Last night I purchased 17 shares of Lorillard at $115.54 which will pay me $105.40 per year. It ends up being a yield of 5.34% including commissions, no complaints there :) This purchase pushes my total annualized dividend income over $4200 meaning from this point forward I'll average $350 in passive income per month. I'm pretty excited about that.
It's actually my second choice in the tobacco industry as I do prefer Philip Morris. That said I cannot control market prices and right now I find PM to be a bit pricey and LO to be priced right. I believe I'm getting some value with this one and would be willing to pay more than I did. Of course I don't know where this stock or the market is headed short term. Would I find a better price if I wait? Hell if I know... All I can do is buy a stock when it hits my target price!
As I stated in a previous post this month, I like Lorillard for a variety of reasons. Obviously the yield is pretty strong with this one. Beyond the yield and the decent price I think I'm getting there is a business behind the stock. This business is in a cash cow industry that sells top notch addictive products. LO is geared towards menthol cigarettes. However they have been making a push into non menthol which is a bigger market. They also sell electronic cigarettes which I find interesting. Believe it or not people use those things! In addition Lorillard is extremely shareholder friendly. I anticipate double digit dividend growth as well as share buy backs.
In my personal life I've battled nicotine addiction with mixed results. It's an extremely difficult habit to break. One month I'm doing good, the next thing I know I've had a little too much bourbon and I'm doing my chimney impression. The hard part is that I do enjoy smoking... I know there is legislation and talks about label changes, this and that. At the end of the day it's my right to smoke. When I'm listening to recorded bugle music; saluting the flag every morning; I often reflect on the great freedoms we have in this country. I think tobacco is here to stay.
Nice Purchase. LO is at the top of my watch list currently. I have a limit order on it that may get filled Thursday morning. I've been looking for another tobacco stock to compliment my small MO position and this one seems to be the most attractively valued.
ReplyDeleteI agree with that assessment. I think I have enough tobacco stocks for now, but we never know when an opportunity will present itself.
DeleteI agree -- nice purchase. While I am not currently looking to add another tobacco stock to my portfolio, if I were, then I would probably go with LO.
ReplyDeleteI think I'll be happy with the LO purchase, lots of people smoke 'Ports.
DeleteI would buy more cigarette stock if it wasnt such a large position in my portfolio already. Cigarette makers are basically mini-monopolies now, thanks to governement meddling which bans advertisement. If you and I wanted to start a cigarette company, how would we advertise our product and take away market share? It would be impossible. Thats why these companies are all good investments, if you have compunction against owning these 'sin' stocks.
ReplyDeleteYeah it would be almost impossible to start a new premium brand. One thing I like about LO is that they are attempting to piggyback off their menthol brand into the regular cigarette space. Since people already know Newports are the best menthols around I think the strategy might work. Brand recognition. I don't see Newport red being as popular as Marlboro or Camel though. That's asking too much!
DeleteCI,
ReplyDeleteGreat buy here. We're on the same wavelength on this one!
It looks like we could have gotten in at a better price, but that's not really what dividend growth investing is all about. It's not about catching the absolute bottom of the market, or individual stocks, but rather it's about buying quality on a value proposition and holding for the long-term while reinvesting your dividends which further speeds up the compounding effect.
I dig LO here. I'm loaded up on tobacco now so it'll be on to different pastures next month for sure. Can't wait to see your watch list updates! I'll be watching from the sidelines until November, but if something really screams at me I'll buy.
Best wishes.
Hmm there are a number of companies looking attractive at the moment. I don't know if I'll buy something else this month or not though.
DeleteI think a fair price on LO is around $125. Paying less than that is even better! I'm feel I own enough tobacco for now. There are certainly are risks with these stocks.