Weekly Purchase - OMI

14 shares OMI, 3.15% yield, $14.00 annual income

I went with a company that has been paying dividends the past 85 years for my purchase this week: Owens & Minor.  As I mentioned last weekend, I believe the stock looks reasonable in an otherwise heated market.  OMI recently had a soft earnings report which seems to have triggered the wrath of Mr. Market all the way down to 52 week lows.  Anyways I spent time reviewing the company last weekend because I was interested in knowing why this stock was sitting at yearly lows while the stock market was sitting at yearly highs.  Usually that means something must be going on.  I didn't discover anything that lead me to believe OMI had long term problems.  Might as well buy more.

It appears I managed decent timing today because my order was filled within a few cents of the daily low and also yearly low.  That's 100% luck, but I'll take it none the less.  From experience I know the stock market has a habit of changing its mind rather quickly; even better entry prices could be around the corner for all I know.  The only other thing I'd note is that OMI is now weighted 1.73% (based on income) for my portfolio.  Sounds just about right, though I wouldn't mind adding if the stock price continues to slide.

 I have many free trades available and did not pay commissions today.  I plan to continue small weekly purchases until my supply of free trades run out.

Symbol: OMI
Core Position: No
Speculative Position: No
Expectations: Steady income; 7% (average) annual dividend growth
Automatic Sell: Dividend cut
Consider Selling:  Frozen dividend, business fundamentally changes, management becomes untrustworthy, fundamentals deteriorate, wildly over valued stock price, or position fails to meet expectations

Baxter International Increases Dividend
Today Baxter (BAX) announced a dividend increase of 6.1% from $.49 to $.52 per quarter.  That boost is a bit smaller than what they've done in the past, but it doesn't surprise me since the company is planning to split in two.  Probably a good idea not to overly commit to a high dividend payment before such an event.  I'd like to add more BAX at some point, but haven't had a chance to look at the spinoff implications yet.

Have a great week!

May Shopping List

Does this bull market have no end?

Even with the S&P 500 sitting at all time highs I must invest my idle cash.  No choice in the matter.  You see, the only way for me to achieve my financial goals is to invest the money I save into income paying securities.  I already know I must average $1,600/mo in savings the rest of the year and then invest it into securities with an average yield of 3.25%.  That's exactly what needs to be done.  No more.  No less.  The only thing left is to execute and I'm not going to let stock prices get in the way!

●Owens & Minor (OMI) 3.10% yield, 18 year streak, 57.1% payout ratio
Owens & Minor offers a very nice yield at current prices.  I believe this company should be worth $34 per share, leaving a small margin of safety on the table.  Morningstar assigns it a $30 fair value as a comparison.  Anyways I haven't added OMI in a couple years and would be delighted to pick up some shares here.  OMI has been paying dividends since 1930.  That's almost 85 years!  With a history that rich, it's one of only a handful of stocks that I wouldn't mind holding during a dividend freeze.

Oh by the way, this stock is trading at 52 week lows right now.  That's tough to find in today's market...  I listened to last week's conference call in an attempt to figure out what's going on.  Basically OMI had a flat quarter.  Management cites weather and costs associated with setting up a couple large new customers as the cause.  I can live with that, no reason to think this business is in trouble.  Occasional hiccups don't concern me, especially because forward earnings guidance didn't change.

●Procter & Gamble (PG) 3.15% yield, 58 year streak, 68.5% payout ratio
First of all, PG's payout ratio isn't as bad as it looks at first glance.  The number listed above is based on earnings that include all kinds of one off items.  You know, the kind of one time events that will not affect the business moving forward.  It has a slightly better payout ratio of 63.4% if adjusted earnings are instead used.  Considering PG raised dividends just last month, that's not bad at all.  At any rate, PG is trading right at my fair value of $82.  Morningstar thinks it ought be worth $89.  I consider it fairly valued, and paying fair value for a company this awesome is never a bad idea.  PG is one of the highest quality stocks in world.  If I had to pick one stock that best embodied "sleep well at night," I'd choose PG.

●General Electric (GE) 3.30% yield, 4 year streak, 72.1% payout ratio
Just like PG, earnings and therefore the payout ratio is skewed here.  A 55.7% payout ratio is a more realistic number, and it happens to leave a lot more room for future dividend growth.  At any rate, I continue to be a fan of General Electric as it sheds risky financial businesses.  I'm on board with the makeover and believe the streamlined company will perform great.  At a minimum, GE gains sleep well at night properties and becomes easier to understand.  Less moving parts.

