Recent Buy

buyThe market goes up and down – sometimes wildly so – from day to day, but it mostly goes up over the long haul.

That’s something I try to keep in mind while I routinely turn rotting dollars into growing and passive cash flow. There was a day, years ago, when The Coca-Cola Co. (KO)‘s stock seemed expensive at $5.00. And I’ve seen that phenomenon play out in real-time over a short period of time – I’ve been at this for less than six years, yet I lament not being able to buy more KO at $26.39, which was the price I paid when I initiated a position in the company back in July 2010.

So while I strongly advocate not buying overvalued stocks, keep in mind that the stock market is filled with thousands of stocks. And while some may very well be pricey at any given moment, there are likely many others that aren’t. Moreover, what might appear to be a price on the upper end of what you’d be willing to pay may become cheap in hindsight when looking back on it. While inflation may be low right now, I think the opportunity cost of sitting on cash over a long period of time is as high as ever.

With that said, I recently took advantage of what I think is a really solid opportunity on a stock that’s dangling in value territory right now. While this stock isn’t necessarily of superior quality across the board compared to its nearest peers, I think the price warrants strong interest right now. It’s basically a company that operates at a similar level to many others in its space, but is available for a somewhat significant discount, pushing its yield well above its recent historical norm.

I purchased 65 shares of CenterPoint Energy, Inc. (CNP) on 10/6/2015 for $18.62 per share. I then added another 15 shares on 10/20/15 for $18.56 per share.

Overview

CenterPoint Energy, Inc. is an electric and natural gas utility company. They own a portfolio of energy-related businesses that serve customers across six states.

They operate a traditional regulated utility business by providing natural gas distribution and electric transmission & distribution services to customers primarily in the cities of Houston and Minneapolis.

However, the company differentiates itself through its 55.4% limited partner interest in Enable Midstream Partners LP (ENBL), which is a midstream pipeline master limited partnership that owns and operates over 21,000 miles of interstate, intrastate, and gathering pipelines in the Mid-Continent region. The partnership also owns and operates natural gas processing and storage facilities.

Founded in 1882, CenterPoint Energy and its predecessor companies have history dating back more than 140 years.

Fundamentals

CenterPoint’s fundamentals are rather solid, though not necessarily any better or worse than many other utilities in general. I view this as a stable and defensive investment that, when bought at the right price, could provide for rather attractive long-term total return.

So we’ll take a look at revenue and profit growth over the last decade first to see what we’re working with.

Top-line growth has been challenging for the firm; revenue is roughly flat, slightly decreasing from $9.277 billion to $9.226 billion from fiscal years 2005 to 2014. This isn’t completely uncommon among larger, more mature utility companies.

Earnings per share, however, has grown nicely over this time frame. EPS is up from $0.75 to $1.42 over the last 10 fiscal years, which is a CAGR of 7.35%.

That growth seems to be largely possible through improvements in profitability, though that has its limits. For perspective, S&P Capital IQ is predicting that CenterPoint will compound its earnings at a -2% annual rate over the next three years. If realized, that would be a somewhat significant bifurcation from CenterPoint’s recent guidance: CenterPoint is guiding for 4% to 6% annual earnings per share and dividend growth through 2018.

When comparing CenterPoint to many other larger utilities, I find their growth to be pretty respectable. However, where the stock diverges in terms of its attractiveness right now is its dividend.

First, the company has increased its dividend for the past 10 consecutive years, so we can see the company has a proclivity for rewarding shareholders with increasing dividends year in and year out. Not the most impressive pedigree around, but I view that as a great start, especially when combined with earnings reports that routinely specifically discuss continued dividend growth.

The 10-year dividend growth rate is also very impressive for a utility company, coming in at 9%. However, this has in part been fueled by an increasing payout ratio.

We can see the payout ratio currently stands at 81.1%, which doesn’t offer nearly as much wiggle room for dividend growth as what the company was afforded a decade ago when the payout ratio was roughly half that.

The most recent dividend increase came in at 4.2%, which is roughly in line with forward guidance. That would be my expectation for the foreseeable future.

Now, dividend growth in the mid-single digits isn’t necessarily eye-popping when looking at most stocks. But it’s pretty exciting when we consider that the stock currently offers an outstanding yield of 5.33%.

That yield, by the way, is significantly higher than the five-year average yield of 4.1% for this stock. So investors buying in today are getting a yield about 120 basis points higher than what the stock typically offered over the last five years. That’s pretty appealing, especially in a low-rate environment.

Debt-wise, CenterPoint operates much the same as most utilities, which is to say in a rather leveraged manner.

The long-term debt/equity ratio is 1.76 and the interest coverage ratio is slightly under 3.

In absolute terms, these numbers leave a lot to be desired. However, this level of debt isn’t all that far off from what a number of other larger utility companies operate with. Notably, though, CenterPoint is more exposed to debt than most other utility companies by the very virtue of its ownership of Enable Midstream Partners, so this is something to be mindful of.

