In 3 years, DivGro has grown to a portfolio of 59 stocks. As I write this article, average yield on cost (YoC) of the portfolio is 4.44% and projected annual dividend income (PADI) is $10,163. The portfolio's payback percentage (capital returned in the form of dividends) is 8.28% and total dividend income is $18,956.
The year 2016 started with lots of volatility and a wave of selling. At one point in January, the S&P 500 and the Dow Jones both were down by more than 10%. For dividend growth investors, the declining market offered some great buying opportunities.
Unfortunately, I did not have a lot of capital available for buys in January. In February, another decline presented more buying opportunities before the markets started to recover. I added shares to existing holdings in my portfolio, including The Walt Disney Company (NYSE:DIS), Cummins Inc (NYSE:CMI), HCP Inc (NYSE:HCP), and STAG Industrial Inc (NYSE:STAG).
In March, I continued to deploy more capital, doubling down on several stocks that have declined by more than 10% since I first bought shares. Doing so have reduced average cost-basis and have increased the average YoC of my holdings.
Here is a summary of these buys:
• Macquarie Infrastructure Company LLC (NYSE:MIC)
MIC owns, operates and invests in a diversified portfolio of infrastructure businesses that provides basic services, facilities and technology to businesses and individuals in the United States. The Company's businesses consist of bulk liquid terminals, an airport services business, a gas processing and distribution business, and a portfolio of contracted power and energy investments.
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The following table contains updated ratings of MIC from various sources:
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| †combined Value/Growth/Momentum score |
According to Tipranks, 1 ranked analyst offering a 12 month price target in the last 3 months, the average price target for MIC is $90. With a valuation of $98 per share, a recent article by Spy Hill Research presents a good case for continuing to invest in MIC. A 10-year discounted cash flow analysis based on EBITDA (earnings before interest, taxes, depreciation and amortization) provides a more modest fair value estimate of $72. Based on the average of these prices ($87), I bought shares at a discount of about 25%.
• T. Rowe Price Group Inc (NASDAQ:TROW)
Founded in 1937 and based in Baltimore, Maryland, TROW is a financial services holding company that provides global investment management services to individual and institutional investors in the sponsored T. Rowe Price mutual funds and other investment portfolios, as well as through variable annuity life insurance plans. TROW is a Dividend Champion with an impressive 30-year streak of consecutive dividend increases.
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This buy reduced my cost basis to $76.93 and increased the YoC of TROW to 2.81%.
Following is a table containing updated ratings of TROW from various sources:
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†combined Value/Growth/Momentum score
According to Tipranks, based on 3 ranked analysts offering 12-month price targets in the last 3 months, the average price target for TROW is $77.33. Morningstar's fair value estimate for TROW is at $77, while S&P Capital IQ has a fair value calculation of $73. Based on the average of these prices ($76), I bought shares at a discount of about 6%.
• Starwood Property Trust Inc (NYSE:STWD)
Founded in 2009 and headquartered in Greenwich, Connecticut, STWD is the largest commercial mortgage REIT (real estate investment trust) in the United States. The company is focused on originating, investing in, financing and managing commercial mortgage loans and other commercial real estate debt investments, commercial mortgage-backed securities, and other commercial real estate-related debt investments.
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This buy reduced my cost basis to $20.88 and increased the YoC of STWD to 9.20%.
Following is a table containing updated ratings of STWD from various sources:
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| †combined Value/Growth/Momentum score |
According to Tipranks, based on 4 ranked analysts offering 12-month price targets in the last 3 months, the average price target for STWD is $22.63. MarketBeat reports a consensus price target of $23.81 from 10 analysts. Based on the average of these prices ($23), my buy price is discounted by about 19%.
• Gilead Sciences, Inc (NASDAQ:GILD)
GILD is a research-based biopharmaceutical company that discovers, develops and commercializes innovative medicines. The company’s primary areas of focus include human immunodeficiency virus, liver diseases such as chronic hepatitis C virus infection and chronic hepatitis B virus infection, oncology and inflammation, and serious cardiovascular and respiratory conditions. GILD markets its products through commercial teams and in conjunction with third-party distributors and corporate partners. The company was founded in 1987 and is headquartered in Foster City, California.
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This buy reduced my cost basis to $101.91 and increased the YoC of GILD to 1.69%.
Following is a table containing updated ratings of GILD from various sources:
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†combined Value/Growth/Momentum score
According to Tipranks, based on 18 ranked analysts offering 12-month price targets in the last 3 months, the average price target for GILD is $115.86. Morningstar's fair value estimate is $128.00, while S&P Capital IQ has a fair value calculation of $119.20. Based on the average of these prices ($121), my buy price is discounted by about 25%.
Omaha, Nebraska-based Union Pacific Corporation (NYSE:UNP) operates through its principal operating company, Union Pacific Railroad Company. The company operates the largest public railroad in North America, with 32,000 miles of track linking 23 states in the western two-thirds of the United States. UNP hauls coal, industrial products, intermodal containers, agricultural goods, chemicals, and automotive products.
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This buy reduced my cost basis to $88.98 and increased the YoC of UNP to 2.47%.
Following is a table containing updated ratings of UNP from various sources:
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| †combined Value/Growth/Momentum score |
According to Tipranks, based on 11 ranked analysts offering 12-month price targets in the last 3 months, the average price target for UNP is $85.70. Morningstar's fair value estimate of UNP is $95.00, whereas S&P Capital IQ has a fair value calculation of $85.50. Based on the average of these estimates ($89.00), I bought shares at a discount of about 4%.
Concluding Remarks
Looking forward to the month of April, I have more cash on hand to double down on holding in my DivGro portfolio. Whether I do that or not will depend on prevailing market conditions and my assessment of the fair value of specific stocks. The S&P 500 and the Dow Jones have both wiped out the losses suffered in January and February, so further opportunities for doubling down may be hard to find.
Hi Ferdi,
ReplyDeleteGreat job averaging down on these stocks. It's been tough to find value in the markets lately. The fact that you not only found value but were able to reduce your cost basis is fantastic. I own STWD, GILD, UNP, and TROW. STWD and GILD, I have a lot of exposure with, but for UNP and TROW I own about 60 shares of each. I'd like to get them both to 100 shares so I can sell calls.
Nice job and thanks for sharing.
Thanks for reading and commenting, Investment Hunting!
DeleteAgreed. We had a couple of opportunities in January and February to pick up shares at a nice discount. Now the markets have wiped out those losses and we're at the highs of the year...
I'm slowly getting ready to be able to sell calls myself. That is, when I'm not too busy at work...
Take care and best of luck with your investments.
You did a great job increasing your positions in some solid companies. I really need to do a better job of building positions up further instead of increasing the number of holdings within my portfolio. Diversification is still important at this stage of the game but I'm very overweight some holdings and others are tiny within my portfolio. I'd like to get a bit more balance in the weightings of course the higher conviction companies deserve a higher allocation. Looking forward to what you do in April.
ReplyDeleteThanks PIP! This article is of course a summary of a bunch of buy posts the past month. I thought it would be useful to share updated information on each stock, and to compare and contrast the buys from a "doubling down" perspective.
DeleteI should do a better job at determining which stocks I need to invest more in. Since starting DivGro, I've been trying to invest in chunks of $2,500 at a time. When I'm doubling up, it means I'm doing a second chunk. I'll loo into your idea of doing higher allocations in the near future.
Take care and thanks for visiting!