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If I Overpay Now, Will I Regret It Later?

The summer after my junior year in college, I travelled in Scandinavia. I found a lovely little art museum called the Louisiana Museum, in Humlebæk, Denmark. In the gift shop was a highly colorful painting by an artist named Ay-O. The price was $100, which was a lot of money for a college student in 1976. I was willing to spend that much to buy it, but I wasn't willing to pay the additional cost of shipping it home. I couldn't carry it with me, and I didn't want to pay to ship it, so I didn't buy it.

I have regretted that decision ever since 1976, and the money I saved was not worth the cost of my regrets.

I thought I had learned my lesson when, a year after my wife and I were married, we began looking for a house. We found one we liked. We put in an offer near the top of what we could afford. The broker told us that our offer had been out-bid, and recommended that we offer an additional $10,000. My wife and I were reluctant to go that high, but we really loved the house. I grabbed a calculator, and quickly computed that $10,000 divided by 10,950 days (30 years * 365 days per year (I was willing to ignore leap-years J)) was 91 cents per day. I asked my wife if she loved the house enough to spend an extra 91 cents per day; she said she did; we raised our bid, bought the house, and have happily lived in the house for many years now.

Recently I realized that I had not learned my lesson. In late April, reports surfaced of Walmart's alleged bribery in Mexico. The stock dropped from $62.45/share on April 20, to a low of $57.36 on April 25, before it started climbing again. When I saw it drop below $58.00, I got greedy, and put in a limit order at $57.00. The price never got that low, the limit order didn't execute, and I didn't get WMT at my price. I should have just put in a market order, and bought WMT at $58.00.

I have regretted that decision since then, and the money I saved was not worth the cost of my regrets.

I recently wrote an article called, "What Do I Want To Buy? When Should I Buy It?". In the article, I described my rules concerning which companies to buy. A candidate has to have a minimum of 10 consecutive years of rising dividends; each dividend increase has to be 5% or more; the current yield at the time of the purchase has to be 3% or more; etc.

The good news is, any company that passes my tests is likely to be a good dividend growth company for many years.

The bad news is, I might be missing out on other good dividend growth companies that don't pass my strict tests.

For example:

The following Dividend Champions have raised their dividends high enough and long enough to pass some of my tests, but their current yield is below 3%, and they are currently overvalued:

 

 

 

 

Name Ticker DF list dividend current price current yield
RAVEN INDUSTRIES INC RAVN champions $0.42 $35.10 1.20
FAMILY DOLLAR STORES FDO champions $0.84 $66.66 1.26
MCCORMICK & CO-NON VTG SHRS MKC champions $1.24 $61.30 2.02
COLGATE-PALMOLIVE CO CL champions $2.48 $107.26 2.31
COCA-COLA CO/THE KO champions $2.04 $80.14 2.55

The following Dividend Contenders have raised their dividends high enough and long enough to pass some of my tests, but their current yield is below 3%, and they are currently overvalued:

 

 

 

 

Name Ticker DF list dividend current price current yield
ROPER INDUSTRIES INC ROP contenders $0.55 $98.62 0.56
ROYAL GOLD INC RGLD contenders $0.60 $75.73 0.79
ROSS STORES INC ROST contenders $0.56 $67.35 0.83
TJX COMPANIES INC TJX contenders $0.46 $44.80 1.03
CASEY'S GENERAL STORES INC CASY contenders $0.66 $58.52 1.13
NOVO-NORDISK A/S-SPONS ADR NVO contenders $1.83 $154.12 1.19
EXPEDITORS INTL WASH INC EXPD contenders $0.56 $36.26 1.54
FASTENAL CO FAST contenders $0.76 $44.30 1.72
APTARGROUP INC ATR contenders $0.88 $50.87 1.73
PRAXAIR INC PX contenders $2.20 $106.58 2.06
AQUA AMERICA INC WTR contenders $0.66 $26.77 2.47
ATLANTIC TELE-NETWORK INC ATNI contenders $0.92 $35.17 2.62
ENBRIDGE INC ENB contenders $1.13 $41.98 2.69

Should I buy some of these overvalued companies now, because (like buying my house) in the future, I will be glad that I overpaid a little?

Or should I not buy these companies now, because (like not buying WMT) in the future, the money I saved will not be worth the cost of my regrets?

I have no idea. :-(

What do you think?

Disclosure: I am long KO, WMT.