It’s been a little while since I published a stock purchase. Even though I haven’t been as active in the markets lately, it’s great to know that my investments have my back. The stocks I own continue to disperse dividends into my brokerage account as usual and the cash b
alance just grows and grows. This small break from investing gives me a glimpse into the future. By sparsely checking my investments over the last couple of months and leaving them be, but continuing to collect dividends, I basically gave myself a brief view of what financial independence looks like. I can live my day-to-day life and do whatever I feel like doing, knowing that the companies I own a stake in will continue to generate rising revenue streams, increase profits and pay me rising dividends as a capital supporter of said businesses. It’s a wonderful world for a dividend growth investor!
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.
As I recently discussed, I see some opportunities for value in this market. I would concur with other investors who would say that the equities market is currently a little pricey and perhaps on the higher side of fully valued. You could even make an argument that it’s a tad overvalued. I try not to look at the market as a whole and instead look at individual securities. After all, I’m not an index investor. I’m a dividend growth investor, and as such I buy individual stocks and have to consider their value on a case-by-case basis. Based on this belief I decided to get my feet wet and make a purchase in the face of the DJIA sitting over 13,000 points.
I purchased 14 shares of McDonald’s Corporation (MCD) on 8/13/12 for $87.94 per share. It was a close call for me, as I almost initiated a position with Archer Daniels Midland Company (ADM), but I felt that the value in MCD was strong enough to warrant an increase in my position. It has an extremely wide economic moat with a strong household brand name, global supply chain, pricing power and products that people love. Although the market may be a little expensive right now, MCD is still a wonderful company trading for an attractive price and that’s what matters to me.
McDonald’s Corporation (MCD) franchises and operates restaurants across the globe.
MCD is a superb company and a great dividend growth stock. It’s grown dividends for 35 years and has grown them by an average of 27.4% over the last 10 years. They have a pretty strong balance sheet with a debt/equity ratio of just under 0.9 and the growth potential for this company is fairly large. The entry yield on my purchase is 3.18%. I purchased this wonderful stock with a P/E ratio of 16.55, which is attractive for the level of safety and growth. This purchase will add $39.20 in yearly dividend income to my annual total. The payout ratio is moderate at 52.6%, but I think the strong growth that MCD will experience will allow the dividend to safely continue growing well above inflation levels.
With this recent buy I still have 28 positions in my portfolio. I received a position in Phillips 66 (PSX) after the ConocoPhillips spin-off. Other than that, I have not initiated any new positions since my last update.
Some analyst opinions on my recent purchase:
*Morningstar currently rates MCD as a 4/5 star valuation.
*S&P currently rates MCD as a 5/5 star Strong Buy.
I’ll update my Freedom Fund in early September to reflect my recent addition.
Full Disclosure: Long MCD, PSX
What are you buying?
Thanks for reading.
Edit: Corrected 10-year DGR
Photo Credit: Stuart Miles/FreeDigitalPhotos.net
Nice purchase! I’m getting increasingly tempted to buy some MCD myself — the stock, that is, although I wouldn’t mind a milkshake right now. 🙂
Great pick. I added to my position a few months ago.
Great to see you back again. I like the add of MCD. I recently added more back in July @ $88.35. If MCD wasn’t the 3rd largest position and really the 2nd when you back out my employer’s stock I would have added more. Around $86 is my next price point.
It was a much welcome sight to see on my blog feed that your blog had a new update.
What is the minimum amount of cash you’ll allocate toward a purchase? How much are you paying in commission? I’ve tried to keep purchases to no less than $2500 based on transaction costs of $8 (limiting the commission to about 1/3 of 1 percent of the investment, maximum).
MCD, can’t go wrong there. Although I haven’t yet purchased any of the stock, I tend to frequent the chains more than I care to admit for their iced coffees, beverages.
So, I guess I’m doing you and the other shareholders a favor 😉
Good time to increase your stake in McDonald’s. You’ll get the next dividend and should also be rewarded with a dividend increase next month. MCD is one of favorite dividend growth stocks.
I’m not sure if I’ll make another purchase this month, but am currently paying close attention to MCD, ADM, and OMI.
Good purchase of MCD. It will probably be my next purchase too, though I’ll do it in September as August is the month that I have a lot of yearly one time expenses occur. I’m just hoping it stays under $90/share for a little while longer. Glad to see you back.
deedubs,
I wouldn’t mind a milkshake either…or perhaps a caramel frappe! Great prices on the stock and the menu items. I’m lovin’ it!
Take care!
Matt,
Thanks for stopping by.
I think you made a great move there and MCD appears to be well positioned for future growth.
Best wishes!
