Wednesday, December 28, 2016

Some Recent Buys (Part 1)

I have yet to report my buys for December. In addition to spending some 30 hours traveling back from South Africa, I've been quite busy doing the research for and writing my recent Seeking Alpha article Top Holdings of Dividend ETFs. I'm happy to say the article is generating a lot of interest and is keeping me quite busy replying to comments.

Several buys have gone unreported and the goal of my next three articles is to detail them. All the buys are additions to existing positions. In some cases, I immediately sold call options on the underlying shares but I'll defer reporting those trades to my next options update article.

Following are summaries of four buys I executed on December 5th and 6th.

Valero Energy Corporation


Founded in 1955 and based in San Antonio, Texas, Valero Energy Corporation (VLO) is an independent petroleum refining and marketing company. The company's refineries produce conventional and premium gasoline, including gasoline meeting the specifications of the California Air Resources Board. VLO's ethanol segment produces ethanol and distillers grain.

VLO is a Dividend Challenger with a 6-year streak of dividend increases. The company pays quarterly dividends of 60¢ per share in the months of March, June, September, and December. At the current share price of $68.80, the stock yields 3.49%.

On 5 December, I bought 100 shares of VLO at $63.26 per share.

I now own 172 shares of VLO at an average cost basis of $61.57. Yield on cost (YoC) averages 3.90% and I'm adding $240 to DivGro's projected annual dividend income (PADI).

Here is a price chart depicting my buy prices relative to the average cost basis:


My fair value estimate of VLO is $62.56.

In comparison, Morningstar's fair value estimate is $68.00, Finbox.io's fair value estimate is $66.41, and Tipranks' average price target is $65.33.

Finbox.io presents a complete breakdown of its fair value estimate as well as range visualizers, not only for its own range of estimates but also for Wall Street analysts' targets and the stock's 52-week trading range (see below, left). I also like Simply Wall St's snowflake graphic, which presents a visual summary of a stock's fundamentals and investment profile.

   










Following is a table containing updated ratings of VLO from various sources:

DARS Rating: 
 Neutral (2.5 to 3.4) 
Rating for Stocks: 
 ★★★☆
STARS and Quality Ranking: 
 
   Quality Ranking:  B 
Quant Rating: 
 
Analyst Consensus: 
 
(3 Analysts) 
Rating and Rank: 
  Financial Strength:     Safety: 
 
Rank and Style Scores: 
  3-Hold    †VGM: 
    
†VGM Style:  Value   Growth   Momentum  and  combined VGM  score

VLO found a bottom in July and is now in a solid uptrend. Several authors on Seeking Alpha are advocating buying shares, including Individual Trader, The Value Portfolio, and Brandon Dempster. And Zacks Equity Research recently picked VLO as a strong value candidate due to its low P/E ratio, solid outlook, and impressive dividend.

The Walt Disney Company


The Walt Disney Company (DIS) is a diversified international family entertainment company based in Burbank, California. Founded on October 16, 1923, by Walt Disney and Roy O. Disney, the company established itself as a leader in the American animation industry before diversifying into live-action film production, television, and theme parks.

DIS pays dividends semi-annually in the months of January and July. The company has a 7-year streak of dividend increases. At the current share price of $105.17 the stock yields 1.48%.

On 5 December, I bought 100 shares of DIS at $99.97 per share. This happened to be 3 days before the stock's ex-dividend date, which means I'll collect the semi-annual dividend of 78¢ in January.

I now own 227 shares of DIS at an average cost basis of $98.65. YoC averages 1.58% and DivGro's PADI increases by $156.

Here is a price chart depicting my buy prices relative to the average cost basis:


My fair value estimate of DIS is $93.18.

In comparison, Morningstar's fair value estimate is quite high at $134.00 and Finbox.io's fair value estimate is quite low at $82.32 (see the breakdown below). According to Tipranks, based on 22 ranked analysts offering 12-month price targets for DIS in the last 3 months, the average price target is $107.76.


   
Source: Simply Wall St

















Here are updated ratings of DIS from various sources:

DARS Rating: 

  Neutral (2.5 to 3.4) 
Rating for Stocks: 
 ★★★
STARS and Quality Ranking: 
 
   Quality Ranking:  A+ 
Quant Rating: 
 
Analyst Consensus: 
 
(22 Analysts) 
Rating and Rank: 
  Financial Strength:     Safety: 
 
Rank and Style Scores: 
  3-Hold    †VGM: 
    
†VGM Style:  Value   Growth   Momentum  and  combined VGM  score

DIS became the first studio to gross $7B worldwide at the box office in a single year. Three films crossed the $1B mark globally this year: Finding Nemo, Captain America: Civil War, and Zootopia. Another film, The Jungle Book, came close with $967M worldwide.

