Trades – Deere & Company (DE) Purchase

Trades - Deere and Company Purchase - Deere and Company Logo

As part of my process towards increasing and sharing my passive income, I post my trading activity for my dividend growth portfolios. As such, early this month on September 11th, I purchased 18 shares of Deere & Company (DE) at $81.90 per share, giving me a cost basis of $82.18 per share net of commissions.

DE is a producer of equipment and machinery in the agriculture and construction industries. In addition to producing these products, DE also provides financing services to its customers as a part of its product offerings. Primary competitors are Caterpillar (CAT), Kubota Corp (KUBTY), and AGCO Corporation (AGCO).

Fairly valued at just approximately 9.5 times trailing 12-month earnings, DE has seen some weakness in its stock price over the last six months, as seen below:

Trades - Deere and Company Purchase - Deere and Company Chart

DE is a Dividend Contender, and can be found on David Fish’s CCC list, with an 11 year track mark of increasing dividends. Their 5-year dividend growth rate is 13.4%, with their latest increase being 17.6%, going from $0.51 to $0.60 per share per quarter.

Given my only industrial position is General Electric (GE), DE provides some much need diversification in this sector. DE currently pays an annual dividend of $2.40 per share, with a payout ratio of just 26.8%. My yield on cost for this purchase is a corresponding 2.92%, and increases my forward 12-month dividends by $43.20 to $1,591.24. DE pays its dividends in February, May, August and November.

What do you think about this purchase? I know many folks in the DG community have picked up shares of DE over the past few months.

I’ve updated my dividend growth portfolio page to reflect this purchase. You can see all of my dividend growth holdings on that page.

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Comments

  1. Thanks for sharing! As you mentioned, I’ve noticed several recent buys of DE among our fellow bloggsters, and it’s apparent why. It’s a tough market to find a sale, and DE is a good buy now. With a great starting yield and only a 26.8% payout there is plenty of room to grow.

    • Couldn’t agree with you more. If you look back during the last recession, evening with falling earnings, DE was still able to grow their dividend each year. Pretty outstanding and why I think this will be a good position for me over the long-haul.

      Thanks for stopping by and commenting!

  2. W2R,
    I am building a position in CAT, so I’ve avoided DE to this point. It’s stayed low for a while giving everyone a good chance to buy it. My main concern with both stocks is their debt levels, with DE have more on a relative basis. Though DE does have a much lower payout ratio, and the div appears to be safe. Nice yield.
    -RBD

    • I am actually considering a duplicate position in CAT, as this will provide an additional level of diversification, but we will see as capital becomes available and I review potential investments at that time. I was fortunate to pop in at a good price point giving me a solid starting yield.

      Appreciate your comments RBD!

  3. DE has been making the rounds the past few months among the dividend bloggers. It reminds me of how popular TGT was about 6 months ago. I can see why many are flocking to this one as a low PE, good dividend growth and a pretty nice current yield makes this stock a good relative buy. I already have CAT in my portfolio for many years and don’t feel the need to add another similar company to the mix but for your added diversification it seems like a good buy. Thank you for sharing your recent purchase. Look forward to more updates.

    • It certainly has been making the rounds. I was fortunate to get in at a pretty solid price and yield considering their dividend growth. As I said to RBD, I am considering CAT a follow up position, but we will see as time goes on.

      Appreciate you stopping by and sharing your experience.

  4. It looks like you picked up some Deere around the 52 week low. Good job! I have been watching Deere recently like many others. CAT is also starting to pull back a bit so I’m not sure which I will go with. Maybe both.

    MDP

    • Timing was fortunate, that is for sure. I am hoping some other positions stay low over the next few months as I have some freed up capital for my DG portfolio. Splitting between DE and CAT is something I am considering, but jumped on DE because I saw a pretty good value at the time.

      Thanks for stopping by and commenting.

  5. W2R,

    Nice buy! The metrics are compelling. Some are calling for a doomsday level of catastrophe in DE’s profits, but I just don’t see that happening. That being said, even if EPS falls much further than the company is guiding for the stock simply goes back to a P/E of 15 or so, which is its 5-year average. Furthermore, the payout ratio could double and the dividend would still be well-covered.

    Great to have you as a fellow shareholder! Volatility might be ahead, which would only allow further opportunity to join Gates and some other successful investors. :)

    Best wishes.

    • They certainly are compelling, especially given the margin for error should earning dip as expected. A big reason I made the move I did was the dividend coverage far in excess of what would be required should earnings fall further than expected. Given their history of continuing to increase dividends in the dark times of 2008/2009, I am confident that they continue that policy.

      Thanks for stopping by and adding your perspective!

  6. I am looking to initiate position in DE too. I hold GE (largest in my portfolio) and looking forward to another one in the sector. DE looks attractive right now and might initiate a position in the near future.

    • I’d love to have you as a fellow shareholder. DE is indeed attractive, and CAT will be too if it keeps falling. I’ll be following along and see what you end up doing.

      Thanks for commenting and good luck with your investments.

