In Part 2 of this article I'm covering three more additions to DivGro. These are stocks in the Financials and Information Technology sectors.Part 1 presented two new positions in the Materials sector, Air Products and Chemicals (APD) and International Paper (IP); and one new position in the Energy sector, Chevron (CVX).
On Monday, the stock market dropped to a 20-month low on the worst Christmas Eve trading day ever! But things certainly got turned around on Boxing Day! As mentioned in Part 1, I've been operating under the assumption that the bulls would keep the bears at bay for another year or so. We'll see how it goes...
Addition #4: JPM (100 shares @ $103.31)
In December I added two Financials sector stocks to DivGro.
The first is JPMorgan Chase (JPM), one of the top 50 dividend growth stocks held in Dividend ETFs. On 6 December 2018, I bought 100 shares of JPM at $103.31 per share, for an initial yield on cost (YoC) of 3.10%.
The stock is now trading about 9% below my purchase price. My timing on this one was unfortunate!
About JPM
JPM is a Dividend Challenger with 8 consecutive years of dividend increases. The stock yields 3.39% at $94.35 per share and has an annualized dividend growth rate of 14% over the last five years. According to Simply Safe Dividends, JPM's dividend is considered Safe with a dividend safety score of 75.
Valuation
Here are several fair value estimates and price targets for JPM:
Finbox.io Fair Value: $86 (uncertainty: high)
Morningstar Fair Value Estimate: $113 (uncertainty: medium)
Simply Safe Dividends Derived Fair Value: $122 (yield is 29% above 5-year average yield)
Simply Wall St Future Cash Flow Value: $109 (2-stage discounted cash flow analysis)
TipRanks Analyst Price Target: $127 (11 Analysts • target range: $115–$132)
Value Line Target Price: $123 (target range: $105–$140)
Yahoo! Finance Analyst Price Target: $120 (27 analysts • target range: $94–$138)
Ignoring the lowest and highest ($86 and $127), and averaging the mean and median of the remaining estimates and price targets, I arrive at a reasonable fair value estimate of $118.
My buy price of $103.31 is about 12% below fair value, and at the current stock price of $94.35, JPM is discounted by about 20%.
Ratings
Following is a table containing ratings and rankings of JPM from various sources:
†VGM Style: Value Growth Momentum and combined VGM score
And here is JPM's dividend score card:
This buy adds $320 to DivGro's projected annual dividend income.
On 21 December 2018, I bought 20 shares of AVGO at $250.40 per share, for an initial yield on cost (YoC) of 4.23%. The stock now trades just below $243 per share, slightly below my entry price.
About AVGO
AVGO designs, develops, and supplies a range of semiconductor devices for use in a variety of applications, including enterprise and data center networking, broadband access, telecommunication equipment, smartphones and base stations, data center servers and storage systems, factory automation, power generation and alternative energy systems, and electronic displays. AVGO is based in San Jose, California.
AVGO is a Dividend Challenger with 8 consecutive years of dividend increases. The stock yields 4.38% at $243.13 per share and has an annualized dividend growth rate of 55% over the last five years. According to Simply Safe Dividends, AVGO's dividend is considered Very Safe with a dividend safety score of 87.
Valuation
Here are several fair value estimates and price targets for AVGO:
Finbox.io Fair Value: $314 (uncertainty: low)
Morningstar Fair Value Estimate: $300 (uncertainty: medium)
Simply Safe Dividends Derived Fair Value: $348 (yield is 43% above 5-year average yield)
TipRanks Analyst Price Target: $127 (11 Analysts • target range: $115–$132)
Value Line Target Price: $123 (target range: $105–$140)
Yahoo! Finance Analyst Price Target: $120 (27 analysts • target range: $94–$138)
Ignoring the lowest and highest ($86 and $127), and averaging the mean and median of the remaining estimates and price targets, I arrive at a reasonable fair value estimate of $118.
My buy price of $103.31 is about 12% below fair value, and at the current stock price of $94.35, JPM is discounted by about 20%.
Ratings
Following is a table containing ratings and rankings of JPM from various sources:
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And here is JPM's dividend score card:
This buy adds $320 to DivGro's projected annual dividend income.
Addition #5: BLK (25 shares @ $385.94)
The second Financials sector stock I added to DivGro recently is BlackRock (BLK), a stock with impressive growth potential. On 19 December 2018, I bought 25 shares of BLK at $385.94 per share, for an initial yield on cost (YoC) of 3.24%.