The Executioner,
I try to make sure each purchase is at least $1,200. This minimum number has grown as my income has grown and as the monthly dividend total has increased. The smallest purchase I ever made was ~$800 worth of SYY when I first started.
I’ll likely grow this minimum number up towards $2,000 or more as my positions meet their maximum level and as the monthly dividend tally starts to really add up.
My commission is $7. I usually make at least one purchase a month, and two if I have the income. The difference between $7 (absolute) and $14 (if possible) is negligible to me overall when looking at the big picture.
Best wishes!
jonathan,
Thanks for stopping by. I see you’re doing great with the portfolio and your income level will really provide a springboard for you.
Great buy on MCD at that price. Solid value for the long-term. If it falls further than here I would make another purchase at $82 or so.
Thanks for the support and thanks for stopping by!
Best wishes.
FI Fighter,
I’m sure you’ll get around to MCD stock. Your portfolio is growing and now you have a rental property in the mix. Great stuff!
As an owner, thanks for supporting my company!! 🙂
Take care!
CI,
MCD is just an awesome company when you look at it from just about every perspective. Just a great all-around business, and the growth overseas could really provide some fuel to the fire.
It looks like you have a pretty solid watch list. ADM was right there for me and that may make the buy list next month.
Best wishes.
Chad,
Thanks for the support.
I think you’ll get your wish with the share price. I don’t see much of a catalyst in the very short-term and the stock price has stalled amidst a very strong overall market. That’s precisely why I picked up more shares, however.
Best of luck.
Take care!
Wow! Make Way! D Mantra back in the house. Good to have ya back. Like many commenters here, I definitely missed your postings and am looking forward to you resuming kicking butt. Ha! Just remember you don’t have to over stretch yourself w/ too many postings and responding to every comment (unless they’re mine of course – LOL). Just sayin don’t burn yourself out.
Anyhow, I like your MCD purchase. I have a relative who’s just starting to do his own investing. At first, he bought Facebook during IPO debacle against my advice. Lucky for him, he’s one of the infamous 1% and, unlike us mere mortals, he could afford the loss. But now he’s starting to come around. I encouraged him toward NSC when it was in the mid 60’s AND I advised him that MCD was good under 90 and Really good around 80. He picked some up I think in the mid 80’s. Think he also got PG at about 60 so he might becoming another convert to DG investing. I should charge commission. 😀
-Rock the Casbah
Hey Dividend Mantra!!
It is so nice to see you back. You have been a solid inspiration for me!!
Great buy. We both bought MCD on the same day I see. They have a great dividend growth rate as you mentioned. I don’t know if they can hold the 10%+ DGR but I’m confident they will continue to raise the dividends at a rate higher than inflation for the foreseeable future.
Market is overvalued. Future growth estimates are the lowest in several years. Even Warren Buffett is selling his dividend champions.
Rock,
Thanks for the kind words and I appreciate your continued support of the blog. It means a lot!
Nice calls on the investments for your very wealthy relative. I hope you get a very well-deserved commission for your efforts.
Best wishes!
Anonymous,
Thanks for stopping by and I’m really glad that you find a lot of inspiration here. That’s the main reason I write. I hope your journey serves you well!
Keep in touch.
austinbroker,
I see that! Very good move for both us, I predict. I also am not sure about the phenomenal dividend growth rate, but I like our chances for rates well above inflation as well!
Take care!
Ocuslista,
I’m not disagreeing with you about the overall valuation of the entire stock market, but I do believe, as I point out in the article, that individual securities need to be valued and evaluated on a case-by-case basis.
As far as Buffett selling his dividend champions, you must be referring to Berkshire’s recent massive reductions in positions with PG, JNJ and KFT. There is some speculation that this is to raise capital for Todd Combs and Ted Weschler, the two fund managers slated to take over for Buffett when he steps down. It’s all speculation, but certainly could be a way to raise capital for the two managers to start re-shaping Berkshire’s investment portfolio in the ways they see fit.
Best wishes!
Responding to an older post here, I know, but while doing some of my own investing research I remembered you had written about MCD and decided to check it out. I see that Compounding Income commented earlier that MCD is on schedule to raise dividends next month, which echoed one of my own thoughts on the topic of timing of purchases. Do you think it is wise to find companies with a history of raising dividends on a regular schedule, and look to purchase them just prior to the expected announced dividend raise? All things being equal, if you’re trying to choose between several different companies to purchase, this may be a useful tiebreaker.
The Executioner,
Thanks for adding that.
A dividend raise that is expected to be announced shortly after a potential purchase is certainly something I consider before making a buy. It isn’t a primary concern, but it could make a potential purchase much more attractive. You get an immediate pop to your yield-on-cost (if that’s something you track), which gets the compounding effect off to a nice start.
Best wishes!