Lanny's Dividend Stock Purchase Activity - August 2019

|
Includes: CMI, MMM
by: Dividend Diplomats
Summary

This month, I invested my hard-earned capital into a company I already own and initiated a position in a wonderful Dividend Aristocrat.

I purchased CMI three different times, adding a total of 24 shares during August for a total cost of $3,591.47.

I purchased MMM shares on 8/6/2019, adding 7 shares to my portfolio for a total cost of $1,146.61.

On your journey to financial freedom or financial independence, you have to stay hungry out there. August brought many stock opportunities, and I was going to feed that hunger by making dividend stock investments in order to take steps closer to being financially independent. In August, I was able and lucky enough to make four dividend stock purchases, and my investments only covered two different companies! The investment purchases were for one company already in my portfolio and one new addition to the dividend family! Time to check out my August activity!

The stock purchases

August definitely was busier than previous months, as the stock market went through a turbulent time period with recent trade tariff discussion and trade war with China. This sent stocks swirling downward. However, by a simple mention of stalling discussions or working things "out" with China, markets come right back up. It's the funniest thing to watch since Jim Carrey's comedic performances in the 1990s.

Since the stock market did drop quite a bit, on a few occasions, during the month, I was able to make a few dividend stock purchases. How do I make stock purchases and screen for dividend stocks? I usually put the stocks through our Dividend Diplomat Stock Screener and trade on Ally's investment platform.

This month, I invested my hard-earned capital into a company I already own and initiated a position in a wonderful Dividend Aristocrat. I love to add to current positions and love to employ a ~5% rule. That 5% rule is when a stock drops ~5% since the last purchase price and nothing fundamentally changed, and then add to that position. Over $4,700 was deployed during August into dividend income producing stocks.

How do I build the capital to make these stock purchases? I save anywhere from 60% to 85% of my take-home pay and strongly believe Financial Freedom does not happen by hitting a home run on an investment. Financial Freedom is mostly dependent upon your ability to save money, plain and simple. Therefore, I work my butt off to make sure expenses remain in-check and that my savings rate is meeting our investment and financial independence goals! Then, you rinse and repeat.

Stock Purchase - Cummins, Inc. (NYSE:CMI) - 3X

Cummins, Inc. was first purchased by me back in July 2019 at a decent price of $166.25. Decent pricing became significantly better in August, to say the least! This is where my 5% rule came into play, and I started to add quite a bit to my position during August. What else is better than buying an undervalued dividend income stock? Buying them at a lower price, of course!

When using our Dividend Stock Screener, we look at these metrics:

  • P/E Ratio less than the S&P 500
  • Payout Ratio less than 60%
  • Dividend Growth
  1. Price to Earnings: Analysts are anticipating an average earnings of $15.77. I captured the purchases below in a snip and you can see my three purchase points during August - $157.10, $148.39 and $142.29; each 5.50%, 5.54% and 4.11% lower than the previous purchase! The most recent purchase of $142.29 was 14.4% lower than my first purchase. Therefore, with expected earnings at $15.77, the P/E ratios in order were 9.96, 9.41 and 9.02. Each ratio was far below the S&P 500 P/E ratio.
  2. Dividend Growth: As stated earlier, it has increased its dividend for over 10+ consecutive years. Its last increase was 15%, but can be anywhere from 5% to 25%.
  3. Dividend Yield: CMI produces $5.244 per year in dividends. Its dividend yield at the time of each purchase was 3.33%, 3.53% and 3.69%, well above the S&P 500 (on average)
  4. Payout Ratio: Based on expected earnings of $15.77 and a dividend of $5.244 per year, this equates to a payout ratio of 33%. Another low payout ratio company. This leaves more room for dividend increases!

Here is proof of the investment purchase below:

In summary, I purchased CMI three different times, adding a total of 24 shares during August for a total cost of $3,591.47. The 24 shares added $125.85 to my forward dividend income projection. In total, I own 30 shares that produce over $157 going forward!

Stock Purchase - 3M Company (NYSE:MMM)

FINALLY, I have now gotten into the dividend aristocrat that everyone knows and loves in 3M. I know Bert has always been adding to his position of 3M and glad to finally be in good company. For those who haven't read yet, 3M has always been one of Bert's 5 Always Buy Stocks.

See - Bert's 5 Always Buy Stocks

  1. Price to Earnings: Analysts are expecting $9.41 this year. At a purchase price of $163.24, this equates to a price to earnings ratio of 17.34. Not the lowest P/E ratio, but is still below the S&P 500, on average, which is approximately 21, at this time.
  2. Dividend Growth: 3M is a dividend aristocrat and has actually increased dividend for 61 consecutive years. Talk about history. Its three-year growth rate is 9.30%, and the most recent increase came in at 5.89%, so much lower than recent history.
  3. Dividend Yield: MMM produces $5.76 per year in dividends. Its dividend yield at the time of each purchase was 3.53%, well above the S&P 500 (on average), which hovers around the 1.90-2.00% mark.
  4. Payout Ratio: Based on expected earnings of $9.41 and a dividend of $5.76 per year, this equates to a payout ratio of 61%. This is right at the ceiling of where I like the payout ratio to be. However, it's gone through all cycles from an economics standpoint and this doesn't scare me too much. Still have plenty of room for safety.

Here is proof of the investment purchase below:

In summary, I purchased MMM shares on 8/6/2019, adding 7 shares to my portfolio for a total cost of $1,146.61. The 7 shares added $40.32 to my forward dividend income projection. I would love to keep adding to MMM if it gets back into the $150 range!

Summary & Conclusion

Therefore, I deployed a total of $4,738.10 in capital and added $166.17 in forward dividend income. The average dividend yield on this round of dividend stock purchases equates to 3.50%. I am hungry and anxious to add more to my newly found 3M position, that's for sure!

I will maintain my main message. Stick to the strategy that works for you, but review if there is anything that may impact your strategy going forward. You are in control and the emotion button is hard to turn off. Persevere and stay consistent, if you can and are able to. I am locked in and ready for further opportunities. This was one step closer to financial freedom, and I hope to continue making strides. Lastly, my dividend portfolio has been updated.

What other investments are you seeing out there? What industry has been your preference as of late? Anyone just stock piling cash? Thanks again everyone, and, as always, good luck and happy investing!

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.