Can you smell it? Yes, it’s earnings release seasons! The time period where stocks can shake, rattle and roll with their prices on a daily basis. Therefore, she made a dividend stock purchase for her account and we also made one for my portfolio. It is time to dive in and see what move I made!
The stock purchases
April has brought many more dividend stock opportunities than in the previous months. We have seen stocks plunge after earnings releases, but also have seem some sky rocket. UPS had dropped over 10% in one day, as well as 3M. Then, you have lawsuits being dropped and Qualcomm’s stock popping up! It’s been a roller coaster of a month and I was happy to get in on the action. At times, there are price points that you can’t pass up. That is how I felt with my two dividend stock purchases below. In April, I purchased additional shares into two dividend stocks, CVS and WestRock.
Stock Purchase – CVS (CVS)
They finally made it to my April Dividend Stock Watch List I released in March. Further, their stock has dropped from 1/1 to 4/17 (date of purchase) by a whopping 20%!Why did I buy them?
First, I wanted to average down my position, as the price of $52.47 was 10% less than the last time I made a move (February). They have had quite the downward spell on their price point and the stock has been oversold. Additionally, I wanted to reach 60 shares or $4,000 total invested, which has been achieved. Here are the quick-stats on the stock purchase by using the Dividend Diplomat Stock Screener:
- Price to Earnings: At a $52.47 price with a forward earning projection of $6.79 for 2019 (from 28 analysts), this equated out to a p/e ratio of approximately 7.27, which is well below the overall market on average.
- Dividend Growth: Same story as last purchase article. Sadly, due to the debt load they took on to acquire Aetna, there is no dividend growth right now. I don’t anticipate dividend growth until 4th quarter 2020. Due to the halt to dividend growth, was okay to pay at the price I did, to drastically reduce my cost basis and buy a higher yield. This is the risk I am taking, as it doesn’t have the DGR checked. See why the impact of the dividend growth rate is real!
- Dividend Yield: With the $52.47 price point, at a dividend of $2.00, their yield was at 3.81%. Their yield is well above the S&P 500 (on average).
- Payout Ratio: Based on forward earnings of $6.79 and a dividend of $2.00 per year, this equates to a payout ratio of 29%. CVS has a very low payout ratio. Hopefully they use their cash flow for debt repayment at this time, to grow the dividend later.
Here is proof of my investment:
In summary, I purchased an additional 15 shares during the month for a total cost of $790.97. The investment firm I use is Ally Invest and since my account is over a threshold, the fees are only $3.95 per trade. We recommend them in our Financial Freedom Product listing, as their savings account is higher than most, as well. The additional 15 shares added $30.00 to my forward dividend income projection for CVS. My total position is at 62 shares, producing $124+ per year. This position needs no more!
Stock Purchase – Westrock (WRK)
This is the FIFTH time I’ve purchased WestRock (WRK) and the last time was February 1st. The last time I purchased WRK, they had a prince point of $38.82. They are the 2nd largest American packaging company and one of the largest paper companies. Further, they also own my favorite type of box – a pizza box, as they also acquired (three years ago) the largest maker of pizza boxes. What’s not to love?
Well, they sweetened the deal, when their price dropped even more to $35.98. This represents an additional 7.3% decline. How do they look, now, through the diplomat stock metrics?
- Price to Earnings: At a $35.98 price point with a forward earning projection of $3.99 for 2019 (from 14 analysts), this equated out to a p/e ratio of approximately 9, which is well below the overall market on average.
- Dividend Growth: Similarly, fairly young in their dividend growth infancy, at 4 years. They are usually between 5% and 7% per year on the dividend growth stand point. I can be okay with that going forward. You’ll see why, with the yield below.
- Dividend Yield: With the $35.98 price point, at a dividend of $1.82, their yield was at ~5.06%, well above the S&P 500 (on average).
- Payout Ratio: Based on forward earnings of $3.99 and a dividend of $1.82 per year, this equates to a payout ratio of 46%. Another, “sweet-spot” payout ratio. They can grow dividends going forward, at a consistent rate, no problem.
Here is proof of the investment purchase below:
In summary, I purchased 30 total shares on 4/17/19 at $35.98 with a $3.95 trading fee for a total cost of $1,083.31. The 30 shares added $54.60 to my forward dividend income projection. In total, I have over 112 shares producing over $204 in dividends per year!
Dividend Stock Purchase Summary & Conclusion
Therefore, I deployed a total of $1,874.28 in capital and added $84.60 in forward dividend income. Two stocks purchased and two stocks that were already in my portfolio. I have a total investment of ~$4,000 for CVS and a ~$4,750 for WRK. Therefore, These two positions don’t need anything more, at this time, and I am looking forward to reinvesting those dividends! At the current price, the reinvestment each quarter should add 0.60 shares of CVS and 1.40 shares of WRK.
I will maintain my main message. Stick to the strategy that works for you, but review if there is anything that may impact your strategy going forward. You are in control and the emotion button is hard to turn off. Persevere and stay consistent, if you can and are able to. I am locked in and ready for further opportunities. This was one step closer to financial freedom and I hope to continue making strides. Lastly, my dividend portfolio has been updated.
What other investments are you seeing out there? What industry has been your preference as of late? Anyone just stock piling cash? Thanks again everyone, and, as always, good luck and happy investing!