Profitability metrics are more than suitable. Over the last five years, the firm has averaged net margin of 6.04% and return on equity of 16.5%. Good, solid numbers here.

Qualitative Aspects

I’ve long been lukewarm on utility companies. They’re heavily regulated, which limits potential growth. While they’re allowed a relatively attractive return on investment by the government, there are natural caps to that. Furthermore, they’re generally geographically limited in terms of expansion.

But in exchange for that you’re buying into what essentially amounts to localized monopolies. You have a captive audience where there is usually very limited competition, and the services that companies like CenterPoint offer are those that people literally cannot live without. Power is ubiquitous for obvious reasons, which lends its hand to generally stable results and a fairly defensive investment, all considered.

As such, I do have a small place in my portfolio for a select few companies in the Utilities sector. What really attracted me to CenterPoint is fourfold.

First, they have no electricity generation assets/capability. I view this as a positive. They don’t have those legacy generation assets that could require expensive conversions away from coal and toward cleaner, more renewable sources of energy.

Second, they differentiate themselves through their ownership in Enable Midstream. While a headwind right now due to lower energy commodity prices, this could be a really nice growth kicker when looking out over the long haul. At the very least, it diversifies the company away from the regulated utility business. This adds risk, however.

Third, I think the valuation right now is very compelling, as I’ll go over shortly.

Fourth, their prime markets are healthy and growing. Houston and Minneapolis offer two of the more exciting and economically vigorous metro areas in the country. While Houston might be somewhat of a mixed bag over the near term due to its exposure to the oil & gas industry, all the reports I’ve come across show a pretty strong and diverse economy. And as I went over a moment ago, utilities are ubiquitous and necessary. You don’t lose your job and then cancel your electricity.

Risks

The company operates with a large amount of debt. Rising interest rates could make this more burdensome. In addition, its ownership in Enable Midstream exposes it to more debt than the average utility company.

Rising interest rates could also make the stock less attractive from an income standpoint.

Its exposure to Houston could prove to a be a short-term headwind due to recent volatility in the oil & gas industry.

Lower commodity prices serve as a headwind for Enable. This could limit distribution growth to CenterPoint, which could in turn limit earnings per share and dividend growth to CNP shareholders.

Valuation

The P/E ratio for CNP stands at 15.21 right now after dropping ~20% YTD. That’s pretty appealing from a number of standpoints. It’s well under the broader market, though rightfully so, in my view, due to relatively limited growth prospects. But it’s also well below the P/E ratio of 20.2 the stock has averaged over the last five years. It also compares very favorably to almost every other utility I’ve come across, which is made even more appealing by the potential growth offered by its exposure to the midstream space. And as mentioned earlier, the current yield is substantially higher than the five-year average. It’s also much higher than what most other utilities offer right now.

I valued shares using a dividend discount model analysis with a 9% discount rate and a long-term dividend growth rate of 4.5%. That dividend growth rate is on the low end of recent guidance so as to build in a margin of safety. So I believe that’s a pretty reasonable assumption moving forward, although sustained lower natural gas pricing and any unfavorable changes in home markets could prove that to be not conservative enough. That said, I view this as a reasonable expectation looking out over the long haul. The DDM analysis gives me a fair value of $22.99.

Conclusion

All in all, I view this as a pretty standard utility when looking at its regulated businesses. But the exposure to midstream assets, lack of electricity generation, and placement in some of the best areas of the country all wet my appetite more than usual.

Above all, though, I think this stock is most attractive at this very point in time simply due to the valuation and yield. The valuation is much lower than it’s been over the last few years, consequently pushing the yield much higher. When compared to most utilities, especially those with heavy generation exposure, this is an opportunity that should really be carefully considered. I’m not necessarily interested in going crazy here, but I’m more than pleased to be able to buy into a small position in CenterPoint at this price.

I’ll quickly note that I have a rather large handful of free trades right now, which is why I was able to split these transactions up like I did.

These purchases add $79.20 to my annual dividend income, based on the current $0.2475 quarterly dividend.

I’m going to include current valuation opinions from other analysts below, which I use to concentrate my reasonable valuation estimate:

Morningstar rates CNP as a 4/5 star valuation, with a fair value estimate of $23.00.

S&P Capital IQ rates CNP as a 2/5 star “sell”, with a fair value calculation of $18.10.

I’ll update my Freedom Fund in early November to reflect this recent purchase.

Full Disclosure: Long KO and CNP.

Have you taken a look at this stock? Like it? Why or why not? 

Thanks for reading.

Photo Credit: Stuart Miles/FreeDigitalPhotos.net

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76 Comments

  1. Good to see the Recent Buy articles are back, to some degree at least.

    I know you’ve always been not-too-thrilled with utilities, so a company like this is a bit of a curveball for you. Still, definitely an interesting one. I like the safety that the utilities provide, and even with CNP’s unique structure of being a utility that’s not really a utility (am I right that they are simply a holding company so they own other utilities/utility assets rather than being a utility business themselves like ED and SO?), it still offers a product that we use every single day without a second thought. With my computer plugged into the wall and using the power from that, I’m literally using a utility company’s product right now. That’s amazing.

