. I like your tobacco and oil stocks but you need guns too. LIke I say if you use them buy them. I smoke and own Malboro. And I dont think that smoking is as bad as they say. Its my right to smoke where I want when I want in public and I hate when people are gonna take that freedom away like Obammy wants to take away my guns. Its America and so its about freedom. Everyone drives and puts gas in so buy oil stocks. Im sick of these tree huggers tellin us what to do. Oil comes out of the ground so it dont pollute. Globe warming is just BS. Im glad you know these things and agree with me so you buy those stocks too. I got Exxon and Malboro. I also got Storm ruger and they pay a dividend. What about them. HANK

  27. Hi Jason,
    I love the comment about having your money work for you. This is one of the beautiful aspects of our approach.
    If you don’t mind me asking, how do you calculate the value using the Dividend Discount model?
    Graham

  28. I like Baxter here as well. My last purchase of the company was right around the current price. I have thought about adding more for several reasons. The spin off, current value and good metrics as you described.

    I’m also eager to get my hand on more JNJ, but I’m not sure there aren’t better values out there right now.

    Take care!

  29. Hbkid,

    You must own a stock at least one business day before the ex-dividend date to collect the next dividend. So if you own a stock the day before the ex-dividend date and sell on the ex-dividend date then you will indeed receive the next scheduled dividend.

    I hope that helped. 🙂

    Best regards.

  30. DutchDividend,

    Thanks! I think BAX represents solid value and yield here. Not a steal, but not overly expensive either.

    And healthcare is just an excellent area of the economy to be invested in, in my opinion.

    Thanks for stopping by! And great looking portfolio, by the way.

    Cheers.

  31. Happy,

    I think I took a peek at CAG real quick a while back. I don’t remember why I wasn’t interested, but maybe I should take another look. 🙂

    Thanks for stopping by!

    Take care.

  32. Good buy! I recently bought 200 shares of BAX so came to a similar conclusion. Thanks to you and a couple other dividend bloggers for mentioning it over the past month or so. We can only hope that it responds even half as well as the ABT split. I was in for 400 shares at a cost of $48. Looking at it today the combined shares are worth $95 and the dividend has grown pretty nicely as well.

  33. R2R,

    Yeah, I did initiate and shortly thereafter add to my position in BAX around that mid-$60 level. I thought there was a lot of value there, and I still think it’s at least fairly priced here. I really believe that the next 12-24 months will be very good for BAX shareholders. The increasing earnings and separation should provide plenty of room for additional dividend growth, and they have really solid and growing market positions.

    I like the GE buy, though. Great job there!!

    Best regards.

  34. JC,

    I hear you. The market isn’t offering much out there, and it just seems to keep going out. One must be selective with opportunities right now. Although, I do envy your cash pile, my friend. 🙂

    Best wishes.

  35. SWAN,

    I have to say, I’m not a big fan of COH. I remember hearing a lot about it when it dipped below $50. Then again as it went below $45. I’m just not sure about the business. Luxury fashions change over time and Kors is eating their lunch. It could be a deep value play, but I don’t feel comfortable about investing here.

    I wish you the best of luck, though, if you decide to invest in COH. Could be a great play.

    Cheers!

  36. BCS,

    I think TGT offers some value here. If my position wasn’t already as large as it is I’d be buying here. That recent dividend increase was very impressive, but they still have a lot of work ahead of them.

    I’ve looked at ED and just can’t get past that low dividend growth rate. But if it suits you and your goals I say go for it. It certainly isn’t going away anytime soon, and the dividends should continue go grow, albeit slowly.

    I’ve never heard of HCLP, but exposure to the boom certainly isn’t a bad thing! Especially with all these issues in Iraq. That just makes the idea of energy independence that much more attractive.

    Take care.

  37. DGJourney,

    Nice buy there! Glad to have you on board here as a fellow shareholder. I really think we’ll do well as shareholders. If the ABT move was any precedent the future looks bright. 🙂

    Cheers!

  38. DividendVenture,

    Thanks! Glad you enjoyed the article.

    I agree it’s not fun to purchase additional shares after a big pop, but the broader market is also up during this time frame. It’s just tough to find stocks that are actually moving in the opposite direction with good fundamentals.

    Thanks for stopping by.

    Best wishes.

  39. MDP,

    Pfizer may turn out well, but I’ve never been interested in companies that are more pure pharma like that. That was some of my rationale behind selling ABBV after the ABT spin-off. But I know some have done really well for shareholders. I just like a little more diversification in healthcare, and prefer more exposure to devices and equipment when I can get it.

    But your profile is really humming, and your regular capital contributions are incredibly impressive. Looking forward to seeing what your dividend income looks like a few months or so from now. You’re going to be killing it! 🙂

    Best regards.