While I'd rather pick up GE shares closer to $25, I do think think its worth $27.50.  Morningstar stamps it with a $29 fair value.

●BP plc (BP) 4.60% yield, 3 year streak, 31.7% payout ratio
Guess what?  BP doesn't really have a 32% payout ratio.  It's more like 59%.  You see, earnings and payout ratios can be skewed the other way too.  Even then, the stock still looks cheap.  I'm of the opinion that BP should be worth $57 to which Morningstar agrees. BP is one of the cheapest stocks I own right now (not that it's THAT cheap imo) which compels me to want to buy more.  If only the market would quit bidding up prices!

April Recap

April was a great month all around.  Dividend increases were strong, incoming dividends were awesome, and I was able to deposit new funds at an elevated rate.  I'm expecting some additional dividend increases next month, but they ought to slow down the rest of the year.

DOW: 16,581 /// S&P 500: 1,884 /// 10-YR BOND: 2.65%

New Purchases:
1) 5 shares ABT at $38.51: $4.40 annual income
2) 8 shares GE at $25.87: $7.04
3) 8 shares ABT at $37.73: $7.04
4) 5 shares TGT at $59.75: $8.60
5) 6 shares ABT at $38.24: $5.28
6) 4 shares BP at $49.02: $9.12 (the dividend has since increased)
7) 15 shares GPC at $85.84: $34.52
8) FRIP: 2 shares GE: $1.76
9) DRIP: .605 shares BNS: ~$1.40

Sales:
none

Dividends Received: $476.40
Baxter International (BAX) $21.56
Coca-Cola (KO) $46.36
Telus (TU) $23.82
Walmart (WMT) $15.36
iShares Emer Mkt Bnd (EMB) $2.55
Illinois Tool Works (ITW) $12.18
Altria (MO) $43.68
Philip Morris (PM) $102.46
Corporate Office Properties Series L (OFC-PL) $22.58
Leggett & Platt (LEG) $18.30
Realty Income (O) $15.69
Realty Income Series F (O-PF) $6.76
W.P. Carey (WPC) $20.59
Kraft (KRFT) $14.18
Bank of Nova Scotia (BNS) $36.31
LTC Properties (LTC) $28.58
Toronto-Dominion Bank (TD) $45.44

Dividend Increases:
1) BP: $.57 to $.585 per quarter: $.60 annual income
2) CVX: $1.00 to $1.07 per quarter: $15.96
3) JNJ: $.66 to $.70 per quarter: $9.60
4) KMI: $.41 to $.42 per quarter: $6.48
5) OHI: $.49 to $.50 per quarter: $4.24
6) PG: $.6015 to $.6436 per quarter: $13.12
7) SO: $.5075 to $.525 per quarter: $4.48
8) UL: €.269 to €.285 per quarter: ~$1.90
9) XOM: $.63 to $.69 per quarter: $4.08

New Deposits:
$1,000 to ROTH IRA, $1,450 to taxable account, $100 to Lending Club

Lending Club Interest:
$12.04

New Purchase - GPC

15 shares GPC, 2.66% yield, $34.52 annual income

At the risk of looking foolish on a public blog, I added a new dividend champion to my holdings today.  First off I know GPC stock is not cheap.  I'm well aware of that fact.  The thing is that I have to invest the money I save into something in order to achieve my goals and the reality is stocks aren't cheap anymore.  I'm willing to pay up for only the highest quality companies which includes perennial dividend raisers such as KO, JNJ, PEP, EMR, and yes GPC.  Keep in mind that capital gains & total return do not matter to me.  I simply want a passive income stream rising faster than inflation and today's purchase will accomplish that.

The 42nd equity position for my self directed retirement fund is Genuine Parts Company.  I've been meaning to add this one for years, but never did manage to get a buy in for one reason or another.  Anyways I gained a new dividend champion with a 58 year streak (the longest streak that I own tied with PG) and also added some diversification to my holdings.  GPC comes with a 17.6 forward p/e, plus it offers a decent yield at the price I paid.  Not great, but not terrible either considering what I have to work with.  I'd be more than happy to add new GPC shares on weakness.  In fact that's my plan.  Still hoping for a correction...