    Great buy, Jason! Also, first comment! Yes!

    Sincerely,
    ARB–Angry Retail Banker

  2. Very good valuation Jason, nice & easy reading. I’m still gathering my BB’s to fire off my next shot but it’s slow coming ha, ha. I see you have made quite a few new (and existing) purchases yet this is the first Recent Buy post in a long time. Do you have a back log to get through or are you going to be a little more selective in what purchases you post? I can only imagine your work load as your site / way of thinking / dedication is taking off.
    Thanks for all you do, it’s good to see these posts again… they are one of my favourites.

  3. ARB,

    Yeah, it feels good to put this one out. I think the stock definitely warrants some attention, especially with a lot of utilities selling for much higher valuations (and lower yields) even while the overall growth prospects aren’t that much greater.

    Most utility companies operate under holding companies, so you sometimes get that regulated businesses bolstered by something that offers a bit more potential reward at the cost of more risk. But CNP really differentiates itself in a number of ways. All in all, I’m happy to buy it here. My exposure to the sector is still very, very low, but I like what I see.

    Love that ubiquitous and necessary nature, which certainly allows for a lot of comfort. The payout ratio is stretched here, so we’ll see how it goes over the next year or two. But the valuation and yield seems to be worth the stretch over the long haul.

    Thanks for dropping by!

    Best regards.

  4. Regan,

    Right. I’ll have to be a bit more selective with these articles moving forward. For me post an article like this on every stock I’ve been buying lately, I’d have to come up with something almost every day. And with the time it takes to put these together (sometimes upwards of four or five hours), I’d never be able to sleep with everything else on my plate. I quite like sleep. 🙂

    Like I mentioned when I announced the changes, I’ll be posting a bit less so as to avoid burnout/repeating myself. Writing 30+ articles per month was just not sustainable for me. My new schedule is much better. But we should have the other writers up and running soon. It’s taken a bit longer than I anticipated/hoped, but I think the end result will be worth the wait.

    Keep gathering those BBs my friend. Hope you’re able to snag a very attractive target when you’re ready to fire. I’ve been super fortunate to have a little more ammo than usual, but I suspect that’ll be coming to an end here by the end of the year. Then it’ll be back to normal. Setting things up for a very fun/interesting 2016, though.

    Keep it up!!

    Cheers.

  5. Hi Jason

    good to be able to get at least some of the rationals of your recent buying spree (been following on Twitter).
    Personally, as I only just started last month on my DGI journey, still see lower hanging fruits which you consider now full positions for yourself. I was lucky to be able to deploy almost $14k since beginning of September adding OHI, WPC, BBL, TUP, BNS, KMI, CAT, OKE, RY and yesterday’s IBM at $141. I even collected $99,96 dividends in cash already!

    I need to thank you here, because without your blog I would not be doing this!

    Philipp

  6. Hello Jason

    Seems great buy, I didn’t knew this company and never heard of, How you find the stocks to put on your radar??

    Yesterday I’ve sold GE and bought PEP, I like the growth of PEP better then GE.

  7. Phillip,

    That’s fantastic! 🙂

    Way to really go out on the hunt there. Picking out some really high-quality stuff there. And you know that ~100 is only going to exponentially increase for you, especially with that kind of capital deployment.

    Appreciate the support. I’m right there with you, turning cash into cash flow.

    Best wishes.

  8. Sharon,

    It’s not difficult to find stocks. I generally use David Fish’s list as my base, although sometimes I find related stocks just by taking a look at quotes and finding tangential names. You can use any number of screeners, but the one I listed as a resource on the Getting Started page is pretty solid:

    http://thezenfund.com/screener/

    PEP and GE are both doing really well right now. Tough to choose, so I just own both (for different reasons). 🙂

    Thanks for stopping in!

    Cheers.

  9. I’ve owned CNP for years as my grandfather gifted me some shares back when I was in 8th grade or so. Sadly that’s like 17 years ago where has the time gone. Its done We’ll for me and it’s been a stable source of dividends. Hope this one continues to generate solid long term results and the valuation definitely looks good here.

  10. JC,

    Wow, that’s awesome. I somehow missed that you even owned stock in the company. I honestly hadn’t really heard of it when I started to dig into it. But I liked the fundamentals, valuation, and yield a lot better than some other more well-known utilities like, say, Southern.

    Hope to own it alongside you for a good long while, but you have a pretty good head start on me as a shareholder over there. 🙂

    Best wishes.

  11. I have wanted to buy AECON for about 2 months but I have not have any cash. Now, while still needing more cash to make a decent buy, the stock is becoming popular in the media and experts are saying that it is a good deal and everyone should buy it. The new Canadian Prime Minister is going to be putting a lot of money in to infrastructure and AECON builds roads, bridges, pipelines and they are a mining company.

    The stock was a good price and I thought I would have time to save up from my pay cheques but I had to place a small order with the cash I had on hand before everyone and their brother jumped on the band wagon.

