Recent buys this month include include one purchases that added a new position to the portfolio, namely, Goldman Sachs. See below for details on each of the recent purchases.
----- Goldman Sachs -----
----- 3M -----
Purchased: 10 shares x $161.00 = $1,610.00 (+$4.95 commission)
----- Goldman Sachs -----
Purchased: 5 shares x $197.229 = $986.15 (+$0.00 commission)
Dividend Income: This purchase adds $25.00 of income annually ($5.00 annual dividend; paid quarterly in Mar, Jun, Sep, and Dec)
Forward P/E ratio: 8.27 vs. S&P Forward P/E @ 18.25
Price to Book ratio: 0.91
S&P and/or Moody's credit rating of BBB+/Baa1 or better: Yes, BBB+
Current dividend yield > 1.5x S&P yield: No, 2.53% vs. 1.95%
Payout Ratio < 60% (or < 85% for utilities): 22.89%
Dividend King or CCC classification: Challenger, 5+ years of consecutive dividend increases
Comments: It is hard to ignore the banks when they are trading at such discounted valuations, some below book value like GS. The bank is actively diversifying its revenue and earnings base, one example is the partnership with the Apple Pay credit card. In recent months, allegations of management mishaps in Asia have been a cloud over the bank along with volatility in interest rates. In light of all that is known at the moment, buying GS and other bank at recent valuations appears to be a risk worth taking. We'll see how things play out from here over the coming decades.
The following graphic shows the shareholder friendly moves that GS has made in recent years and also indicative of what many of the large banks have been doing as well. More often than not, the dividend yield is often larger than the buyback yield over a period of multiple years, however, this has not been the case for GS, and when banks have been trading at such low valuations, this a great thing. The average buyback yield for the past 5 years has been 6.24% - an unusually high buyback yield and the average trailing dividend yield for the same period was 1.37%. These circumstances provide an opportunity for management to purchase large chunks of shares on the cheap, enhancing shareholder returns and paving the way for many more significant dividend rate increases.
The following graphic shows the shareholder friendly moves that GS has made in recent years and also indicative of what many of the large banks have been doing as well. More often than not, the dividend yield is often larger than the buyback yield over a period of multiple years, however, this has not been the case for GS, and when banks have been trading at such low valuations, this a great thing. The average buyback yield for the past 5 years has been 6.24% - an unusually high buyback yield and the average trailing dividend yield for the same period was 1.37%. These circumstances provide an opportunity for management to purchase large chunks of shares on the cheap, enhancing shareholder returns and paving the way for many more significant dividend rate increases.
Purchased: 10 shares x $161.00 = $1,610.00 (+$4.95 commission)
Dividend Income: This purchase adds $57.60 of income annually ($5.76 annual dividend; paid quarterly in Mar, Jun, Sep, and Dec)
Current dividend yield > 1.5x S&P yield: Yes, 3.58% vs. 1.95%
Comments: 3M had been trading at a hefty premium for a while and but recently come down in price to much more reasonable valuation levels. Looking forward to building the position from here and can only hope that the valuation remains reasonable for the near future to entice me to do so.
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