  40. Dividend Diplomat,

    I prefer Wells Fargo and US Bancorp for bigger US banks. Not to say that that Chase might not turn out great, but I choose to somewhat limit my exposure to banks in general due to their habitual issues every decade or two.

    Cheers!

  41. Hank,

    I’m not asking that you agree with me or pat me on the back. But I do ask for respectful comments, and your last diatribe wasn’t. Like I said, I don’t like to censor or delete comments, but I do encourage a culture of respect. We’re all like-minded people here on equal footing.

    And this isn’t Russia, but I do own this blog and reserve the right to delete if people are being disrespectful.

    Cheers!

  42. dividendsfree,

    Money is what we all want working for us. It works 24/7, 365 days per year. And it asks for no food, shelter, or help. What more could you ask for? 🙂

    And I value stocks using the DDM as can be found in the spreadsheet that accompanies the Dividend Toolkit:

    http://dividendmonk.com/dividend-book/

    I hope that helps. 🙂

    Take care.

  43. Well well well =), look who’s been shopping! I’m happy to hear you are still swinging. I’ve heard of BAX quite a bit, but I ended up going for AMGN not so long ago.

    Right now I’m trying to keep a close eye on MDT. I don’t like it when companies split, and I like it less when they go around making large acquisitions. I’m not about to sell my shares, but I am a bit concerned.

    Thanks for the update!

  44. ILG,

    Yeah, I think BAX should do well here. I’m not in it for the capital gains, but rather I think the train will leave the station as the spin-off approaches. And when the full-year earnings are out I think a lot of investors will see the value here.

    JNJ is one of my largest investments by dollar value (oscillates with PM). I don’t think it’s cheap here, but I also don’t know if it’s ever a bad time to buy a little if it’s not grossly overvalued. It’s just a great company.

    Best wishes.

  45. gmf001,

    Nice buy there! 200 shares is very, very nice. I can only hope that one day I can deploy fresh capital like that. 🙂

    I stupidly sold ABT (and ABBV) after the spin-off. I should have just kept the shares, but I was concerned about the low yield with ABT, and I was also worried about patent cliffs with ABBV (primarily Humira). However, I did end up buying JNJ with the proceeds and that’s done well for me.

    Thanks for stopping by!

    Best regards.

  46. Spoonman,

    Hey, I’ve always got a bat in my hands. 🙂

    I hear you on MDT. The thing I’m most concerned about is the way this transaction is taxable. As I understand it we’ll be relinquishing shares in Medtronic, Inc. for the new Medtronic Plc. I haven’t seen many details regarding how this will be done, but I’m concerned about paying taxes on this.

    Something definitely to watch.

    Cheers!

  47. Congrats on adding more BAX here, we’re in good company as it seems a lot of people are loading up. It’s going to be fun to watch the split next year and it’ll be interesting to see where the overall market is at that point. Keep the great posts coming, I really loved the multi-stage rocket article. Thanks to you my rocket is slowly starting its long journey. Have a great weekend!

  48. Nice buy! I too am looking at BAX, hopefully it falls to $70 so I can buy some. The BAX is similar to the ABT split so hopefully it’ll create more value, thought I’m not a fan of spin-offs and splits. I’m also looking at ROST and TJX as potential buys.

    Thanks for the update!

  49. As several of you mention the US market starts to be expensive with high P/Es. Why do you guys not look outside the US for your investments? Do you have to pay so high fees for the trading?

  50. For some reason political rants on comment sections seems to be the fad now days. Just look at any comments section for a major online news (CNBC, YAHOO, MSN, etc).

    He could of just simply asked what he intended to ask, do you like gun stocks such as RGR?

    Personally I picked up some Smith and Wesson after that horrible school shooting when everyone was worried about more gun control. Sure enough stocks rebounded and I sold out with over a 30% profit in about 3-4 months. I just wish I had a larger chunk of money to invest at that time, you don’t get opportunities like that too often.

    Congrats on your recent buy!

  51. Hey DM,

    Have you ever thought of writing for LinkedIn? That might be a nice way to boost traffic for your blog as well. Just a thought.

  52. Ryan,

    I’m glad to hear your rocket is slowly approaching the stratosphere. Once that thing builds some momentum, there’s no stopping it! 🙂

    And I think BAX should serve us well for the long haul. I think we’ll certainly see some interesting changes over the next year or so, but they have placed themselves in a good spot for the long term in a great area of the economy.

    Best wishes!

  53. Living At Home,

    I’m with you. I’m also not a fan of splits. You constantly hear of synergies when businesses are acquired (like MDT and COV), but then we hear about focus when they split. It’s just a bunch of hype and spin. I’d rather the business stay whole with the economies of scale that affords. Typically one area of the business somehow complements another side of the business, or it wouldn’t be part of the company.