    I am hopeful my order goes through for under $15 a share tomorrow. AECON just raised their quarterly dividend from $0.36 to $0.40.

  12. I’m in Houston and can report the people I know who work there are generally more or less happy with their employer. That is usually a good sign there is some stability and growth outlook, else the staff gets crabby. No position.

  13. Hey Jason, hope all is well. Was curious as to whether you have ever considered posting a high level view of how the Freedom Fund is allocated across sector. I know you use Personal Capital (and as a result I am now using PC, which I love and am grateful for the recommend), which breaks this out pretty meaningfully and I always find it interesting to see how I am exposed by sector. I know your approach is to buy value where you find it, but I guess I would be interested in an anecdotal view of the Freedom Fund, as I’m sure newer investors and those new to DGI are also to some extent trying to formulate their approach towards sector.

    I was just thinking about how you have made numerous references to your high and perhaps growing allocation towards energy, and I would think readers may find it interesting to see how your fund is allocated (as would I!!!). Happy hunting!

  14. beth,

    Best of luck there with Aecon. Never really took a look at it, but I’m a big fan of infrastructure plays. I think that’s going to be a big story looking out over the next 10-20 years, which is one reason I have some pretty significant exposure there.

    Cheers!

  15. FV,

    Thanks for the “boots on the ground” look at Houston’s morale. Most of what I’ve read shows a pretty vibrant city/economy. We’ll see how it goes, but I think that’s a great city to be exposed to.

    Best regards.

  16. Jason P,

    Your wish is my command! 🙂

    https://www.dividendmantra.com/2015/05/sector-allocation-as-it-pertains-to-dividend-growth-investing/

    That’s something I long wanted to take a look at, and the timing was right once the FF became fairly large. I don’t think it’s necessarily meaningful/helpful to stress out over sector allocation when a portfolio is still somewhat small, but crossing over that $100k mark means you should probably start to be mindful about where you’re at moving forward.

    Best regards.

  17. Jason,

    Interesting choice on Centerpoint. I don’t know a lot about them, but they seem to have a solid utility / energy mix that can provide some extra stability. As always, enjoy that passive income boost!

    – Gremlin

  18. Gremlin,

    Yeah, it’s really all about that big boost in the annual income. But I wouldn’t have put out the capital if I didn’t think it was sustainable and could grow, and CNP looks to be about as well placed as any of the bigger utilities out there. But growing that annual income by almost $80 all in one swoop is really awesome. If I could do that with every purchase, I’d be golden! 🙂

    Thanks for stopping by. Hope all is well over there.

    Best wishes.

  19. Hi Jason,

    Great that you post your recent buys again.

    But there were still a few more buys recently. 🙂

    I try to list all of them on my website The Dividendlover.

    Simply because it’s interesting to see what the blogger community just buys.

    Best regards, TDL

  20. I too am Leary of utilities, but will have to look into this. I can see why you can’t do this on every buy, but I’d ask that you do them when you uncover hidden gems like this and today’s CPSI.
    Not as necessary when you add to or buy know dividend stocks!
    Thanks again looking forward to new material. Glad for you to have a better life.

  21. Jason, I knew you would eventually come to your senses and buy another ute! All joking aside, my utes have been one of my best performing industry’s since I started buying stocks. They are reliable and pay large dividends.

  22. TDL,

    That’s great that you compile all of the recent buys like that. It’s great to see what stocks are being picked up across the community. 🙂

    Thanks so much for sharing that and putting that together!

    Take care.

  23. Bill,

    Well, one man’s gem is another man’s garbage… or something like that. 🙂

    But, definitely, I’ll try to reserve the few Recent Buy articles I put together for stocks I may not have covered recently/before. That’s why I wanted to cover CNP with this article instead of, say, WMT or IBM (some other stocks I’ve bought recently).

    Thanks for the support. Definitely digging the new schedule, which has given me some of the best balance I’ve had in a long time now.

    Hope all is well with you over there as well. I can only wish the same happiness for everyone else.

    Cheers.

  24. Presone,

    Ha! Yeah, I’m definitely not going crazy here, but CNP really ticked off a lot of boxes I look for. Utilities in general have performed really well over the last few years, but I think a lot of that was due to chasing yield. Valuations then became a little disconnected from reality. If (that’s a big if) rates normalize at some point here in the near future, I suspect a lot of that will be given back. We’ve already seen that somewhat. CNP, for instance, is down something like 20% on the year. Many other utility companies have come back down to where they should be as well. But I’m not really too concerned about any of that. Just buy the growing income at the right valuation/quality level and you should be fine. I’d just stay away from any relatively expensive companies in this space that have a lot of legacy costs to worry about.

    Best regards.

  25. AJ,

    That’s fantastic!

    I don’t really know much about the future for hard disk drives, so it’s not a play for me. But you gotta like that kind of dividend increase when you’re already working with a yield that high. That’s a very rare combination. 🙂

    Cheers.

