Recent Buy - DOW Inc (DOW), Delta (DAL), and 3M Co (MMM)

It feels like it has been forever since I made my last purchase and cash has been piling up in the meantime.  When it comes to investing, we all know that patience is most certainly a virtue one needs to exhibit on a regular basis, whether it comes to waiting for reasonable valuation to present itself or simply buying and holding a basket of investments in an attempt to delay the gratification of what a sum of dollars can buy today and instead investing that sum of money in a security and then waiting for it to exponentially grow into a greater sum of dollars over a decade or two in sum cases much longer.  Well, with the ongoing global coronavirus scare and the number of confirmed cases growing on a daily basis, Mr. Market has begun to panic and as a result has agreed to sell me some shares at much more reasonable valuations than what he was willing to do just a few months ago.  In response to Mr. Market's panic, I've put $7,500 in capital to work in the past month with the average yield of 4.0% for an additional $297 in annual dividend income. See below for the details on the latest transactions in recent weeks.

----- Dow Inc (DOW) -----

Purchased: 32 shares x $46.10 = $1,475.20

Dividend Income:  This purchase adds $89.60 of income annually ($2.80 annual dividend; paid quarterly in Mar, Jun, Sep, and Dec)

Forward P/E ratio:  10.98 vs. S&P Forward P/E @ 19.27

Current dividend yield > 1.5x S&P yield: Yes. 5.8% vs. S&P's 1.79%

Payout Ratio < 60% (or < 85% for utilities): No, 79.8%

Comments: This is still the old, yet also "new" DOW that was spun off from the Dow DuPont merger around this time last year.  The company is still restructuring post spin off with the goal of making the company much more lean with greater margins which I referenced when I first initiated the position shortly after the spin-off in 2019.  I don't recall seeing expectations set by management that the dividend would be increased after the first year and with the current high yield and corresponding high payout ratio, I am not expecting an immediate dividend increase this year, especially in light of the aforementioned changes that remain underway.  Last year, the company outlined its "disciplined capital allocation framework" for the "new" DOW, which included a long-term dividend payout ratio across the cycle at ~45% of net income and a near term target of share repurchases of >= 20% of net income.  I have a couple of the DOW presentation slides I shared last year that can be seen here.

----- Delta Airlines (DAL) ----- 


Purchased: 56 shares x $53.05 (avg price) = $2,970.90

Dividend Income:  This purchase adds $90.16 of income annually ($1.61 annual dividend; paid quarterly in Mar, May, Aug, and Nov).  The quarterly dividend payments have been a bit sporadic in recent years if you looked at the dividend history (in some years Q4 is paid in December and other years in November).

Forward P/E ratio:  7.84 vs. S&P Forward P/E @ 19.27

Current dividend yield > 1.5x S&P yield: Yes. 3.03% vs. S&P's 1.79%

Payout Ratio < 60% (or < 85% for utilities): Yes, 21.78%

Comments: Current dividend yield > 3.0% AND the payout ratio less than 25%, where do you ever come across a company with those metrics - I guess the previously bankrupted airline industry.  The prospects for this industry are certainly much better now post bankruptcy and M&A in 2020 than it was at the start of this century.  If the coronavirus becomes a pandemic, certainly this industry will experience a dip in revenue in the near term, but I am confident they remain a going concern and willing to take on the risk and increasing my ownership share in the company at this very attractive valuation level.

----- 3M Co (MMM) ----- 


Purchased: 20 shares x $152.74 = $3,054.88

Dividend Income:  This purchase adds $117.60 of income annually ($5.88 annual dividend; paid quarterly in Mar, Jun, Sep, and Dec)

Forward P/E ratio:  16.06 vs. S&P Forward P/E @ 19.27

Current dividend yield > 1.5x S&P yield: Yes. 3.85% vs. S&P's 1.79%

Payout Ratio < 60% (or < 85% for utilities): No, 61.82%

Comments: There perhaps is nothing more indicative of a company having a wide moat and good management than perhaps 61 years of consecutive annual dividend increases.  Will the coronavirus stop this company from raising its dividend, I would not bet on it.  In fact, the coronavirus will likely increase the sales of many of MMM products.