  7. W2R,

    Big fan of this move for you. I was early on my two purchases of DE, but am happy you got in at such a low price! I love Jason’s take above, and agree this is a great long-term investment. Always nice seeing your forward dividends march higher and higher, keep at it.

    Best Wishes,
    Ryan

  8. Hey W2R,

    I think it’s a good purchase. I was looking at it myself earlier this week, but haven’t gotten the money together to get it purchased in time. I try to buy individual stocks in $2,000+ increments to avoid getting eaten alive by fees.

    I like a company like Deere–profitable, attractive PE, and right there near the bottom of its 52week range. If I had cash on hand, I’d be buying.

    • Fortunately by investing with TradeKing, I only pay $4.95 per trade. This allows me to have a lower expense on a purchase of $1,500 or so than most other brokers out there. Of course, with all my Loyal3 transaction, there are no fees!

      As for DE, I think they are priced well, and certainly a robust add to any portfolio. I hope you join me as a shareholder in the near future.

      Appreciate you sharing your thoughts.

      • I’ve been interested in L3, but been scared off by thinking it may be “too good to be true,” especially in regards to its rumored ability to let you pay for shares with credit cards AND no fees.

        That 1% cash back from the credit card could turn some ho-hum trades into pretty exciting ones if it essentially boosts a first-year dividend by 25-33%.

        You haven’t had any negative issues with them in the past? Do you use a credit card to purchase shares on there?

        • I can honestly say I have had zero issues with Loyal3. While you are capped at making $10, $25, or $50 purchases with a credit card, simply wait a couple minutes and you can rerun a duplicate transaction to make purchases of more than those amounts. Recently I picked up $250 of MAT and MCD (to be published soon). Simply five, $50 transaction of each, and voila, great stocks with a “juiced” yield for the first year. Assuming a 1% rewards card, my MAT and MCD positions would yield 5.6% and 4.6% in the first year of holding. Not too shabby at all!

          Whenever I look at utilizing a start-up company like Loyal3 offering something that is “too good to be true,” I want to make sure I’m protected and my money is protected. First off, I am not buying a fund, so that removes some of the Madoff risk. My money is going directly into shares of real companies, protected from fraud by SPIC’s $500,000 policy. Additionally, I want to know how they make money, since this is ultimately what will dictate their ability to survive long-term. Loyal3 generates income from managing the social stock programs of several stocks (allows a company like KO to sell small batches of stock giving them liquidity when needed) as well as participating in IPOs, offering retail investors the opportunity to get in on the IPO price, not the opening price to market.

          Let me know if you have any other questions!

  9. Wow, DE really is popular now! I won’t argue it’s a decent value, but I just am not willing to buy it when earning are expected to decrease over the coming years. I’m personally holding off until the cycle appears to bottom, and earning start improving again.

    Thanks for stopping by my blog as well!

    • I’ve been watching DE for most of the year as it dropped into a price point that I was comfortable with. While earnings are expected to decrease, I believe most of that is priced into the stock already and am not worried about this impacting the growth of the dividend, which is my primary focus. Given their track record during 2008/2009, they have shown that temporary earnings weakness has not altered their desire and means to grow the dividend. Given their low payout ration, a 40% drop in earnings would still give them less than a 50% payout ratio.

      Best of luck with the blogging, and congratulations for being so far ahead of the game at the age of 23.

  10. I really like this company :) I bought 50 shares of DE back in 2011. There’s a bit of paper profit but not much. It’s a well run company that’s fairly valued today. At one time John Deere almost went bankrupt because its products were so good that their machines hardly ever caused problems. So then Deere made not-so-perfect equipment with flaws so that its tractors and combines would break down or cause inefficiencies after awhile so farmers would have to pay DE to fix or maintain them over time. Deere learned that the servicing business has higher margins than production. I think you made a great purchase. Food is a big part of our lives so it makes sense to invest in the agricultural sector, and DE is a great way to do this :D

    • Glad to have you as a fellow shareholder! As a dividend investor, I’m not too concerned with paper profits, because they are just that, profit on paper. I like real, tangible benefits of ownership as viewed through a growing stream of dividend income. I have heard of Deere’s history of making too good of equipment, and have seen some of that in my own life. My parents had an old lawnmower that was almost 20 years old when they got it, but lasted another 15 with just a bit of preventative maintenance. Hard to make money with a 35-year product life cycle!

      Thanks for your thoughts Liquid!

  11. I have been watching DE for a long time and I think you got in at a perfect time. V and DE have been popular as of late and I think great for long term plays. Good luck and I hope to join you as a fellow shareholder soon!

  12. I quite like DE. Too bad I don’t have any capitals in the RRSP account or I’d purchase DE right now. May initiate a position in the near future depending on how things go. Good purchase!

  13. I bought some DE shares too in august. ☺ Either we’re all bad investors or we all saw the same good opportunity. I also doubled my MCD position during summertime and depending on capital availability if Exxon drops to 90-92$ I might double my position there too… we’ll see!

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