  26. Yield, yield and more yield. Seriously, a nice addition to your growing portfolio. I know that you typically don’t buy into the utility sector but this name has some very “non-utility” attributes particularly when it comes to its dividend growth rate. I wouldn’t worry too much about debt levels here. Seems like most utilities operate under a heavy debt load. Thanks for sharing. Time for me to make my October move. Three weeks in and I have yet to make my buy. It’s coming!

  27. Keith,

    Definitely feels good to be able to add on to the annual dividend income by such a large amount all in one shot. I try to avoid chasing yield, but I’ll go after it when I think there’s a solid opportunity. Even the five-year average yield is fairly attractive, but 5%+ is tough to pass up.

    I’m sure you’ll get a buy in very soon. I’ve been busier than normal, which is great. I’m super fortunate. Just trying to close the year out really strong and start 2016 off with a bang! 🙂

    Thanks for stopping by.

    Best wishes.

  28. Great post like always. This comment cements the fact that you’re probably paid to post once a week! But I’m happy with that though, I’d rather have 1 post per week than once per month! Or even worse nothing at all 😀

    Great to follow all your purchases on twitter. You’re going crazy now and it’s wonderful to watch! Wish I could follow along but there’s just no way! I’ll trudge along behind at least that means I’ll end up in a good spot eventually 😀

    I hope you’ll get there way before 40 that shows that exceeding expectations is possible and gives as all hope to retire even earlier than we’re planning!

    cheers / Henrik

  29. Henrik,

    Well, I can really write to my heart’s desire. But it seems like some people think that I was going to go on writing 40 or so articles per month forever. That’s just not at all what I had/have in mind. I quite enjoy writing (and all the inspiration that writing hopefully provides others), but not to that level. I’m attempting to reach financial independence so that I can live multiple lifetimes, not just one where I’m spending eight hours (or more) per day on the laptop. If that means a lot less money from writing over the next five or ten years or whatever, that’s fine with me. Quitting my job last year just proves that I’m not out to do things for money. Not anymore.

    It’s definitely been really crazy and fun lately. I won’t be able to keep this up much longer, but I’m going to continue turning cash into passive and growing cash flow whenever and wherever possible. I have some thoughts in the back of my mind that, if realized, could mean the accumulation period for me is going to be much shorter than I initially anticipated. As it stands, I’m firmly ahead of schedule. But I think some acceleration is possible through creativity. Meanwhile, I suppose I’m just trying to make hay while the sun is shining.

    I’m definitely giving it my all over here. And I think, when it’s all said and done, my experience should prove to be really motivational and inspirational for anyone out there that think it’s this really long, linear journey. I’ve realized over time that it’s just not like that at all. There’s so much abundance… so many opportunities to speed things along, and then you have compounding on top of that. It’s out there waiting for you.

    Best regards!

  30. I think like you said, you ought to be pretty safe with this one. No generation means no direct exposure to commodity prices, up or down. Just indirect exposure from demand of the contracted companies who use them. And, winter is coming 🙂 So natural gas use ought to rise as people heat there homes more. Localized monopolies are nice too! And the dividend seems pretty solid.

    And I defiantly like having some holdings in/near the energy sector that is not oil related.

    Hope it work out, I’v a similar Canadian holding 🙂

  31. Hi Jason,
    Nice to see you posting. 😉

    I would give this a pass since S&P rates this as a sell (2 stars), and because they give it a Quality Ranking of B. The S&P Capital IQ Quality Ranking is a measure of the growth and stability of earnings and dividends, with a B+ being average. I use Morningstar, S&P, and Merrill Lynch ratings to narrow down prospects, and this stock doesn’t make it through the filter. You have a pretty stellar record, though, so I wouldn’t short the stock.

    Best wishes,
    Keith

  32. DW,

    Winter is coming. 🙂

    We’ll see how it goes, but I’m pretty happy with it. I’m not a big fan of utility companies at all, so I think it says a lot that I took this one on. I’m pretty selective here with my allocation.

    Best of luck with your Canadian holding over there. Gotta love a captive audience.

    Thanks for dropping by!

    Cheers.

  33. Keith,

    Thanks. I’m definitely going to try to continue putting out at least one post a week here, which, when combined with everything else I write, will probably end up putting me at about 20 articles per month. That’s about as busy as I really want to be. 🙂

    Yeah, I’m not a real big fan of S&P Capital IQ, to be honest. I include their information up there, but I really place a lot more weight on Morningstar. I find them to be more accurate, all in all. And since I place the most weight on my own opinion, I also find that Morningstar is quite often very close to what I come up with. As you can see in this article, our valuations are only a penny away from each other. And if that’s anywhere near correct, this stock is somewhat significantly undervalued. When I write about the undervalued/overvalued stocks of the month, I like to blend all three numbers. Even with that, CNP is pretty cheap here with a historically high yield. I’ll take it!

    Thanks for dropping by. Hope all is well.

    Best regards.

  34. Interesting buy. I won’t buy any utilities stocks. I’m from Germany and there the politicians destroyed the two major utilities in about 2 weeks after Fukushima. Too much regulation and politics for me.