    Great looking portfolio over there. I see a lot of Stage 3 stocks with lower yields, but higher growth rates. Good stuff! 🙂

    Cheers.

  54. Fredrick,

    I do have investments outside of the US, with shares in Canadian and European companies. However, one has to be careful to consider taxation and legalities. I prefer to invest in stocks that have ADRs here on our exchanges so as to rule out issues with currency conversion and difficulties of trading stocks on foreign exchanges. Plus, I prefer not to invest in certain economies (like China) where the laws of ownership aren’t as clear as they are here in the US.

    And considering that, there aren’t many high-quality foreign companies trading for extremely cheap prices. At least, not from where I’m standing.

    Best regards!

  55. Kipp,

    Well, I viewed his last comment as rather a personal attack with political innuendos mixed in. And I’d rather stick my thumb in my eye than get in a political discussion.

    Nice move on Smith and Wesson. I’ve never actually looked at any of the major gun manufacturers, but I can see the appeal. Nice gain! 🙂

    Best wishes.

  56. dziuniek,

    I’ve actually never considered it. I didn’t even know you could write for LinkedIn. I thought that was just a professional service for sharing resumes and networking. I didn’t know they had writers? That’s really interesting! I’ll have to look into it. Thanks for the suggestion. 🙂

    Best wishes.

  57. Jason,

    I understand how you feel, I didn’t see his comment up there as a personal attack on you, but rather an attack on all other’s commenting saying you did well. He actually complimented you in the middle there before he continued the political rant. With that said we have probably invested more time than is deserved into Hank’s comment.

    Just keep building your portfolio and living frugally! That is what is important, and that is the message of your blog. Although my investing is primarily in 401/457 type accounts where I don’t have the freedom of individual stocks, I do enjoy the individual stock market and wish to build a dividend portfolio when I am able to transfers those funds to an IRA. Which is why learning about individual stocks is important to do before such a transition (even if years away).

    If you are ever in the GR area hit me up!

    Thanks,

    Kipp

  58. Kipp,

    Actually, this isn’t the comment I was referring to. He left a comment elsewhere on the blog that was uncalled for. Anyway, I agree this is more than enough time to address this. 🙂

    I’d love to meet up the next time I’m in GR. I hope to go out there at least once this summer and hit up a Whitecaps game. I love going down to that park. You can’t beat sitting right behind home plate for $14! Plus, they have great food. I actually keep going back and forth on whether or not I’d ultimately like to settle down out there, but it’s far away from family. It’s tough being a city boy stuck in the country!

    I’ll send you a note if I end up making it out there at some point.

    Cheers!

  59. Nice purchase! Added to my position in JNJ yesterday, currently my 7th largest holding (eventually get to my largest holding). I do not have a position in BAX, but it’s on my radar now. Thanks for the stock purchase ideas, as I read your blog regularly!

  60. DM,

    Nice work! Following through on your analysis, bringing in more dividend income coming forward now! The valuations were strong, solid margins and a great dividend growth rate over the last 5 years, impressive. I bet you felt pretty excited to get a purchase in, I know how antsy I get when I go a month or so without purchasing something. But that sometimes may not be a bad thing, depending on what valuations are out there. Nice job and keep at it!

    -Lanny

  61. Really like the BAX buy. Medical industry is a very bullish sector right now and especially long term outlook. I am nervous about the spinoff as share prices have to find new footing. Hopefully it will work out as BAX is in my holdings as well.

    Good Day and Grind On!

  62. Jon,

    Appreciate the readership very much. Thank you!

    And JNJ is about as solid as they come. It alternates almost daily with PM as my largest holding, and I couldn’t be happier. Just not much to dislike with JNJ.

    Thanks for stopping by.

    Best regards!

  63. Lanny,

    Yeah, not much to dislike here with BAX. Solid numbers all the way around. I think the key will be how the two independent businesses plan on rewarding shareholders, but I think that we’ll end up better off when it’s all said and done.

    And I hear you on being antsy. I suppose that my timing (this career move and sudden lack of capital) couldn’t be better because the opportunities are few and far between right now. But I still like seeing that snowball grow. 🙂

    Cheers!

  64. Asset-Grinder,

    I think we’ll be okay with the separation of the two units, but time will tell. If ABT is any precedent we’ll do well.

    In the end we’ll have a piece of two well-placed businesses. My biggest question is how they’ll handle the dividend and whether or not both entities will be able to grow their payouts.

    Best regards!

