Recent Buy
Whenever I make a new purchase for my portfolio I feel it's only fair to get a post written giving all of the juicy details. I want to be as transparent as possible with my journey to reach financial independence through dividend growth investing. Being open about the moves I make allows for better discussion with all of you and helps spread ideas around as well as letting me create my own "investing journal" to chronicle why I purchased a company in the first place and that way I can revisit if something changes and make the decision on whether to continue owning the company or not.
I've had to slow down the pace of my investments over the last month because there's a whole lot in flux right now with our finances. Starting in May I should be covering all of our expenses since my wife resigned early this year to be with our son while he's in the hospital. So I've been trying to conserve more capital to help with the transition. However, since I had sold some shares of HAL, my employer, I had some capital to invest back into some excellent dividend growth companies.
On April 28th I initiated a new position in an absolutely excellent company. I've been eyeing this company for a couple years now but always felt shares were a bit expensive. Waited a few months and wanted to start a position but shares were expensive. This cycle continued until this past week when I figured that quality companies will usually trade for a premium so I might as well get on board. I purchased 8 shares of Becton, Dickinson & Company (BDX) (Full Analysis Here) for $141.37 per share. After commission my per share cost basis came to $142.36. Based on the current quarterly dividend of $0.60 these shares will provide $19.20 in annual dividends and carry a YOC of 1.69%.
I'm excited to finally add this company to my portfolio since BDX has a 43 year streak of raising the dividend. I know it's not the best valuation as the TTM P/E ratio is 24 but the forward P/E ratio sits at just 16. Although doing a simple Gordon Growth Model calculation with my cost basis of $142.36, current dividend of $2.40, and a 10% required return, BDX would just need to raise the dividend by 8.2% per year to generate a 10% annualized return. The dividend is also currently well-covered by both earnings per share and free cash flow suggesting that further dividend increases should continue. For a more in-depth analysis of Becton, Dickinson & Company you can view it on Seeking Alpha.
Becton, Dickinson & Company is well diversified with just 40% of revenues coming from the United States, 32% from Europe, and 27% from Asia-Pacific, Canada, and Latin America. There's plenty of room for expansion into the APCL segment as health care services are generally improving and as more of the population there moves into the middle class they will demand more health care.
I'm very bullish on the health care sector because the population continues to grow and also age. Those are very good signs for the health care sector over the long term as both the very young and very old require more health care services. Also while being in the hospital with my son I've seen BDX products everywhere and they're all one time use. While that's no good for our medical bill that's great for BDX. We use on average around 16 BDX syringes every day and that's not including any of the other BDX products. I mentioned in my dividend growth checkup that I'm quite underweight with the health care sector since at the time it only accounted for 6.2% of my annual dividends. So it's nice to add an excellent company that's in the health care space even though the valuation is a bit stretched and the starting yield is rather low.
My forward 12-month dividends are up to $5,647.45. Total taxable accounts', Loyal3 and FI Portfolio, forward dividends are at $5,703.43.
I've updated my Portfolio page to reflect this addition.
I've had to slow down the pace of my investments over the last month because there's a whole lot in flux right now with our finances. Starting in May I should be covering all of our expenses since my wife resigned early this year to be with our son while he's in the hospital. So I've been trying to conserve more capital to help with the transition. However, since I had sold some shares of HAL, my employer, I had some capital to invest back into some excellent dividend growth companies.
On April 28th I initiated a new position in an absolutely excellent company. I've been eyeing this company for a couple years now but always felt shares were a bit expensive. Waited a few months and wanted to start a position but shares were expensive. This cycle continued until this past week when I figured that quality companies will usually trade for a premium so I might as well get on board. I purchased 8 shares of Becton, Dickinson & Company (BDX) (Full Analysis Here) for $141.37 per share. After commission my per share cost basis came to $142.36. Based on the current quarterly dividend of $0.60 these shares will provide $19.20 in annual dividends and carry a YOC of 1.69%.
I'm excited to finally add this company to my portfolio since BDX has a 43 year streak of raising the dividend. I know it's not the best valuation as the TTM P/E ratio is 24 but the forward P/E ratio sits at just 16. Although doing a simple Gordon Growth Model calculation with my cost basis of $142.36, current dividend of $2.40, and a 10% required return, BDX would just need to raise the dividend by 8.2% per year to generate a 10% annualized return. The dividend is also currently well-covered by both earnings per share and free cash flow suggesting that further dividend increases should continue. For a more in-depth analysis of Becton, Dickinson & Company you can view it on Seeking Alpha.
Becton, Dickinson & Company is well diversified with just 40% of revenues coming from the United States, 32% from Europe, and 27% from Asia-Pacific, Canada, and Latin America. There's plenty of room for expansion into the APCL segment as health care services are generally improving and as more of the population there moves into the middle class they will demand more health care.
I'm very bullish on the health care sector because the population continues to grow and also age. Those are very good signs for the health care sector over the long term as both the very young and very old require more health care services. Also while being in the hospital with my son I've seen BDX products everywhere and they're all one time use. While that's no good for our medical bill that's great for BDX. We use on average around 16 BDX syringes every day and that's not including any of the other BDX products. I mentioned in my dividend growth checkup that I'm quite underweight with the health care sector since at the time it only accounted for 6.2% of my annual dividends. So it's nice to add an excellent company that's in the health care space even though the valuation is a bit stretched and the starting yield is rather low.
My forward 12-month dividends are up to $5,647.45. Total taxable accounts', Loyal3 and FI Portfolio, forward dividends are at $5,703.43.
I've updated my Portfolio page to reflect this addition.
Congrats on the purchase, JC. So many great stocks....so little money.
ReplyDeleteI looked at BDX in the past and liked what I saw.
R2R
R2R,
DeleteBDX isn't cheap here by any means but I've been trying to add shares of it for almost 4 years now. I was too naive when I first started to realize the opportunity that was presented and didn't capitalize. So I just bit the bullet and started a position. Hopefully I can lower my cost basis on a market selloff or sell in May and go away situation.
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BDX is legendary as a dividend payer. I have no position though.
ReplyDeleteFV,
DeleteBDX has a great history and I expect that to continue as they have CareFusion acquisition and also further penetration into foreign markets. Lots to like here.
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Nice buy JC...43 years of dividend increases is definitely a huge positive for this stock! And it sounds like they have plenty of cash to continue. I also like that they are well diversified into foreign markets. I think there is still huge potential for growth outside of the US. AFFJ
ReplyDeleteAFFJ,
DeleteBDX is awesome and I expect continued success from them for decades to come. There's the aging population in developed markets. Further penetration outside of the US. And an increasing global middle class that will demand more health care services.
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Good buy. The dividend yield is a little low for my taste, but it is a solid company nevertheless. Looks like BDX is trying to maintain 10% per year dividend growth, so your yield on cost should rapidly increase.
ReplyDeleteTake care!
Ferdi,
DeleteYeah the yield is low and I admit that I paid up for the shares here but this is by no means a full position yet. I'll be looking to add more shares at better valuations in the future. Although hopefully that's a not too distant future.
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I have BDX in my watch list as "neutral". I like it because it is a healthcare company, but as of now I hesitate investing in it as I think I can get a better deal for the buck elsewhere. For example if I invest $1,000 into BDX, I will be receiving $16 in dividends, if I invest the same amount in COP I will be getting $40 in dividends annually, so as of now I am skipping this stock.
ReplyDeleteMartin,
DeleteI'd say BDX is probably more of a total return candidate because a lot of the wealth created by them will be due to capital gains. But in the end it's all about investing in excellent companies and BDX is one of the best with some great tailwinds to help push growth.
Thanks for stopping by!