    I’ve read that you bought POT. Nice buy, I also look at this stock. What do you think of MON?

  35. mephisto,

    Can’t say I blame you there. I’m also not a big fan of utility companies. I think they have a place, though, due to the localized monopolies and ubiquitous and necessary nature of the services. Can’t destroy a local utility without something to replace it, and energy will likely continue to be transmitted from centralized locations for the foreseeable future. I do see long-term headwinds in terms of energy production at the site of usage, which is a big reason why I’m keeping my allocation low.

    MON is interesting. They’ve done incredibly well with Roundup over there. But everything I’ve come across shows a real love-hate relationship between Monsanto and their clients (farmers), and I’m not sure that bodes well just in case a competitor comes up with something better. It also seems that their main product isn’t working as well as it used to, so that’s a concern as well. In addition, there are prevailing concerns over genetically modified seeds, although we have yet to come up with a viable alternative.

    Take care!

  36. Hi Dm,

    Seems like a nice buy there. Solid company and dividend. I’m glad you are posting new recent buy articles. I really enjoy reading them.

    Cheers,
    G

  37. Hi Jason,

    Thank you for sharing this analysis, certainly an interesting stock. I’m not very familiar with screening utilities yet, but it sounds like you’ve found one here that offers a lot of potential. This sector certainly has a captive audience and winter is coming!

  38. Just added to ABBV @ $46. I know they have FDA warning on their second best selling drug but over the long run it will be just another news.

  39. Great fundamentals of a company I’ve never looked into! As you mentioned, the market is filled up with so many options that new names can appear on a daily basis!! Looks like an interesting option.

    Cheers,

    Mike

  40. Geblin,

    Thanks! Glad you enjoyed it. Hope you found some value here. I love putting these together, showing the thought process behind a decision. I think it provides a lot to chew on for readers, but also allows me to look back and see what I was thinking at that particular time. 🙂

    We’ll see how it goes, but I think it’s a really solid choice at this valuation.

    Cheers!

  41. AJ,

    Most of my mistakes have been mistakes of omission. But I made a big mistake of commission when I sold out of ABT/ABBV after the spin-off. Wish I could go back in time and reverse that one, but hindsight is 20/20. I’ve done really well either way, so it’s all good. But I’d love to have those shares back.

    Cheers.

  42. Mike,

    Yeah, always opportunities abound. Less of them around after a day like today, though. I’m always hoping to wake up to huge drops, so today was a big disappointment. Just sat it out. Hope tomorrow is better! 🙂

    Best wishes.

  43. Dividend Mantra,

    Great buy and great additional to the yearly dividend income. People need electricity to live their lives and natural gas is required for businesses and residental customers for various things.

    The utilities can be a great investment sometimes. I know I have a great investment in Emera up here in Canada.

  44. IP,

    You’ve got it, bud. Can’t live without power. Ubiquitous and necessary. Guaranteed revenue stream, though heavy regulation limits one’s enthusiasm.

    Thanks for dropping by. I hope Emera continues to treat you right! 🙂

    Cheers.

  45. I like CNP. I was a consumer for 10 years before I moved to a different market. I’m just giddy you got a ute. Your purchases border on rebellious lately with a bit more risk/out or your norm—I like it. That may not be how you see it. You are definitely racing for the finish and doing so in style. I’m pumping those pom-poms for ya! I’ve been picking up enough in the health sector to make me never want to deploy cash there again—it’s just too easy. The hammering continues, so many good buys out there. I still like TEVA (got some and want more). It’s pre-emptive with the whole generic Viagra, biologics, and AGN generic division. Hey, if you’re just flat out bored (ha!), you can do a write-up on them. The dividend isn’t something you would normally touch so it would be a metaphysical experience for you. I kid. I was just speculating that TEVA could create a quick /cheap version of Daraprim to refute the hedgefund controversy regarding the decades old formulation. That would be a hit. I’m certain there is a loophole somewhere. There always is. Cheers!

  46. If Jason is living the high life right now, it is because he stood by his principles. He lived frugally for years and invested over 50% of his income consistently. This was well before he was able to grow this blog to the size it is today. If he is reaping the rewards of earning 100k from writing a blog, then we should all congratulate him on his success. He is still educating us with his reasoning for buying stocks; moreover, other DGI investors have never been this open about their expenses/income. What Jason did was unprecedented and we as the readers were spoiled.

  47. Jason, congrats on the purchase, I also initiated a position!

    Can you please share your thoughts on ABBV? How bad is this? I’ve been reading that some people have been selling because of a SEC investigation. I am inclined to hold and ride it out. Thank you

  48. The most intriguing part about this post for me is the fact that you mention in one of your replies that you are buying more and only selecting certain stocks to write about. Will the freedom fund reflect all of your most recent stock buys, or only the ones you write about? Congrats again on all the success!

  49. divy,

    Ha! Yeah, I’m reaching for the finish line for sure. I’ve got a few ideas in the back of my mind that may shorten the accumulation period for me. Not so much in terms of a lot more capital to deploy over the next, say, five years, but rather just in terms of boosting the dividend income like I’m doing while simultaneously cutting a few expenses. We’ll see how that goes.