AbbVie Inc


AbbVie Inc (ABBV) is a worldwide, research-based biopharmaceutical company that develops and markets products to treat conditions such as chronic autoimmune diseases, including rheumatoid arthritis, psoriasis and Crohn's disease; hepatitis C; HIV (human immunodeficiency); endometriosis; thyroid disease; Parkinson's disease; complications associated with chronic kidney disease and cystic fibrosis, and other health conditions. ABBV was incorporated in 2012 and is based in North Chicago, Illinois.

ABBVspun off from Abbott Laboratories (ABT) in January 2013, so the company does not yet have a long track record of paying and raising dividends. The company pays quarterly dividends in the months of February, May, August, and November. At the current share price of $62.50, ABBV yields 4.10%.

On 5 December, I bought 100 shares of ABBV at $60.56 per share.

This buy doubles my ABBV position to 200 shares with an average cost basis of $61.65. The average YoC is 4.15% and I'm adding $256 to DivGro's projected annual dividend income (PADI).

Here is a price chart depicting my buy prices relative to the average cost basis:


My fair value estimate of ABBV is $70.80.

Morningstar's fair value estimate is $73.00 and Finbox.io's fair value estimate is $70.30 (see the breakdown below). According to Tipranks, based on 8 ranked analysts offering 12-month price targets for ABBV in the last 3 months, the average price target is $71.50.


Source: Simply Wall St















Here is a table with updated ratings of ABBV from various sources:

DARS Rating: 
 Recommended (3.5 to 3.7) 
Rating for Stocks: 
 ★★
STARS and Quality Ranking: 
 
   Quality Ranking:  NR 
Quant Rating: 
 
Analyst Consensus: 
 
(8 Analysts) 
Rating and Rank: 
  Financial Strength:     Safety: 
 
Rank and Style Scores: 
  3-Hold    †VGM: 
    
†VGM Style:  Value   Growth   Momentum  and  combined VGM  score

I like ABBV's efforts to return value to shareholders in the form of share buybacks and dividend payments. Earlier this year, the company's share repurchase authorization was increased by $5 billion to $10 billion and the company hiked its quarterly dividend by 12% recently.

Nike Inc 


Founded in 1964 and headquartered in Beaverton, Oregon, Nike Inc (NKE) is engaged in the design, development, marketing and selling of athletic footwear, apparel, equipment, and accessories. The company's portfolio brands include the NIKE Brand, Jordan Brand, Hurley, and Converse. NKE sells its products to retail accounts, through NIKE-owned retail stores and Internet Websites, and through a mix of independent distributors and licensees.

NKE is a Dividend Contender with a track record of 15 consecutive years of dividend increases and a 10-year dividend growth rate of 16%. NKE pays quarterly dividends of 18¢ per share in the months of January, April, July, and October. At the current share price of $51.29, NKE yields 1.40%.

On 6 December, I bought 53 shares of NKE at $50.80 per share.

This buy rounds out my NKE position to 100 shares with an average cost basis of $51.79. My YoC averages 1.39% and I'm adding $38.16 to DivGro's PADI.

Here is a price chart depicting my buy prices relative to the average cost basis:


My fair value estimate of NKE is $93.36.

In comparison, Morningstar's fair value estimate is $57.00, whereas S&P Capital IQ calculates a fair value of $54.30. According to Tipranks, based on 25 ranked analysts offering 12-month price targets for NKE the average price target is $61.05. Finbox.io has a fair value estimate of $47.86, as illustrated below:

Source: Simply Wall St

















Here is a table with updated ratings of NKE from various sources:

DARS Rating: 
 Neutral (2.5 to 3.4) 
Rating for Stocks: 
 ★★★☆
STARS and Quality Ranking: 
 
   Quality Ranking:  A+ 
Quant Rating: 
 
Analyst Consensus: 
 
(25 Analysts) 
Rating and Rank: 
  Financial Strength:     Safety: 
 
Rank and Style Scores: 
  3-Hold    †VGM: 
    
†VGM Style:  Value   Growth   Momentum  and  combined VGM  score

In my most recent pulse article, NKE was identified as the top ranked stock in my DivGro portfolio. The stock has struggled in 2016 and is down about 20%. But NKE remains an attractive stock and has maintained a positive earnings surprise trend for 18 straight quarters. The company has a strong balance sheet, which will afford it the financial flexibility to drive future growth.

Conclusion


These four buys increase DivGro's projected annual dividend income by a total of $690. I have now surpassed my goal of increasing projected annual dividend income to $12,000 in 2016.

Thanks for reading! Take care everybody!

2 comments :

  1. Can't go wrong with DIS! I've held them for many years and love their products and future growth potential. A little weird that they only pay a dividend twice a year (Jan and July) but a great stock!
    TheDividendLife.com

    ReplyDelete
    Replies
    1. I agree -- DIS is a great company. They used to pay only annually. I once heard the reason was that SO many people owned a single share (think grandparents buying a share for their grandkids, etc.) that he cost of mailing dividend checks was astronomical...

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