Tuesday, January 21, 2014

Weekly Purchase - TGT / FRIP - LEG


4 shares TGT, 2.91% yield, $6.88 annual income

I added a few Target shares today.  Price of this stock is currently under pressure from the widely publicized data breach, a slower than expected start to Canadian expansion, and lowered earnings guidance.  It seems to me that all retailers, not just Target, have potential security vulnerabilities.  Yet it is TGT that will have to deal the mess and it doesn't look pretty.  It might have to replace credit card terminals, pay legal fees, and face sluggish sales in light of all the negative publicity.  One analyst downgraded the stock and even thinks TGT will have to cancel its stock buyback program.  To me, this sounds like the proverbial "blood in the streets."

On the flip side, $59 is a nice price for this company since all the negatives listed above seem short term in nature.  Long term I think the company will be fine, I see no reason for any drastic actions like a dividend cut.  However I do expect dividend growth to be much lower than normal this year.  My plan is to nibble a little bit here and there, but stay diversified.  Target is a high quality company trading at an attractive price, but it will remain a small part of my portfolio. 

If TGT stays in the 50's I'll likely buy some more next week, but I must admit WMT looks attractive too.


1 share LEG, 3.98% yield, $1.20 annual income

This is my first ever FRIP purchase.  Kind of exciting!  I only had about 38 bucks to FRIP so I decided to pick a company with a low stock price rather than wait another quarter.  I believe LEG is undervalued at $30, but to be honest it's not my top choice at these levels.  My Scottrade account is still young, you can expect to see a lot of FRIPing in my future.

All in all I like FRIP a lot better than DRIP.  The only thing I don't like is that dividend reinvestment discounts do not apply.  I'll have to make sure companies that offer those discounts are placed in my other brokerage.

4 comments:

  1. CI -

    Haha, we must be on the same page. I had an order for TGT go through today, too. And I just posted about "blood in the streets." I've been thinking about that line all day as I checked the Target share price. I think TGT can weather the storm. Glad to see WMT/retail in general is going down, too. I'd definitely like to add to my WMT position.

    How long did it take you to make the switch to FRIP? I'll admit, I left Scottrade after I first got started since they didn't offer dividend reinvestment. I'm thinking that eventually I'll make my way to FRIP'ing, but I'd like to have a stronger dividend income stream first. Still building that and I think the Sharebuilder dollar cost average DRIP is working well for me at the moment.

    Take care!

    DW

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    1. Well I'm a bit of an oddball with dividend reinvestment. I take dividends as cash, I FRIP, and I DRIP. Ha!

      I DRIP companies in my Fidelity accounts that offer reinvestment discounts. Currently that is OHI and BNS. All other dividends are taken as cash.

      I FRIP all the dividends in my Scottrade account. This is where my current taxable contributions will go. If something offers a DRIP discount it's going to be placed in Fidelity though. I refuse to give up discounts just to FRIP.

      I'm not ditching Fidelity or Scottrade because I prefer to diversify brokers. If one broker has problems I have another till the mess gets sorted out. I probably won't need more than 2 unless I reach millionaire status.

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  2. I like both TGT and WMT here at these levels as well as PM. Lots of choices to add to positions but WMT is the smallest position of the 3 for me. I've got enough capital to make probably one purchase if I want to keep my options open for buying a rental property. I'd like to make some more stock purchase moves but I need to keep money set aside for the property. A good problem to have I guess.

    I really like the FRIP and Scottrade will be my next brokerage when I open one up. Probably sometime in the first half of the year.

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    1. Yeah I like WMT here too. I have to hope it stays around 75 for next week! Man that is so awesome that you're getting into rental properties. Rental properties are just as good as dividend stocks in my opinion. I wish you the best of luck with that endeavor.

      If you decide to go with Scottrade, you can hit me up for a code that get you 3 free trades (I'll get them too) at sign up. Had I known about this program I would have given one of my fellow bloggers this bonus when I started the account.

      Thanks for checking in

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