    I haven’t looked at TEVA in quite a while now. That may be one I’ll pick up at some point. I like the generic angle for sure. The yield actually isn’t that bad, and I’ve been buying a few stocks lately with rather low yields (WFM, VFC, etc.). Just trying to balance those with the higher-yield plays like CNP, however, which is something I’ve always attempted to do.

    Keep it up over there!

    Best wishes.

  50. Mike,

    Thanks for the support! 🙂

    I’ve learned over time to not feed the trolls. Their hunger is insatiable. I have neither the ability to feed them nor the time.

    The internet is a big place. If this site isn’t for you, that browser can put you on a new site in seconds.

    Edit to add: I’m definitely not making $100k/year from writing. I wish I were and would apologize to nobody if I were able to. That’s the kind of success I wish for myself and everyone else as well. Anyone who shuns success or a high income maybe doesn’t get what this is all about, or they’re simply envious because they’re unable to figure out how to earn so much themselves. Living frugally is a key part of this journey/strategy, and I still have no car, live in a modest apartment, and eat PB&J sandwiches for lunch. But if you’re able to increase your income dramatically, that simply shortens the time frame. However, my online income has taken a permanent and dramatic hit due to the changes I’ve made. I wish I could say I’m working less and making more, but that’s just not the case. The people that are now running the site aren’t doing so out of the kindness of their hearts, but the whole thing is worth it to me. I think I was on track to start making six figures per year from writing, but the effort necessary to reach that level and sustain it wasn’t worth it to me. I’m on cruise control at this point, so there’s no need to kill myself trying to get to where I’m going. That’s the whole point of rolling that snowball – less effort required over time as it starts to move on its own. 🙂

    Best regards.

  51. Brazo,

    I’m not real concerned about ABBV. Morningstar put out a nice report and they slightly reduced their fair valuation due to the potential for a somewhat significant loss of sales from Viekira. They still live and die by Humira, though, for better or worse. And the erasure of 10% of the company yesterday seems overdone to me. I wish I would have bought the dip yesterday but I was busy finishing up three articles on the day. I always thought I’d have more time to watch stocks all the time once I started working from home, but a few still slip by me.

    Cheers!

  52. secondhandmillionaire,

    I’ll of course be discussing which stocks I’m buying (or selling) when I update the Freedom Fund. And the portfolio, as always, will be true to everything I own when the spreadsheet is updated. But I’ll be summarizing a lot more than usual due to the combination of temporarily increased volume and my desire to write a little less than before. You can see what I did last month when I discussed every stock transaction that occurred during the month of September (even though there weren’t corresponding articles for all of them):

    https://www.dividendmantra.com/2015/10/freedom-fund-update-october-2015/

    Have a great weekend!

    Best regards.

  53. It is always enjoyable to read your recent buy article. I have honestly never heard of the company but after reading it through, it seems like an attractive buy. I will keep it in my mind. Thanks for sharing!

    Cheers!

    BSR

  54. Well, scrap the TEVA thoughts (I meant that their divy isn’t the most consistent or the poster child for growth)

    …I wanna here about your plan and these ideas that are hanging out in the back of your mind. Sounds promising! Go you!

  55. Jason,

    You continue to be the example to all of us by continuously investing in high quality stock and showing the reasoning behind each of them.

    I must that when you have been out for a couple of days, I started to feel a bit alone but very happy that your are back.

    Cheers, from Switzerland that is getting coooldddddd, enjoy the beach for us….

    Cheers,

    RA50

  56. Another utility! 🙂

    Thanks for bringing it to our attention as I haven’t heard of it prior this reading. It’s good to see how you look at these types of stocks and your analysis makes sense to me.

    I agree with RA50, enjoy the beach for us, midwest weather is creeping in!

    Take care!

  57. DM,
    Thanks for sharing! I have never heard of this company. I was just briefly looking into their numbers and it appears that the company is a great one with a nice potential upside in the future. That was a nice addition to your portfolio.
    Take care and Keep in touch
    LOMD

  58. BSR,

    Glad it brought a new stock to your attention. Utilities have a lot to like and a lot to not like, but I think, if one were looking for exposure to a utility company right now, CNP is one of the best available plays.

    Thanks for dropping by!

    Best regards.

  59. RA50,

    Thanks so much. Appreciate that!

    I must also say that I miss the older schedule to some degree. I have such a passion for this stuff that I could literally write three or four articles per day. The problem is that, if I let it, that passion will overwhelm all of my other passions/interests. So this is me just trying to find that balance, making sure I don’t l let one interest overwhelm my entire life. I think, in time, I’ll find that perfect balance. It’s certainly been nice to have more unstructured free time lately. But I have a lot more to say and I really hope to continue inspiring for years to come. I have something like 100 topics written out in a journal that I haven’t covered here yet. Hopefully, pacing myself keeps that fire at bay so that I don’t burn out. 🙂

    Definitely enjoyed the beach this weekend. Last month, I booked us a trip up to a local resort for our six-year anniversary. Didn’t end up spending a lot of money, but we stayed right on the beach over in St. Pete Beach this past weekend. Definitely a great time.

