With The Year Almost Half Over, Let's Look Back At Our 2016 Stock Purchases

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Includes: AFL, BA, CSCO, MSFT, PEP, TGT, V
by: The Dividend Bro

Summary

Since the start of the year, we've purchased Visa, Cisco, Pepsi, Boeing, Aflac, Microsoft and Target.

These positions are up an average of 7.09% since purchase.

This gain doesn't take into account dividends received.

It is hard to believe, but 2016 is almost half way over. With that being the case, I thought it might be a good time to look back at the purchases made in my wife's and my portfolio. While I am primarily concerned with investing in quality companies that have a history of paying and raising dividends, I think it is important to check in and see how the companies we've bought are doing. Since the start of the year, I have documented all of our purchases in a monthly portfolio update. For this article, I have not included dividends received for each position. The purpose of this article is just to see how each stock has performed since purchase. To see how I establish target prices, click here. Information is accurate as of 6/17/2016.

Target Price

Purchase Price

Current Price

Purchase Date

Change Since Purchase

Visa (NYSE:V)

$72

$73.37

$76.99

1/22/2016

5.33%

Cisco (NASDAQ:CSCO)

$25

$23.68

$28.95

1/29/2016

22.26%

Pepsi (NYSE:PEP)

$98

$99.04

$103.41

2/12/2016

4.14%

Boeing (NYSE:BA)

$117

$115.94

$129.82

2/24/2016

11.99%

Aflac (NYSE:AFL)

$68

$63.17

68.79

3/24/2016

8.90%

MSFT (NASDAQ:MSFT)

$50

$50.33

$50.13

4/29/2016

-0.40%

Target (NYSE:TGT)

$69

$69.03

$67.50

6/6/2016

-2.22%

Total

7.09%

Click to enlarge

Since the beginning of the year, we have made purchases in seven companies in five different sectors of the economy: Financials (Visa and Aflac), Technology (Cisco and Aflac), Consumer Staples (Pepsi), Consumer Discretionary (Target) and Industrials (Boeing). The average return for each stock is just over 7%. That is a pretty solid return when you remember that this doesn't include dividends received. Cisco has performed the best since purchase, but I must admit I am rooting for lower prices for this technology company. It is one of our smaller positions and would love to add to the position. Boeing was purchased shortly after the stock took a nosedive due to news that the SEC was examining its accounting practices. While we didn't buy at the low for the year of $102.10, we have had nice capital gains on the position. Even though Aflac has pulled back from its fifty-two-week high, we still have an almost 9% return. Not bad for a boring old supplemental insurance company.

Microsoft and Target have been the two laggards. Microsoft agreed to buy online professional network LinkedIn (NYSE:LNKD) on 6/13/2016 for $26.2 billion. Since then, the stock has dropped more than 2% as some investors feel the company paid too much for LinkedIn. Shares of Target were scooped up after the "controversy" over its bathroom policy. While I do not want to get into the politics of bathroom usage, the company has forty-eight straight years of dividend growth. I'm happy to add to our position at this lower price.

While I was able to get most stocks at or below my price target, I paid a bit more than my target price for both Visa and Pepsi. Pepsi has had forty-four consecutive years of dividend growth and according to David Fish's U.S. Dividend Champions, that is something only forty-three other companies can say. I've wanted to own shares of Pepsi for some time and figured paying a 1% premium to my target price for a company with an impressive dividend growth history was a sound investment choice. While the position is up just over 4% since February 12th, shares of Pepsi haven't traded below my purchase price of $99.04. In the short term, my thesis has been proven correct, but I would love for Pepsi to trade lower in order to buy more shares.

Visa is another example of where I paid more than my price target. I first wrote about Visa on 1/25/2016. In that article, I discussed that we sold Baxalta (BXLT) in order to purchase shares of the credit card super giant. Visa is the largest credit card company in the world and is continuing to take market share from its competitors. In the previous article, I gave some examples of this.

In April of this year, Costco (NASDAQ:COST) will stop accepting American Express (NYSE:AXP) and only accept Visa credit and debit cards at stores and gas stations.

USAA, one of the country's largest issuers of credit and debit cards, will be switching from MasterCard (NYSE:MA) to Visa. USAA members made $26 billion in purchases on their cards last year.

At the beginning of the year, Fidelity announced it was dropping American Express in favor of Visa. Fidelity has almost 24 million customers.

When a company demonstrates this type of market dominance, it has the potential to increase earnings which can then be used to reward shareholders with sizeable dividend increases. And that is just what Visa has done. The average annual dividend raise over the past five years is 30.70%. To me, that growth makes up for the sub 1.0% yield. It also helps justify buying shares of Visa 2% higher than my price target. When a company offers you the potential for capital gains and high dividend growth, paying a little more than you wanted is justifiable.

Conclusion

Dividend and dividend growth are the most important aspects of investing to my wife and me. We also want to make sure we buy shares of companies at a reasonable valuation. Overpaying for a company can be painful if there is turn in fundamentals or if the market takes a dive. We were able to acquire shares of Visa, Cisco, Pepsi, Boeing, Aflac, Microsoft and Target near or below our target price. The average gain in share price for each of these positions is 7.09%. Pretty good return for a short time period. We were able to achieve these returns because we had buy targets and bought shares when the company was at or below this price.

Disclosure: I am/we are long V, MSFT,CSCO, TGT,BA,PEP, AFL.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: We are not investment professionals, please do your own research prior to making a financial decision.