Hope you guys had a wonderful Thanksgiving! As you can tell, I enjoyed mine with some radio silence here on the blog. While not fully intended, our lives have changed a bit with the addition of a puppy to the house. She is certainly an energetic sort and we’ve been working on adjusting our schedules and lifestyle a bit to accommodate taking care of our new family member. But I digress; this is an investing blog, so let’s take a look at my most recent transaction…
As part of my process towards increasing and sharing my passive income, I post my trading activity for my dividend growth portfolios. As such, on November 12th, I purchased 9 shares of International Business Machines (IBM) $161.80 per share, giving me a cost basis of $162.35 per share net of commissions. This was my first purchase of IBM, and the purchase was made in my Roth IRA.
IBM is a well-known, diversified information technology company in the process of reinventing themselves. Historically, they were known for their hardware solutions, but over the last couple of decades have been expanding the service side of their business. Over the past decade, they’ve seen some top-line revenue struggles as they transition their business, but have been able to reward shareholders with strong dividend increases through rising earnings per share due to extensive share repurchases.
Some fellow dividend growth bloggers have put together some great posts on IBM, so feel free to check them out:
- Dividend Mantra: Recent Buy (IBM)
- Dividend Diplomats: International Business Machines (IBM) Stock Analysis
- Dividend Developer: Dividend Stock Analysis – IBM
Since mid-October, IBM’s stock price has dropped significantly, plummeting from just north of $180 down to the low $160s. This drop was the result of a poor quarterly report indicating continued struggles in growing revenues. However, as a dividend growth investor, my primary concern is dividends, and the ability for the company to continue growing them in the future. Failure to increase revenue has been offset thus far by share repurchases thus far, and there is plenty of room and cash flow to continue to do so. Below is a chart reflecting their stock price over the last five months:
IBM Trade Details
Generally speaking, I tend to stay away from technology companies. Currently, I only own Cisco in the technology space, and it is a small position. My purchase of IBM is not much bigger, and overall I still have a small allocation to the sector. As part of my push to continue to diversify my portfolio, this adds another great dividend generator to my growing portfolio.
IBM is a Dividend Contender, having raised their dividends for 19 consecutive years. Management has done a tremendous job continuing to increase dividends with flat revenues, and I anticipate this to continue moving forward. With their latest dividend increase raising their annual dividend from $3.80 to $4.40 per share, my purchase of 9 shares carry a yield on cost of 2.71%. Over the last five years, IBM has a dividend growth rate of 14.3%. This purchase adds $39.60 to my forward 12-month dividends, bringing me up to $2,096.75 of total forward 12-month dividends. IBM pays its dividends quarterly in March, June, September, and December.
What do you think about this purchase? I know some folks in the DG community have picked up shares of IBM after their big tumble in price in October.