    Hope you’re enjoying that fall weather over there. I do miss the change in seasons sometimes!

    Cheers.

  60. RTR,

    We literally spent all weekend at the beach. Just got back, actually. It was a lot of fun. It’s funny because even though we live down here, we don’t actually go to the beach all that often. You have to “make time” for it. Easy to take for granted, I suppose. But we made the most of some time on the sand over the last few days. 🙂

    Hope you enjoyed the analysis and the information. It’s not a stock that gets a lot of attention, which may have in part contributed to the valuation.

    Enjoy the cooler weather up there. I do miss fall!

    Best wishes.

  61. LOMD,

    No problem. Happy to share! 🙂

    It’s definitely an interesting utility. I like the lack of generation, midstream exposure, geographical location, and lengthy operational history. The valuation and yield adds some icing to the cake.

    Hope you’re enjoying your weekend.

    Take care!

  62. Awesome as always! This article was especially intriguing to me personally… I am still learning a bit about utilities, so this gave me some thoughts to ponder for sure. Keep up the good work bro! Hey, I am curious, have you ever considered doing a “best of…” series? Like, “best of health care dividend stocks” or “best of tech dividend” or “best of REITS” etc…. ? I am just curious, I totally understand if that isn’t your style? But I bet a TON of people would love to see some articles like that… just sayin’…. anyway, seriously dude, keep it up! We love what you are doing down there! You are an inspiration!

  63. JaC,

    Glad to hear that. Hope it provided you a ton of value! 🙂

    That’s a great suggestion there. I’ve long been hesitant to the idea of putting together “best of” lists only because it’s really impossible to compare any one company to any other. Just so many different business models out there. It’d be impossible to compare, say, Johnson & Johnson to, say, Becton & Dickinson. So I like to just analyze companies on their own merits and then buy stocks when I think the fundamentals, qualitative aspects, and valuation are all there (assuming I have capital and room in the portfolio).

    I’ll definitely think about that, though. If I think I can put something together while adding value, I will.

    Thanks for the support. Really appreciate it!

    Best regards.

  64. Hi!

    Seems like a nice buy. I see that you have NOV in your portfolio. Did you consider adding to your position? With a P/E of 8,29 and a P/B of approx. 0.8, it seems like a good opportunity to get this quality company on sale.

    All the best,

    Rune

  65. Rune,

    I actually used to have a fairly large position in NOV. As I noted during the most recent Freedom Fund update, I sold most of my stake for tax-loss harvesting purposes. My plan is to build that position back up, though I’m leery of my overall exposure to the Energy sector in general. That said, I did buy 25 more shares of NOV this month after the 30 days (wash rule) was up. It’s also my pick for this week’s undervalued dividend growth stock:

    http://dailytradealert.com/2015/10/25/undervalued-dividend-growth-stock-of-the-week-56/

    I may grab another 20 or 30 shares at some point in the near future, but I’m hesitant to go too much heavier than that due to that industry exposure.

    Cheers!

  66. Hi Jason,

    It is only a couple weeks back when I discovered your blog and got hooked on to it ever since. Regret not having seen it earlier!! Your rationale behind the buy recommendation is thorough and extremely helpful.

    I just opened up a Roth IRA but was not sure where to invest my money there. Would you be able to provide me with some guideline or any recommendations on how to maximize profits using a Roth without taking very high risks?? Would a lifecycle fund make sense there or would you recommend putting all my money in ETF’s?

    Any thoughts on this would be much appreciated.

    Best,
    Pooja

  67. Pooja,

    Glad you found the blog. It’s been a lot of fun sharing everything I’ve been up to over the last four or so years now. The results speak for themselves. Living below your means and intelligently investing your excess cash flow (preferably into high-quality assets that pay growing passive income) can radically change your life for the better.

    My best recommendation to you would be to read everything you can get your hands on. Knowledge is power. Only once you really know how to properly invest your money can you make smart decisions.

    I’ve put together a great list of books/resources here:

    https://www.dividendmantra.com/getting-started/

    But there are many, many great books on investing out there. I’d recommend looking at strategies across the spectrum and then coming to your own conclusions.

    Best of luck over there!

    Take care.

  68. Just picked up NOV at the low point today. Its fun to see the chart and know you were the guy at the point of the dip, even though it doesn’t mean anything long term. I appreciate your work. It has really kept me motivated. I just added it up and have gone from 0 to $2262 in dividends available to gain in this first year. Thanks a ton.

  69. pygmycoho1,

    Nice move there on NOV. I’ve picked up shares twice this month, with a few more coming my way just yesterday. I continue to believe the stock is very, very cheap here.

    And congrats on the dividend income. That’s fantastic. $2,262 turns into $4,000 turns into $6,000… so on and so forth. 🙂

    Keep it up!

    Cheers.

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