About BLK
BLK is an investment management company that provides a range of investment and risk management services to institutional and retail clients across the world. The company’s offerings include single and multi-asset class portfolios investing in equities, fixed income, alternatives and money market instruments. BLK was founded in 1988 and is based in New York City
BLK is a Dividend Challenger with 9 consecutive years of dividend increases. The stock yields 3.37% at $371.40 per share and has an annualized dividend growth rate of 12% over the last five years. According to Simply Safe Dividends, BLK's dividend is considered Very Safe with a dividend safety score of 97.
Valuation
Here are several fair value estimates and price targets for BLK:
Finbox.io Fair Value: $362 (uncertainty: high)
Morningstar Fair Value Estimate: $500 (uncertainty: medium)
Simply Safe Dividends Derived Fair Value: $507 (yield is 36% above 5-year average yield)
About BLK
BLK is a Dividend Challenger with 9 consecutive years of dividend increases. The stock yields 3.37% at $371.40 per share and has an annualized dividend growth rate of 12% over the last five years. According to Simply Safe Dividends, BLK's dividend is considered Very Safe with a dividend safety score of 97.
Valuation
Here are several fair value estimates and price targets for BLK:
Finbox.io Fair Value: $362 (uncertainty: high)
Morningstar Fair Value Estimate: $500 (uncertainty: medium)
Simply Safe Dividends Derived Fair Value: $507 (yield is 36% above 5-year average yield)
Simply Wall St Future Cash Flow Value: $432 (2-stage discounted cash flow analysis)
TipRanks Analyst Price Target: $490 (11 Analysts • target range: $440–$592)
Value Line Target Price: $693 (target range: $590–$795)
Yahoo! Finance Analyst Price Target: $535 (13 analysts • target range: $440–$573)
Ignoring the lowest and highest ($362 and $693), and averaging the mean and median of the remaining estimates and price targets, I arrive at a reasonable fair value estimate of $495.
My buy price of $385.94 is about 22% below fair value.
Ratings
Following is a table containing ratings and rankings of BLK from various sources:
†VGM Style: Value Growth Momentum and combined VGM score
And here is BLK's dividend score card:
My new BLK position adds $313 to DivGro's projected annual dividend income.
TipRanks Analyst Price Target: $490 (11 Analysts • target range: $440–$592)
Value Line Target Price: $693 (target range: $590–$795)
Yahoo! Finance Analyst Price Target: $535 (13 analysts • target range: $440–$573)
Ignoring the lowest and highest ($362 and $693), and averaging the mean and median of the remaining estimates and price targets, I arrive at a reasonable fair value estimate of $495.
My buy price of $385.94 is about 22% below fair value.
Ratings
Following is a table containing ratings and rankings of BLK from various sources:
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And here is BLK's dividend score card:
My new BLK position adds $313 to DivGro's projected annual dividend income.
Addition #6: AVGO (20 shares @ $250.40)
The last new position I'm reporting is Broadcom (AVGO), considered by one author on Seeking Alpha to be the best Information Technology stock you can buy today. The company has a world-class management team, a wide moat, and strong growth prospects. Adding to those positives, AVGO offers a safe and fast-growing dividend.
On 21 December 2018, I bought 20 shares of AVGO at $250.40 per share, for an initial yield on cost (YoC) of 4.23%. The stock now trades just below $243 per share, slightly below my entry price.
About AVGO
AVGO is a Dividend Challenger with 8 consecutive years of dividend increases. The stock yields 4.38% at $243.13 per share and has an annualized dividend growth rate of 55% over the last five years. According to Simply Safe Dividends, AVGO's dividend is considered Very Safe with a dividend safety score of 87.
Valuation
Here are several fair value estimates and price targets for AVGO:
Finbox.io Fair Value: $314 (uncertainty: low)
Morningstar Fair Value Estimate: $300 (uncertainty: medium)
Simply Safe Dividends Derived Fair Value: $348 (yield is 43% above 5-year average yield)
Simply Wall St Future Cash Flow Value: $361 (2-stage discounted cash flow analysis)
TipRanks Analyst Price Target: $291 (21 Analysts • target range: $250–$325)
Value Line Target Price: $305 (target range: $245–$365)
Yahoo! Finance Analyst Price Target: $275 (23 analysts • target range: $240–$350)
Ignoring the lowest and highest ($275 and $361), and averaging the mean and median of the remaining estimates and price targets, I arrive at a reasonable fair value estimate of $310.
