Category: Stocks

I recently sold my shares in Abbott Laboratories (ABT).

I had a little more than 53 shares, and I got a letter about an odd lot tender offer. This is when a company tries to get shareholders with less than 100 shares to buy more to get up to that price.

I guess it is better for them, since small shareholders can require more bookkeeping. But I don’t think it’s always good for the small shareholder.

For one thing, if I read the letter correctly, I would have to pay $52 a share, plus a processing fee of $2.50 a share. That comes out to $54.50 a share. Right now it’s at $47.47, with an all-time high of $47.59.

I got a tender offer from Verizon when I had 14 shares. I bought more on the open market to get up to 100. They also offered to sell to me above the market price.

Abbott has a P/E right now of 31.88. I know PE ratio is not everything, but that is pretty high. I don’t mind re-investing dividends in stocks with a PE ratio that high, but I would not buy more shares or shares in a new company with a PE ratio that high. I think 20 is as high as I would go. If ABT’s PE ratio goes below 20, and they are still paying increasing dividends with a good payout ratio, then I would buy more someday.

I was hoping to get more of my stocks up to 100 shares, but if some company with a high PE ratio forces my hand, I will sell. I will have to get that $12 every three months from somewhere else. I did buy more JNJ. Even after selling ABT, I am still going to come out ahead. I might just buy more JNJ to get that to 100.

Image from Abbott Laboratories website, assumed allowed under Fair Use.

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After being a dividend growth investor for five years, I have started listening to the conference calls of some of the companies that I own shares in. Eventually I plan on getting to the calls of companies I am interested in as well.

One of the companies that I started with is MDU Resources, ticker MDU. They are based in North Dakota. They have multiple lines of business: utilities, oil exploration, pipelines and construction. For the most recent quarter, the percentages of earnings from each division was: 38% from construction, 22% from utilities, 8% from pipelines, and 32% from exploration and production.

One reason I am listening to their calls is the decline in oil prices to see how it affects them. On one hand, they are not just an oil driller, so the price decline will not sink them. On the other, while they are diversified in terms of industries, a lot of their activity is in the Dakotas. Oil prices did decline during the period covered by their most recent quarterly report, but the consensus is that oil prices might fall further.

I have over 50 shares of MDU. I would like to get all my stocks up to at least 100. I think for now I will wait to see what happens with MDU. Their earnings increased last quarter, but not by much. Their exploration is concentrated in the Bakken, so there is some risk there.

On the other hand, they have paid a dividend for over 50 years, and raised it for almost 30. The company seems committed to keep raising the dividend. They managed to keep raising it during the financial crisis of 2007-2009. If they could keep things afloat during that period, I think there is a good chance they will keep the company profitable going forward.

Image from MDU Resources website, assumed allowed under Fair Use.

This site has a disclaimer.

I have made a few changes to my stock portfolio.

I sold Deere a while back, about two days after I wrote a post about not knowing that to do with it. It did not raise its dividend this year. I decided I am going to stick to my rules.

I also bought about 50 or so shares of Aflac. I now have about 103. When I stared buying dividend stocks, I just bought as many shares as I could get for $1000. Before too long I changed my mind and I then went for 50 shares of each stock. Now I want to get to 100. (I don’t know what I will do about stocks that split.) I still have only 13 shares of 3M and 15 of Air Products.

Aflac has a P/E ratio of 9.5 or so. A lot of stocks have pretty high P/E ratios. I am going to start out my maxing out on the stocks that are lower than average at the moment. I think the historical average for the S & P 500 is 16. The webmaster of Dividend Growth Investor will not buy a stock with a P/E over 20. I wonder why he/she is willing to go a bit higher than the historical average.

I also bought 100 shares of Kellogg. Maybe it was not a great idea to buy a new stock when I still have a lot under 50 shares, but the P/E ratio is 12.96 (right now), and I wanted to get more into the food/water/land sectors.

I don’t know if I bought Aflac in time to get a dividend payment for all 100 shares. I intend to hold these stocks for a while, or at least as long as they make their payments. I honestly do not pay too much attention to the ex-dividend date or the date of record too much. Yes, I want to make as much as I can, but I have held Aflac for four years. Missing out on one payout is not the end of the world. When I bought 50 more shares of Exxon I missed the cutoff date.

