Two Buys, Two New Positions Initiated
I knew I’d be in the market to pick up some more stocks once my tax situation was ironed out. Thanks to aggressive quarterly payments made last year, I ended up getting a refund for the first time in probably 15 years or more.
That refund, combined with some additional income earned beyond what I anticipated a few weeks ago, has put me into a position to go shopping again. I feel a little bit like the kid who got the $100 Toys “R” Us gift card for Christmas and bolted through the front door the next day, ready to blow it all!
Actually I didn’t blow it all, but I have made two recent stock buys that incidentally are both new positions.
This past Monday on March 2, I picked up 35 shares of Southern Company (SO) for $44.73 a share plus the $7 trade commission. The total cost of this transaction was $1,572.55 and it added $73.48 to my 12-month forward dividends.
I purchased SO with a dividend yield pushing 4.7% for a few reasons. First, this electric utilities company has been paying dividends regularly for decades on end and I don’t anticipate that being interrupted anytime soon. Second, I’m very light in the utility sector and wanted to beef it up a little while the sector is getting pulled down as a whole. And finally, after several low yielding purchases earlier this year, I felt it was time to balance the buys out with a slightly higher yielding stock.
Looking ahead, I wouldn’t mind doubling my SO initial position at around $41-$42 a share if it gets that low. In the same sector I am also watching Avista Corp (AVA), which I own 6 shares of and want to build out alongside SO.
This morning the markets took a dive following the employment numbers and further advancing of the U.S. dollar. Several companies I’ve been watching slid, but one in particular I wanted to grab up with its ex-dividend date approaching on March 11 following a slow and steady decline from its 52-week high.
Today I bought 18 shares of Walmart (WMT) for $82.50 a share plus the $7 trade commission. This buy cost me $1,492 and added $35.28 to my 12-month forward dividends.
Walmart is a dividend growth stock I’ve been watching since day one and never pulled the trigger on because something else always interested me more when funds were available, such as Target during its slide a year ago. With Walmart dropping nearly 10 percent off its high around $90 a share and working on 42 years of dividend raises, I felt it was time to get my feet wet despite the relatively low 2.38% yield.
I am aware that Walmart’s most recent dividend raise was a weak two percent from $1.92 a share to $1.96, and I don’t mind one bit. This retailer isn’t going anywhere anytime soon and neither is their dividend. Should the market get rocky in the years ahead I want to make sure I have a solid stable of the steady payers.
From a financial planning perspective, Walmart pays its dividend on the January/April/July/October schedule, my weakest at the moment. I want to eventually achieve better balance among the months for dividend payments so purchases like Walmart fit perfectly into that plan.
Between these two buys I have added nearly $109 to my annual dividends that currently stand at $8,899. That’s about half of what I lost from the massive Ensco (ESV) dividend cut, a topic best saved for another post.
I like the SO buy, and have them on my shortlist as a potential first Utility sector stock for my portfolio. With WMT, I own a small position through my Loyal3 account, and don’t have any plans on expanding it until they show they are i a position to expand their dividend at a faster rate. One small jump is a data point. Two in a row has the potential to begin a trend.
Thanks for the update DWC!
W2R, Walmart was a bit of a gamble and the slow dividend expansion did give me reason to pause. I feel like the small raises have contributed in part to the price decline so there was some value in the purchase at the current price. We’ll see in the long run
Target remains my top retailer to own and is my top holding period behind KO and KMI.
As for SO, I fully intend to add to at minimum double that position at some point.
Thanks for stopping by!
Best,
DWC
I like the SO buy as well. Wal-Mart I’m not too sure as the dividend growth seems to be a little slow the last few years.
Thanks, Tawcan. I expect to get a lot of eye rolls regarding the WMT purchase. It’s a stock I’ve wanted to have in the portfolio for quite some time and felt like now was as good a time as any. I don’t expect it to be one of my big core holdings but I like having it as part of the team.
Best,
DWC
Hey DWC,
I used to own SO and had to sell to liquidate some of my assets last year to fund our home purchase….it looks like the stock has remained flat and its right aroudn the price where I sold it. I am looking at utilities again and SO is on my shortlist…although the PE is a tad high. The yield is juicy enough to initiate here.
Best wishes
R2R
R2R, It looks like SO made a run up toward 50 or so but has pulled back with utilities in general as the interest rate hike fears grow. I’d like to own 3x what I bought and am hoping the pullback continues marching utilities south. As for the PE, I think that comes with the territory.
Best,
DWC
Nice moves DWC. I’d like to had some Walmart too at some point. Thanks for sharing.
Thanks, MD. I regret not buying some Walmart a year ago in the low-to-mid 70s, but you can’t make every move you want to. Hopefully it goes lower so you can get in under $80. I’d gladly add a little more as well.
Best,
DWC
DWC,
I have really wanted to initiate a position in SO for a some time, but it seems like it is always way over valued. It has dropped about $10 a share in the last month or so and is back on my radar. Buying a utility in a rising interest rate environment can be a bit tricky, but if Dripped and purchased over time SO could certainly be a good addition.
MDP
Hey MDP. I’ve been watching SO for awhile now and it’s dropped down to what I consider the high end of the bottom range, if that makes sense. The jobs number this past week fired up the interest rate rumors, but will the Fed really raise them this year? If they do, are we looking at a significant raise or a quarter percent?
I figured if they raise rates then I’ll add to my position around $40 or at least drip some shares there. If they don’t raise rates and SO creeps back up then I’ll be happy and collect the dividend.
Love your PM purchases, btw. Adding to my position is very high on my list and the current price is very close to my happy zone
I’m holding some cash aside for that very purpose.
Best,
DWC
I’ve just been considering utility stocks the last few days. Here in the UK, we don’t have so many companies with lengthy records of increasing dividend payments, but utilities always pay a high yield. Even if the dividend is cut, as Centrica (natural gas) recently had cause to do, then the yield is still high anyway – I guess utilities offer a fair degree of safety in that sense.
I’m pretty sad that the dollar is so high again right now, this is putting me off purchasing any American stocks until it comes back down to a more reasonable level, i.e. $1.60 or more to the £
Cheers
TV,
Thanks for the note. I don’t ever want to be high on utilities, but I would like a little slice of two or three companies simply for diversification and the yield. I have plenty other low yield/high growth names in my portfolio so the steady yielders like utilities help balance that out.
Man, I completely forgot that we should be getting a tax refund this year. Possibly a couple grand. That’s going to help build up cash so I can cash flow the investment capital. I don’t have any exposure to utilities but I think they’re starting to get down to “nibble area”. I don’t like all of the regulatory hurdles they have to jump over. I agree about WMT. The last 2 increases were subpar but is it really going anywhere anytime soon? I expect some more normalized increases to start coming again soon. Thanks for the update.
JC,
The tax refund blew my mind. I was totally expecting to owe and then bam, two grand coming back to me. Unfortunately I did have a completely headache-inducing unexpected expense this month that canceled out the tax refund, but what can you do.
I’m really heavy in Target at over 300 shares so I wanted a little Walmart on its dip to play alongside that. If Costco weren’t priced through the moon I wouldn’t mind a little of that, either.
Great purchases DWC. I hold WMT as well and looking forward to add more. The stock has dropped close to 10% and is coming closer to my average price. Will probably add more in the next few weeks.
DGJ,
I’d like to see Walmart get back below $80 which is where I would consider adding or at the very least FRIPing more. Happy with this initial purchase as I wanted to bite the bullet sooner rather than later on one of what I consider my 2014 misses. Another is Wells Fargo, but that just won’t retreat.