This article presents my final buys in 2016, all executed earlier this week. Tomorrow, I'll post my last article for 2016 detailing a few sell transactions.
I've been consolidating DivGro and preparing for options trading, closing several positions and using the cash to round out remaining positions to 100 shares (or multiples of 100 shares). With a solid foundation of dividend growth stocks, I can boost dividend income by selling covered calls on the stocks I own.
I'm still in progress on moving my portfolio to Interactive Brokers. I'm looking for more flexibility in options trading, for example, the ability to roll options forward in a single trade. The company's competitive commissions is another attraction.
Target Corporation
Target Corporation (TGT) sells a range of general merchandise and discount food products in nearly 1,800 stores in the United States and 124 stores in Canada. TGT offers both everyday essentials and fashionable, differentiated merchandise at discount prices. TGT operates as a single business segment and has a fully integrated online business, Target.com. Although relatively small to TGT's overall size, sales at Target.com are growing much faster than in-store sales.TGT is a Dividend Champion with a 49-year streak of dividend increases. The company pays quarterly dividends of 60¢ per share in March, June, September, and December. With a share price of $72.43, the stock yields 3.31%.
On 27 December I bought 100 shares of TGT at $73.86 per share, adding to 40 shares I already owned. The yield on cost (YoC) of my TGT position now averages 3.39% and I'm adding $240 to DivGro's projected annual dividend income (PADI).
My average cost basis is $70.78, illustrated in the following price chart along with my entry points:
My fair value estimate of TGT is $78.35.
In comparison, Morningstar's fair value estimate is $72.00, S&P Capital IQ's fair value estimate is $84.10, and Finbox.io has a fair value estimate of $89.22. According to Tipranks, based on 10 ranked analysts offering 12-month price targets for TGT, the average price target is $76.44.
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.
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Here is a table with updated ratings of TGT from various sources:
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TGT figured prominently in two of my December articles. First, the stock was one of two DivGro stocks – along with Qualcomm Inc (QCOM) – to appear in my top 10 ranked dividend growth stocks. Second, in my latest DivGro pulse article, I identified TGT as one of my smallest holdings. So I decided to buy some TGT shares, especially when I noted that TGT was trading at a discount to fair value. I also sold a couple of $72.50 puts on TGT, which would allow me to buy more TGT for around $70 if the puts are assigned.
Ford Motor Company
Founded in 1903 and based in Dearborn, Michigan, Ford Motor Company (F) manufactures and distributes automobiles worldwide. The company offers vehicles primarily under the Ford and Lincoln brand names. Ford sells its products through distributors and dealers, as well as through dealerships to fleet customers. The company provides vehicle financing products through a wholly owned subsidiary, Ford Motor Credit Company LLC.
Ford pays quarterly dividends of 15¢ per share in the months of January, April, July, and October. At the current price of $12.16, the stock yields 4.93%.
Ford has not increased its dividend in two years. Rather, the company paid a special dividend in the first quarter of 2016 and another special dividend may be coming in 2017.
On 27 December, I bought 400 shares of Ford at $12.44 per share, reducing my overall cost basis to $12.75. I now own 1,000 shares of Ford. This buy adds $240 to DivGro's PADI and my YoC now averages 4.71%.
Here is a price chart depicting my entry points relative to the average cost basis:
My fair value estimate of Ford is $15.28.
Morningstar's fair value estimate is $15 and Finbox.io has a fair value estimate of $13.27, illustrated below in a breakdown graphic. Tipranks, based on 7 ranked analysts offering 12-month price targets for Ford, the average price target is $11.64.
|  Source: Simply Wall St |
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My interest in Ford is mainly because it seems to be an excelling stock for options trading. I've executed a couple of successful covered calls already and I have another promising open trade. One Seeking Alpha article suggests that buying Ford at current levels could be lucrative, as the company is seeing a sales surge in their SUVs and pick-up trucks, which is expected to continue into 2017.
Main Street Capital Corporation
 Main Street Capital Corporation (MAIN) is a principal investment firm that provides customized debt and equity financing to lower middle market companies and debt capital to middle market companies. The company invests primarily in secured debt investments, equity investments, warrants, and other securities of companies based in the United States. MAIN was founded in 1997 and is based in Houston, Texas. MAIN pays monthly dividends and has a 6-year streak of dividend increases. The total annual dividend is $2.22, which means the stock yields 6.04% (at the current price of $36.70). |
On 27 December, I bought 100 shares of MAIN for $37.47 per share. This buy increases my position to 330 shares with an average cost basis of $26.49. I'm adding $222 to DivGro's PADI, and my average YoC is 8.38%.
Here is a price chart depicting my entry points relative to the average cost basis:
My fair value estimate of MAIN is $34.32, so I bought shares at a premium to fair value. Perhaps I should have waited for a more favorable entry point, but I needed to complete my trading before year's end as I'm transferring my accounts to another brokerage. Nevertheless, if MAIN drops from here, I'll be a buyer again.
Morningstar's fair value estimate is $35.21, while Tipranks estimates an average price target of $37, and Finbox.io has a fair value estimate of $31.14 (see below):
Here is a table with updated ratings of MAIN from various sources:
†VGM Style: Value Growth Momentum and combined VGM score
MAIN's performance has been stellar for DivGro. In September, the stock became DivGro's sixth home run stock, meaning that MAIN's total returns have passed the 100% mark. Much of the returns are dividend-related, as MAIN has paid back 27% of my original investment in dividends.
These three buys increase DivGro's projected annual dividend income by a total of $702. DivGro's projected annual dividend income ends 2016 above $12,000 – this means going forward, I can expect to receive $1,000 every month, on average, into perpetuity!
Thanks for reading! Do you own any of these stocks or are you interested in buying any of them? Please let me know in the comments below.
My fair value estimate of MAIN is $34.32, so I bought shares at a premium to fair value. Perhaps I should have waited for a more favorable entry point, but I needed to complete my trading before year's end as I'm transferring my accounts to another brokerage. Nevertheless, if MAIN drops from here, I'll be a buyer again.
Morningstar's fair value estimate is $35.21, while Tipranks estimates an average price target of $37, and Finbox.io has a fair value estimate of $31.14 (see below):
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Source: Simply Wall St
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MAIN's performance has been stellar for DivGro. In September, the stock became DivGro's sixth home run stock, meaning that MAIN's total returns have passed the 100% mark. Much of the returns are dividend-related, as MAIN has paid back 27% of my original investment in dividends.
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