2016 has been off to an interesting start. The stock market has been on a downward tear with continuing fears over China’s slowdown and the seemingly unending oil glut. My portfolio’s paper value has decreased by 15%-20% since I started investing in early 2015. As a dividend investor, however, this does not phase me in the least.
While everyone around me is panic-selling and the media continues to spell doom and gloom, I’m eagerly purchasing as much stock as I can. In fact, my only regret is that I don’t have more capital to scoop up tons of quality companies at bargain prices. On the bright side, I received a 12% raise at work to kick off the new year, which is certainly enough to give my monthly equity purchasing power a nice little boost.
With that being said, in this post I will give you a quick rundown of what I’ve been buying in January. Let’s take a look!
Health Care Property Investors
HCP is a company I’ve had my eyes on for a while now. It is a healthcare REIT that boasts a large and diverse portfolio of over 1200 properties in both the US and Britain and it operates across five segments within the healthcare industry: Senior Housing, Post Acute/Skilled, Life Science, Medical Office, and Hospital.
The company is very popular among income investors due to its meaty yield and reliable dividend. Indeed, HCP is a distinguished dividend aristocrat, having increased its dividend like clockwork every January since 1986, with this month’s increase marking its 30th consecutive dividend hike — quite the impressive feat!
HCP’s revenue grew from $477 million in 2005 to $2.480 billion in 2015. That’s a compound annual growth rate of 17.92%, which is pretty great for a company that’s been around since 1985. On the other hand, dividend growth has been pretty sluggish over the past decade, with a 10-year compound annual growth rate of only 2.92%. However, the company’s juicy yield of 6.29% at current prices easily makes up for the slow dividend growth.
Honestly, I view companies such as HCP or AT&T almost like bonds rather than stocks at this point. I don’t invest in them for their dividend growth, but rather for the safety and reliability of their payouts, which still grow enough to outpace inflation, even if only by a smidgen.
On 1/5/2016 I initiated a position in HCP by purchasing 12 shares at $39.04/share for a total investment of $468.54, and on 1/12/2016 I grabbed another 14 shares at $36.55/share for an additional investment of $511.70.
According to Morningstar, the company’s fair value sits around $53. With my cost basis coming out to $37.69/share, this means that I purchased the stock at a 30% discount, a true steal for a company of the quality of HCP. This is why I love bear markets! 😉
The 3M Company
Ah, 3M. This has got to be one of my favorite companies ever. There is so much to love about it.
For one, it is everywhere. Seriously, it boasts a huge variety of brands and products that you are likely to find in every household or office, whether it be Scotch tape, Post-It Notes, or Ace elastic bandages, just to name a few. But the company expands far beyond just the Consumer/Office sector, with a strong presence in other segments like Industrial and Transportation, Health Care, Security and Protection Services, Display and Graphics, and Electro and Communications.
I absolutely love companies that own a variety of strong brands, as they tend to make for extremely defensive investments that can survive pretty much any economic environment. And 3M certainly fits the bill.
Furthermore, 3M is one of the finest dividend aristocrats out there. It has been increasing its dividend for a whopping 57 consecutive years, starting in 1959. And if that weren’t enough, the company’s dividend growth rate clocks in at 9.33% on a 10-year annualized basis, 14.32% on a 5-year annualized basis, and 20.21% on a 3-year annualized basis! For a company that’s been around for so long and whose “growth period” is arguably behind it, to boast an accelerating, double-digit dividend growth rate is nothing short of phenomenal.
3M’s balance sheet is also a financial fortress, with a tiny debt-to-equity ratio of 0.7 and an interest-coverage ratio sitting north of 50. Its return on equity is also excellent, clocking in at 35% in 2015. Pure awesomeness all across the board.
On 1/25/2016 I initiated a position in MMM by purchasing 3 shares at $138.57/share for a total investment of $415.71.
According to Morningstar, the company’s fair value is around $160. This means that I bought in at a solid 14% discount. Unfortunately, the stock price shot up to $151 just a few days after my purchase, which is really frustrating. I really wanted to buy another dozen shares at sub-$140 prices! 🙁
Oh well. Hopefully the bears will quickly take the stock back down so that I can keep buying this wonderful company at truly bargain prices.
I don’t think much needs to be said about Disney. It’s probably one of the best companies you could invest in. For realz.
Its stock price has recently been dragged down due to concerns over ESPN’s decline in subscribers, which I think is unfair and short-sighted. I mean, the newest Star Wars was an absolute hit (and I can confirm the movie was fucking awesome) and has already become the third highest-grossing film of all time with a worldwide gross sitting just shy of $2 billion. Lol. Disney is sitting on a goldmine with the Star Wars franchise, and seeing as they will be releasing a new Star Wars movie every year for the next 5 years, I think it is safe to assume they will be raking in massive amounts of dough, yo.
And then you have Marvel, another powerhouse franchise that just keeps on pumping out profits. There is a plethora of films already planned through 2019, shall I list them all?
- Captain America: Civil War (2016)
- Doctor Strange (2016)
- Guardians of the Galaxy 2 (2017)
- Spider-Man (2017)
- Thor: Ragnarok (2017)
- Black Panther (2018)
- Avengers: Infinity War – Part 1 (2018)
- Ant-Man and the Wasp (2018)
- Captain Marvel (2019)
- Avengers: Infinity War – Part 2 (2019)
- Inhumans (2019)
Oh and that’s not all. You also have the four Netflix Marvel series, the first two of which have been incredibly successful (Daredevil and Jessica Jones). And those four series will eventually lead up to a fifth Defenders series.
So yeah, I think Disney will be ok. But if the market wants to cut the price, hey, I’m not complaining! I’m just gonna take advantage of the sale and scoop up some shares.
On 1/29/2016 I purchased 7 shares of DIS at $95.39/share for a total investment of $675.73. This transaction was done in my 401(k), bringing my total position in DIS to 17 shares (excluding the 10 shares I own in my taxable account).
According to Morningstar, the company’s fair value is $134, which means that I bought these shares at a 29% discount. This was a fantastic opportunity to average down, so I’m glad I took it!
2016 is off to a great start. I’ve made some good money in Forex, I received a raise at work, and I purchased some high-quality companies at bargain prices. I also set a new personal record in the gym, with a 275-lb close-grip bench press at a bodyweight of 170 lbs, which I’m very happy about.
Life is good.