As part of my process towards increasing and sharing my passive income, I post my trading activity for my dividend growth portfolios. As such, this past week on November 10th, I purchased 18 shares of Chevron Corporation (CVX) and 30 shares of Baxter International (BAX). These were my first purchases of both CVX and BAX, and the purchases were made in my Roth IRA.
Chevron Corporation (CVX) Trade Details
CVX is a fully integrated energy company that is primarily involved in the exploration, production, refining, and marketing of petroleum and petroleum based products. Often times referred to as one of the ‘Oil Majors’, CVX is tremendously well respected in their industry and by the investment community at large.
Over the past couple of months, the price of oil has plummeted, sending shares of most energy companies sinking. While I wasn’t able to purchase at 52-week lows seen during October, I purchased my shares at what I consider less than fair value. With a current P/E of 10.88 at the time of purchase, and a forward P/E of 12, CVX stands as a strong position for my portfolio, and allows me to continue to diversify my holdings. The chart below reflects the latest drop in price over the past five months for CVX.
As a dividend producing company, CVX has been raising dividends for 27 years, and is known as a Dividend Champion (or Aristocrat depending on your resource). Sporting a respectable 10-year dividend growth rate of 10.9% and a 3-year growth rate of 11.2%, CVX has shown the ability to consistently and steadily increase their dividend. Their most recent dividend increase was back in April where they raised their quarterly dividend 7% from $1.00 to $1.07 per share. With a payout ratio of just 39.4%, CVX has plenty of room to continue increasing this dividend for years to come. A bonus for shareholders, CVX has been consistently reducing their outstanding share count over the last eight years, down almost 14% since 2006. As a shareholder, these buybacks increase my earnings per share, and allow me to become a bigger owner of the company over time.
CVX becomes the third company in my dividend growth portfolios representing the Energy Sector, and one I’m glad to have added. I purchased 18 shares of CVX at a cost basis of $118.18 per share, net of commissions. With a yield on cost of 3.62% at the current dividend rate, my shares add $77.04 to my forward 12-month dividends. Fortunately, this purchase was made prior to the ex-dividend date, so I will be receiving my first dividends next month. CVX has traditionally paid dividends in March, June, September, and Dec ember.
Baxter International (BAX) Trade Details
Much as my BBL purchase was the first in the Materials Sector, Baxter International is my first Healthcare Sector holding. Like CVX, I was unable to buy on the strong dip back in October, but was able to enter the stock at a price I was comfortable with. While not the “steal” CVX is, I was looking for more exposure in the healthcare field and JNJ was just a bit more expensive than I desired. With what might be a trend for my purchases, BAX is currently planning a spinoff in 2015 of its Biotech business, which strays from the core medical products and services business. This spinoff is very similar to the one that Abbott Laboratories underwent a couple of years ago.
While BAX currently shows trailing P/E in excess of 22, the forward looking P/E is a, more reasonable 14.8. Again, not a bargain basement price, but a solid entry point into a growing company. Over the last five months BAX has falling from its latest highs as evidenced by the chart below.
Baxter International has been raising their dividend for eight years consecutively, with a 5-year growth rate of 16.2%. Their most recent dividend increase was for 6.1%, raising their quarterly dividend payment to $0.52 from $0.49 per share. Like CVX, BAX has been reducing the outstanding shares over the last eight years, buying back over 16.3% of its outstanding shares during that time period.
I purchased 30 shares of BAX at a cost basis of $70.67 per share, net of commissions, giving me a yield on cost of 2.94%. With annual dividends of $2.08 per share, my purchase adds $62.40 to my forward dividends. This purchase was made in time for the ex-dividend date in early December, which will allow me to receive my first dividends from BAX in January. BAX traditionally has paid its dividends in January, April, July, and October.
Let the good times roll and the dividends pile in! With these two most recent purchases, I am officially over the $2,000 mark in forward 12-month dividends, ringing in at a total of $2,057.15. With a month and a half left of the year, and some more capital available to invest, 2015 is looking like it will be a tremendous increase over 2014. I know I’m looking forward to it!
What do you think about these purchases? The oil majors have been pretty popular purchase of late given the price of oil falling. Strike while the iron is hot or the commodity markets have cooled!