Images from Aflac website and Kellogg website, assumed allowed under Fair Use

This site has a disclaimer.

I bought some John Deere today. I put a limit order in a week ago, and it was triggered this morning.

I looked at the financial statements, and things looked pretty good. It has been increasing its dividend for 10 years. The most recent two increases were 12% and 10%. The P/E ratio is lower than most of the stocks on the market. It is about 10. I think a lot of stocks will pull back at some point. I have been thinking that for about a year, and it has still not happened. I don’t think Deere would go down as much when that happens.

I also wanted to increase the number and amount of stocks that I own. I have sold a few in the past few years, and that has limited the growth of my dividend income stream. So I need to buy more stuff.

Plus it is a “play” on food. I think that there will be more resource constraints going forward, food being one of them. Better agricultural practices will be one of the ways those constraints will be dealt with, and I think that the world will need more Deere tractors going forward.

Image from John Deere web site, assumed allowed under Fair Use

Like many other dividend growth investors, I plan on posting changes to my portfolio.

I recently bought some more shares of ExxonMobil. My goal is to have 100 shares of each stock, and more if it splits before I get to 100. ExxonMobil has a P/E ratio under 12 (at least it did when I bought it a week or so ago). It has gone up about 5% since I bought it. I don’t like to buy when a stock is pretty high (using P/E ratio as a metric), but my real goal is the cash flow from dividends.

I admit, to a certain degree I bought because I have not bought too many new shares in a while, and I kind of felt like I should do something. I know that it is wrong to buy based on emotions rather than metrics, but this stock did seem to fit both criteria.

I also put in some buy orders for a few more stocks. If or when those orders are filled remains to be seen. They all went up in price right after I put the orders in.

Image from ExxonMobil web site, assumed allowed under Fair Use

I sold Intel today. I also bought Bemis (ticker BMS). I put in limit orders, and they were filled within a minute early in the day. The day I decide to buy, and it goes down 3%. It looks like the correction that everyone keeps talking about is here.

So the clock on Intel’s dividend increases is going to be reset. I find it a bit odd that everybody thinks Intel is toast since they are not in a lot of mobile devices. People are going ga-ga over the cloud, which is all servers, and I think most of those run Intel.

I now have 100 shares of BMS. I originally bought as many shares of stocks as I could get for $1000. I dropped that idea, and tried to go for 50 shares of each. Now I want to try to get 100 shares of each. If I already have 100 due to stock splits, I will buy 100 more. 3M is down 3%, so that might be a good stock to buy soon.

Image from Bemis web site, assumed allowed under Fair Use

I am thinking about selling Intel. They will pay their next dividend in March, and it will be the seventh time they pay out 22.5 cents per share.

Many dividend investors only invest in stocks that grow their dividend every year. (Some also have criteria including the payout ratio, the growth of the dividend and the yield.) If I stick to that rule, then I should sell Intel.

One issue is I do not know what I will buy. A lot of stocks are still going up and have P/E ratios above 20. If I do not buy something else, I will get less income.

But on the other hand, I think that coming up with some rules and sticking with them is the way to make money. I know that a lot of studies have shown that most active investors do not beat the indexes. I wonder if those studies looked at actual behavior, or if there are any that looked at stratgies. There is a saying on Wall Street: Bears make money, bulls make money, pigs and sheep get slaughtered. So you should plan your work and work your plan. I sometimes think part of the reason that a lot of active investors do not do as well as the market because they do not stick to their plan.

Image from Intel’s Twitter feed, assumed allowed under Fair Use

I am thinking about selling CINF. I starting thinking about this after reading an article on Dividend Growth Investor.

He mentions that CINF’s dividend payout ratio is pretty high, and their dividend increases have been pretty small. The most recent increase was only 1.2422%, from 40.25 cents to 40.75 cents. When a company measures dividends to one-hundredths of a cent, perhaps that is a sign that you should look at a different stock.

Selling at the current price would give me about $1700. With that, I could buy about 18 shares of MMM, 20 shares of APD, 28 shares of DOV, 23 shares of CB, 25 shares of JNJ, or 42 shares of WGL. Many of those stocks have gone up in price since I bought them, but so has CINF. But I might sell CINF soon and wait for some of the other stocks to go down.

I already have a few other insurance stocks, so it’s not like one less will hurt me. Those have lower payout ratios and higher rates of dividend increases.