My buy price of $250.40 is about 19% below fair value.
Ratings
Following is a table containing ratings and rankings of AVGO from various sources:
†VGM Style: Value Growth Momentum and combined VGM score
Seeking Alpha doesn't have a dividend scorecard for AVGO's.
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to each comment as quickly as possible.
TipRanks Analyst Price Target: $291 (21 Analysts • target range: $250–$325)
Value Line Target Price: $305 (target range: $245–$365)
Yahoo! Finance Analyst Price Target: $275 (23 analysts • target range: $240–$350)
Ignoring the lowest and highest ($275 and $361), and averaging the mean and median of the remaining estimates and price targets, I arrive at a reasonable fair value estimate of $310.
My buy price of $250.40 is about 19% below fair value.
Ratings
Following is a table containing ratings and rankings of AVGO from various sources:
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Seeking Alpha doesn't have a dividend scorecard for AVGO's.
My new AVGO position adds $212 to DivGro's projected annual dividend income.
Concluding Remarks
I added six new positions to DivGro in December.
Part 1 of this article covered three of these additions, APD, IP, and CVX, adding $377.92 to DivGro's projected annual dividend income (PADI).
In Part 2, I covered three more additions, JPM, BLK, and AVGO. These positions will add $850 in PADI to my portfolio.
So, in total, the six new positions added about $1,228 to my PADI! This partially makes up for giving up PADI totaling $2,439 with my recent tax-harvesting sells.
Part 1 of this article covered three of these additions, APD, IP, and CVX, adding $377.92 to DivGro's projected annual dividend income (PADI).
In Part 2, I covered three more additions, JPM, BLK, and AVGO. These positions will add $850 in PADI to my portfolio.
So, in total, the six new positions added about $1,228 to my PADI! This partially makes up for giving up PADI totaling $2,439 with my recent tax-harvesting sells.
to each comment as quickly as possible.
I really like your BLK purchase and am tempted to pick some up myself. I've made a few sales over the past week and raised up some cash and might make another 2-3 sales before the end of the year to free up a bit more cash.
ReplyDeleteI agree BLK is a great buy at these levels. Of course it is tricky to time buys when the market is so volatile, but I'm a long-term investor and in time, I think these buys will all do just fine.
DeleteI'm not particularly looking to sell anything else before years-end, but I guess it depends on what the market does. I might nibble a bit more, though!
Wow, thats a lot of capital being put to work. That should give you a good bump in dividend income. Keep it up FerdiS.
ReplyDeletecheers
R2R
Yes, but I sold a lot to harvest taxes, too, so my dividend income is down a bit overall. I'm expecting a bonus in January, so I'll buy back many of the stocks I sold for tax harvesting at the end of January and into February...
DeleteHi Ferdi,
ReplyDeleteI like your purchases. Honestly I need to have a deeper into Broadcom. The dividend increases are crazy and it seems to be a very popular stock in the community at the moment. I used to own Black Rock and sold it for a nice profit, but it's coming back to the buying area, so also worth to think about...
Cheers
Thanks for commenting, Div.Income. Broadcom has an interesting history and I've seen several DGI's pick up shares, so I agree -- it seems to be a popular stock at the moment. I particularly like the yield, which is nice for a Tech stock.
DeleteAll the best and happy new year!~
I've been looking at BLK for a while myself. They've been part of the VDIGX ETF for a while and pays good dividends. That and JPM are probably solid companies to get some more exposure into Financials as interest rates continue to rise.
ReplyDeleteHow tied to these target prices are you though? I'm never been too keen on target prices. Having worked as as analyst for a while, there's a lot of behavioral biases and assumptions that get mixed in with valuations.
Hi, Financeoholic -- thanks for your comment!
DeleteI've been looking for a little more exposure to Financials, so that is part of my reason for buying JPM and BLK. Not all DGI's are excited or even interested in Financials, though, especially banks.
As for target prices, I use them more for guidance than anything else. In fact, when I do a full valuation on a stock, I do consider target prices but weigh them less than "fair value estimates" such as those from Morningstar or finbox.io. Of course, I do a DDM analysis myself -- but, as you know, the parameters you choose to use (discount rate etc) produces wildly different estimates. So I do the cross check with as many other sources I can access.