Seeking Alpha

Lanny's Dividend Stock Purchase Activity - October 2019

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Includes: DAL, MMM, OXY, WBA, WRK, XOM
by: Dividend Diplomats
Dividend Diplomats
Large-cap, Dividend Investing, Dividend Growth Investing, Value
Summary

Investing consistently in dividend income stocks allows you to create and build another income source with dividends.

The trade wars caused almost all brokerages to reduce their trading fees to $0. Therefore, we made quite a few more purchases this month than normal, and even some on a smaller scale.

October also showed signs of weakness, with downward points during the month. It's no surprise that our bigger purchases came during that time period.

On your journey to financial freedom or financial independence, you have to stay hungry out there. October was busy with my brokerage reducing fees down to $0, joining the zero fee movement, as well as a downturn here and there in the stock market. Time to check out my October activity!

Investing consistently in dividend income stocks allows you to create and build another income source with dividends. This is my primary vehicle on my road to financial freedom, which you can see through my Dividend Income and my Dividend Portfolio, which continues to build and build.

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. Nothing matters more than your savings rate on your journey to financial freedom, 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.

The stock purchases

Quite a few things occurred in October and I don't want to beat anything to a pulp here. First, the trade wars caused almost all brokerages to reduce their trading fees to $0. This includes Ally, Fidelity, E-Trade, Charles Schwab, to name a few. Therefore, we made quite a few more purchases this month than normal, and even some on a smaller scale.

October also showed signs of weakness, with downward points during the month. In the chart below, you can see the dips that occurred early in the month, as well as into the second week of October. It's no surprise that our bigger purchases came during that time period.

Stock Purchase - 3M Company

I initiated a position in 3M (MMM) back in August, so I won't bore you with the details on this powerhouse Dividend Aristocrat. Further, for those that haven't read yet, 3M has always been one of Bert's 5 Always Buy stocks.

  1. Price-to-Earnings: Analysts are expecting $9.28 this year. At a purchase price of $158.40 and $150.96, this equates to a price-to-earnings ratio of 17.06 and 16.28, respectively. 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 3-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 3.64% and 3.81%, 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 $9.28 and a dividend of $5.76 per year, this equates to a payout ratio of 62%. This is right at the ceiling of where I like the payout ratio to be. However, the company has gone through all cycles from an economics standpoint, and this doesn't scare me too much. There is still plenty of room for safety.

Here is proof of the investment purchase below:

I purchased an additional 17 shares during September for a total cost of $2,659.58. The 17 shares added $97.92 to my forward dividend income projection. In total, I own over 24 shares, which produces over $138 going forward!

Stock Purchase - Delta Air Lines, Inc.

Here we go, and I am back at it again! Similarly, I won't bore you with more details on Delta Air Lines (DAL), as I have covered the stock many times in the past.

  1. Price-to-Earnings: At a price of $51.66 with a forward earning projection of $6.99 for 2019 (from 17 analysts), this equated out to a P/E ratio of approximately 7.40, which is well below the overall market on average.
  2. Dividend Growth: The company is also young in its dividend streak, as it is on 5 years now consecutively. The recent increase was approximately 15%, and the double-digit growth was extremely appreciated! See why the impact of the dividend growth rate is real!
  3. Dividend Yield: With a $51.66 price point, at a dividend of $1.61, its yield was at ~3.11%, well above the S&P 500 (on average).
  4. Payout Ratio: Based on forward earnings of $6.99 and a dividend of $1.61 per year, this equates to a payout ratio of 23% - a super-low ratio. The company can grow dividends by double digits in the near and long term without any problem.

Here is proof of my investment:

In summary, I purchased an additional 15 shares at $51.66 for a total cost of $774.84. The 15 additional shares added $24.15 to my forward dividend income projection. In total now, I own almost 79 shares of DAL, which produces $127 in dividend income per year, and this is not including my wife's portfolio.

Mini Stock Purchases (Less than $500)

Now, here's a new segment. Since the trading wars have heated up and fees now are $0 to trade, I am going to list out and talk at a significantly high level - those dividend investments made that are < $500.00. That way, I can still show the results from the month, what I am buying, the impact - but also not to go into too much detail on smaller purchases.

Therefore, I purchased 2 additional shares in Occidental Petroleum (OXY) to average down my price, as well as 5 shares in WestRock Company (WRK) to also average down my price.

In total, I deployed a total amount of $269.40 and added $15.42 to our forward dividend income, equating to an average dividend yield of 5.72%.

My Wife's Dividend Stock Purchases

Another new segment! My wife has an account that we also make dividend stock purchases into. For some reason, we are still running two separate, individual, taxable accounts. All is good, especially because we use the same platform. In October, we made quite a few dividend stock purchases for my wife's account:

We made a few purchases before the $0 fee took place. The companies she purchased that were currently not already in my portfolio are Exxon Mobil (XOM) and Walgreens (WBA) - two Dividend Aristocrats. Her portfolio is full of safe and sound dividend investments, and since we've been together, her portfolio has been blossoming into an extremely significant part of our family's finances. You'll start to see that come October dividend income results time.

In total, $3,372.73 was put into investments, producing $138.20 in dividend income going forward. This is an average dividend yield of 4.10%.

Summary and Conclusion

Combined, my wife and I deployed a total capital amount of $7,076.55 for October and added $275.69 to our forward dividend income total!

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.

Were you busy during October? Strike when the dips happen? Any dividend stock purchases you were surprised about, based on what you see above? Please share your thoughts and comments! Thanks again everyone, and as always, good luck and happy investing!

- Lanny

Original Post

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