Symbol: GPC
Core Position: No
Speculative Position: No
Expectations: Steady income; 7% (average) annual dividend growth
Automatic Sell: Dividend cut
Consider Selling:  Frozen dividend, business fundamentally changes, management becomes untrustworthy, fundamentals deteriorate, wildly over valued stock price, or position fails to meet expectations

Weekly Purchase - ABT & BP

6 shares ABT, 2.30% yield, $5.28 annual income
4 shares BP, 4.65% yield, $9.12

Even though its stock price crept up the past month, I still think BP plc looks attractive with a 10.0 forward p/e.  I wish more dividend growth stocks traded at valuations that cheap!  The second purchase was Abbott Laboratories with a most reasonable 15.6 forward p/e.  This month my plan was to increase underweight positions, that's why I've been adding to ABT, BP, and GE fairly regularly.  Moving forward, balancing my portfolio will take preference.  That will include starting new positions, and also adding to holdings that have a dividend weight less than 1.5% (when valuations make sense).  Since I don't want to fund a retirement with the 4% rule I decided it would be appropriate to weight my holdings based on income instead of market value.  Ideally core stocks might have 3-4% weightings; supporting stocks 1.5-2%.

Please note that I have free trades available and did not pay commissions today.  Under normal circumstances I try to buy in lots of at least $1,000 so as to minimize the effect of commissions/fees.

Weekly Purchase - TGT

5 shares TGT, 2.88% yield, $8.60 annual income
1 share GE, 3.38% yield, $.88 (FRIP purchase from last week)

I'm having difficulty finding places to park new money.  I wanted to pick up additional shares of General Electric and BP, yet prices haven't been cooperating the past couple weeks.  So I went with Target today because I feel it still offers value.  This is my fifth TGT purchase in the past six months or so.  I don't want to rehash reasons why I like the company over and over again.  It's pointless.  However I would note TGT comes standard with a 12.4 forward p/e and trades at a price lower than my fair value calculation.  As a comparison, Morningstar gives it a $65 fair value which is a couple bucks lower than mine.  Anyways the stock offers a nice yield and seems cheap by most measures.

Another nice month for dividend growth investors
Dividend increases just keep on rolling in.  So far in April, 4 companies I own have declared higher dividend rates.  That would be Procter & Gamble (7% raise), Kinder Morgan, Inc. (2.4%), Omega Healthcare Investors (2.0%), and Southern Company (3.4%).  I'm especially pleased to see boosts from KMI and OHI because I wasn't 100% sure those companies would announce raises this quarter.  Before April is in the books I also expect increases from Johnson & Johnson, Exxon Mobil, and Chevron.  April has potential to be another awesome month!

Unilever to start charging fees on plc ADR shares (UL shares)
"With effect from the dividend payable in June 2014 we will be charging an annual fee of $0.02 per PLC ADR share, or $0.005 per share on each of the four quarterly dividends. This fee will offset part of the aggregate costs incurred in the US programme." (taken from Unilever's investor relations website)

Bad news for Unilever plc shareholders in the US.  I haven't seen this reported anywhere else, so I thought I'd bring it to my readers attention.  While I don't like the fee at all, I still plan to continue accumulating UL shares when valuations make sense.

Bank of Nova Scotia ends 2% dividend reinvestment discount
"On March 4, 2014, the Bank announced that there will no longer be a discount from the Average Market Price (as defined in the Plan) applied to purchases of additional common shares with reinvested dividends." (taken from Scotia Bank's investor relations website)

I haven't seen this reported anywhere else either.  BNS was one of two companies I chose to synthetically DRIP, but I no longer have any reason to continue doing so.  Too bad I didn't notice this until now (I've been really busy the past couple months) because it's too late to stop it in time for next week's payment.  I will no longer DRIP BNS starting Q3.

Weekly Purchase - ABT

8 shares ABT, 2.32% yield, $7.04 annual income

This will have to be one of the shortest posts I've ever done, just don't have time to keep up with this blog at the moment.  Anyways I went with Abbott because it's one of my favorite dividend growth stocks and feel it's priced attractively as a long term hold.  Awesome company.

I'm currently away from home in North Carolina working long hours.  I have very little free time, but did get a chance to dip my toes in the Atlantic ocean a week and a half ago.  I was stationed in NC when I started this blog, kind of fun seeing people I know walking around base.

Catch you guys next week!