Today with the market further it's decline as of late I initiated a new position in, Cardinal Health, Inc. (CAH), which has increased its annual distributions each year for over two decades. In addition, I bolstered my equity weight in two existing positions, KHC and BAYRY, which I have been buying frequently as of late. See below for details on the transactions.
----- Cardinal Health, Inc. (CAH) -----
Purchased: 40 shares x $50.00 = $2,000 (+$4.95 commission)
Dividend Income: This purchase adds $76.40 of income annually ($1.91 annual dividend; paid quarterly in Jan, Apr, Jul, and Oct)
Forward P/E ratio: 10.6 vs. S&P Forward P/E @ 16.15
Debt to Capital < 50%: No, 60%
Interest Coverage ratio of at least 3:1: Yes, 7.6x
S&P and/or Moody's credit rating of BBB+/Baa1 or better: Yes, BBB+
Current dividend yield > 1.5x S&P yield: Yes. 3.64% vs. S&P's 2.03%
Payout Ratio < 60% (or < 85% for utilities): Yes, 38.3%
Dividend King or CCC classification: Contender (22 years of dividend increases)
Comments: I've had my eye on CAH for a long while now, but hadn't hit the "buy" button until recently. Yes, there are some near term headwinds such as impending competition from Amazon and legal battles surrounding the distribution of opioids, but I suspect the company will remain a going concern (which is a good thing of course) for many decades to come as innovation within the healthcare industry continues to develop at a rapid pace. With earnings and free cash flow (FCF) yields hovering around 10%, there is a lot to like here and it appears that much of the noise surrounding the company and industry has for the most part been priced into the current valuation leading me to believe there is an attractive risk/reward relationship. Another bright spot with CAH is it's capital allocation decisions as of late. Per the image below, management has not only continues to increase dividends, but has also been aggressively repurchasing shares of its outstanding stock while valuation is depressed translating into a buyback yield of 6.41% over the past year - excellent!
----- Kraft Heinz (KHC) -----
Purchased: 10 shares x $47.40 = $474 (+$0 commission)
Total share count in KHC now stands at 110 shares.
Dividend Income: $25 annually ($2.50/annually; paid quarterly in Mar, Jun, Sep, and Dec)
Dividend yield > 1.5x S&P yield: Yes, 5.2% vs. S&P's 2.03%
Forward P/E ratio: 13.09 vs. S&P Forward P/E @ 16.15
Comments: Not much to add here as nothing material has come about since last purchase other than a continued decline in market value, what looks appealing at $58 looks even better at $47 :)
----- Bayer AG (BAYRY) -----
Purchased: 28 shares x $17.80 = $498.40 (+$0 commission)
Total share count in BAYRY now stand at 172 shares.
Dividend Income: This purchase adds $24.12 of income annually ($0.8614 annual dividend paid in Jun)
Dividend yield > 1.5x S&P yield: Yes, 4.84% vs. S&P's 2.03%
Forward P/E ratio: 9.38 vs. S&P Forward P/E @ 16.15
Comments: I continue to build my share count in this equity position by the dozens and I don't see it letting up anytime soon. Sometime within the next couple of years, perhaps sooner, I expect the market value of this company to double quite quickly and experience compound growth from there on both in capital appreciation and dividend income growth. The opportunity I see here is similar to what I saw in Corning back in 2012/13 when I began building a position in that company when it as trading near book value at < $14 share with a fantastic runway for top and bottom line growth along with P/E multiple expansion which indeed did materialize in the years since.
----- Cardinal Health, Inc. (CAH) -----
Purchased: 40 shares x $50.00 = $2,000 (+$4.95 commission)
Dividend Income: This purchase adds $76.40 of income annually ($1.91 annual dividend; paid quarterly in Jan, Apr, Jul, and Oct)
Forward P/E ratio: 10.6 vs. S&P Forward P/E @ 16.15
Debt to Capital < 50%: No, 60%
Interest Coverage ratio of at least 3:1: Yes, 7.6x
S&P and/or Moody's credit rating of BBB+/Baa1 or better: Yes, BBB+
Current dividend yield > 1.5x S&P yield: Yes. 3.64% vs. S&P's 2.03%
Payout Ratio < 60% (or < 85% for utilities): Yes, 38.3%
Dividend King or CCC classification: Contender (22 years of dividend increases)
Comments: I've had my eye on CAH for a long while now, but hadn't hit the "buy" button until recently. Yes, there are some near term headwinds such as impending competition from Amazon and legal battles surrounding the distribution of opioids, but I suspect the company will remain a going concern (which is a good thing of course) for many decades to come as innovation within the healthcare industry continues to develop at a rapid pace. With earnings and free cash flow (FCF) yields hovering around 10%, there is a lot to like here and it appears that much of the noise surrounding the company and industry has for the most part been priced into the current valuation leading me to believe there is an attractive risk/reward relationship. Another bright spot with CAH is it's capital allocation decisions as of late. Per the image below, management has not only continues to increase dividends, but has also been aggressively repurchasing shares of its outstanding stock while valuation is depressed translating into a buyback yield of 6.41% over the past year - excellent!
Company Profile: Cardinal Health, Inc. engages in the provision of pharmaceutical and medical products. It operates through the Pharmaceutical and Medical segments. The Pharmaceutical segment distributes branded and generic pharmaceutical, specialty pharmaceutical, and over-the-counter healthcare and consumer products in the United States. The Medical segment manufactures, sources and distributes Cardinal Health branded medical, surgical and laboratory products, which are sold in the United States, Canada, Europe, Asia and other markets. The company was founded by Robert D. Walter in 1971 and is headquartered in Dublin, OH.
----- Kraft Heinz (KHC) -----
Purchased: 10 shares x $47.40 = $474 (+$0 commission)
Total share count in KHC now stands at 110 shares.
Dividend Income: $25 annually ($2.50/annually; paid quarterly in Mar, Jun, Sep, and Dec)
Dividend yield > 1.5x S&P yield: Yes, 5.2% vs. S&P's 2.03%
Forward P/E ratio: 13.09 vs. S&P Forward P/E @ 16.15
Comments: Not much to add here as nothing material has come about since last purchase other than a continued decline in market value, what looks appealing at $58 looks even better at $47 :)
----- Bayer AG (BAYRY) -----
Purchased: 28 shares x $17.80 = $498.40 (+$0 commission)
Total share count in BAYRY now stand at 172 shares.
Dividend Income: This purchase adds $24.12 of income annually ($0.8614 annual dividend paid in Jun)
Dividend yield > 1.5x S&P yield: Yes, 4.84% vs. S&P's 2.03%
Forward P/E ratio: 9.38 vs. S&P Forward P/E @ 16.15
Comments: I continue to build my share count in this equity position by the dozens and I don't see it letting up anytime soon. Sometime within the next couple of years, perhaps sooner, I expect the market value of this company to double quite quickly and experience compound growth from there on both in capital appreciation and dividend income growth. The opportunity I see here is similar to what I saw in Corning back in 2012/13 when I began building a position in that company when it as trading near book value at < $14 share with a fantastic runway for top and bottom line growth along with P/E multiple expansion which indeed did materialize in the years since.
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