  65. I’m getting absolutely slaughtered with COH. DM calls it right: the same arguments you hear now are the same ones people had when it dipped to 50, and 45, and 40. Half of me wants to just give up on it and use it for tax loss harvesting, the other half wants to add more because I think the market is just kicking while they’re down now.

    They’ve only got 5 years worth of dividend increases, and already managed to screw it up. 5 quarters now with the same dividend. COH presents a value right now, but there’s good reasons for it.

  66. DM,
    I enjoy your in depth analysis of stocks. Most sites out there want $omething for this kind of information. You make me a better investor! Keep at it. I really need to start learning and using your Dividend Discount Model. That will help justify my buy price and give me some peace of mind.

  67. DFG,

    Thanks for stopping by!

    I’m here to help investors make better decisions. I know I could probably sell my services and make a lot more money, but I wonder if that wouldn’t be counter to what I’m really trying to achieve. It’s a lot easier to spread the message when there is no barrier to entry. So that’s my approach. 🙂

    Best regards.

  68. Jason, I bought 25 shares of IBM today. I’m now at 75. If it goes to 175 dollars per share I’ll go up to 100. How many years until yield on cost for a purchases of IBM today reaches T’s current yield?

  69. DD,

    Nice buy there. IBM definitely remains high on my watch list right now.

    I just did a quick back-of-the-envelope calculation. Assuming 15% dividend growth (may happen, may not) you’d be looking at a YOC of ~5.5% in about six years. Hard to say if that will happen or not, but I think looking out over the next 10-20 years IBM will be paying much more income by the end of that road. However, T will have paid significant cumulative dividends because the starting yield is so much higher. In the end, you have to find that correct balance between current income and growth in that income.

    Best regards!

  70. As I’m reinvesting dividends I sometimes wonder if it really makes sense to buy low yielders w high dividend growth vs the T’s, vz’s, mo’s of the world. When you are doing dividend reinvestment. Yield really grows on the high yielders. I bought a pile of VZ’S when it was absurdly low 27 dollars in 2010. With div reinvest, the original dollars invested are generating 10 percent or more already in 4 yrs.!! How long til this happens w IBM?

  71. DD,

    That’s a great experience with VZ there. The question becomes will the next four years look like the last four?

    I would caution that 10% YOC in four years is very uncommon, unless you’re starting out with very high yield. Most of the stocks I invest in have a starting yield of somewhere around 3% or so, so it takes a number of years to get to 10% YOC, even with strong growth.

    Cheers!

  72. Yes, I think the starting yield on VZ when i purchased in 2010 was in the high 6’s, maybe even close to 7.

  73. I added to my BAX position today as well. it’s always tough psychologically for me to average up on a position, but I believe this one still has room to run!

    quick question–which sites do you go to for your past and future CAGR calculations?

    also, if you had a big pile money to invest, say $20,000 theoretically–would you make one large buy of a stock, small continuous buys of that same stock (depending if the stock price went up or down), or would you make small buys of multiple stocks? I find it interesting when some investors buy one big chunk of a stock at a time, often because they have enough conviction in that stock and its value. but I’m too much of a scaredy cat to do that!

    anyway, it could be an interesting idea for an article…

  74. kolpin,

    I hear you. It’s tough to average up, but if the valuation is still good then I’m all for it. In fact, we should be glad when fair value increases over time – it means underlying fundamentals are getting better. 🙂

    I use Investopedia for my CAGR calculator: http://www.investopedia.com/calculator/cagr.aspx

    As far as the $20,000 question goes, send me $20,000 and I’ll show you! 🙂

    Just kidding, but seriously it would depend on the size of my portfolio. If this happened tomorrow I would spread it out, probably $4k-$5k per position. So I’d be buying shares in 4-5 different companies. If this were a situation where my portfolio were $500k or so then I might be more likely to go all in on one company, especially if the conviction is strong.

    Best regards!

  75. Exactly – one persons “big pile” is another’s entry position and it’s all about spreading risk appropriately. If you saw my earlier comment on purchasing 200 BAX – that’s my starting position, as I wanted some exposure to this stock. I’ve got a couple more, smaller orders where I’m bottom fishing, hoping to buy on any opening, or mid-day turbulence that might pop up to help lower my average share price. I feel I’m ‘fully invested’ in a position at somewhere between $25K – $35K, but that’s based on a sizable pool of investments – sometimes I don’t get there based on how a stock performs, sometimes I get too greedy and my secondary purchases are at levels that are too aggressively low. That’s fine by me. There’s always another worthwhile investment and many times there’s another time to dive back in. If you have a pool of $100K or so, then you’re likely ‘fully invested’ in a position at something like $3K-$4K and you’re likely not playing as many games with the purchase price (depending on brokerage fees).

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