I started the Portfolio in Action series in order to show my investment process.  These are the real trades I make in my personal dividend growth stock portfolio.  I want to be open with my readers about all of my trades so that you can follow me on my journey, learn from how I go about investing and offer any advice you may have to help me make better investing decisions.

My goals for 2013 included investing at least $8,000 into new stocks.  I like to make purchases of at least $1,000 a trade so that means I’ll probably make around 8 purchases this year.  Today I made my first two purchases of dividend growth stocks in 2013.  I had intentions of making initial purchases in new companies that I don’t currently have in my portfolio in order to diversify my portfolio a little better.  However, I felt that two great opportunities presented themselves in a couple companies I already own and decided to take advantage and add to my positions.

Purchased Aflac (AFL)

One of my favorite companies that I own is Aflac.  Today Aflac announced 4th quarter earnings which were an increase year over year and a good finish to fiscal year 2012.   

I am unclear on the reasoning but after the good earnings announcement shares of AFL traded down around 5% today.  I took advantage to make another purchase in this company that has increased their dividends annually for 30 years.  Aflac is currently trading at a P/E of around 8.4.  I believe the market is valuing AFL lower than other stocks because of uncertain risks in Aflac’s investment portfolio as well as a weakening of the Japanese Yen which is where Aflac earns a large portion of their earnings.  I haven’t done an analysis of AFL on my site yet but you can read a good recent analysis of Aflac here at Dividend Growth Stocks.  Currently Aflac pays $0.35 per quarter in dividends for a $1.40 annual amount.  The current dividend yield is at 2.6%.

Purchased ConocoPhillips (COP)

I also decided to make another purchase in ConocoPhillips.  COP was one of the first stocks I purchased back when I started investing in dividend growth stocks.  Originally when I started buying dividend stocks I wasn’t concerned about making purchases with at least $1,000.  So my first purchase was only around $500 worth and I decided to make a new purchase in COP in order to increase my position size.  COP did a spinoff last year of Phillips 66.  For me this makes it a hard company to currently analyze.  When I look at the financials on the company in a ValueLine report or a Standard & Poor’s report I’m not sure if they have been adjusted for this spin off or not.  So I didn’t do a complete current analysis of COP before this purchase.  I based my current buying decision off of the higher current dividend yield compared to other leading oil companies, the low P/E ratio under 10 and a recent decrease in the stock price that I felt offered a good opportunity to add to my position.  I may regret this decision but I have a feeling it will work out in the long term.  COP has a history of annually increasing dividends for 12 years in a row.  Currently they have a dividend yield of around 4.6%.  This will increase the overall yield of my portfolio and give me more exposure to the oil industry which I feel can only go up over time.

Conclusion

I’m excited about both of my purchases this month.  I plan on owning both of these companies for the long term and feel they will perform well over time.  The next purchases I make will be in completely new companies so that I can add to the diversification of my overall portfolio.

What are your thoughts on the two companies I purchased?  Do you own COP or AFL?

Disclosure:  I am long AFL and COP.

 

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9 Responses to Portfolio in Action: First Stock Buys of 2013

  1. I own COP from pre-split and would like to own some AFL. I might have to go after AFL with puts because I’d like the starting yield to be higher. My position with COP is pretty small because it was one of the first stocks I purchased as well. I’m holding off on COP right now although I’ll probably regret that in a few years.

    Nice buys!

    • Dan Mac says:

      Thanks for the comments JC. I initially purchased COP pre-split as well. I think it’s a great company and the only questions I have are how things will go now that they spun off Phillips 66. But they offer the highest current dividend yield out of the major US oil companies so I decided to add to my position. As for AFL, yes the initial yield is low but both the earnings and dividend growth have been good. Also the company is currently selling at a historically low P/E so I think buying in at these levels will turn out pretty well over the long term. I always look for an initial entry dividend yield of at least 2.5% as long as there is good growth so I feel AFL meets my requirements.

  2. Craig says:

    I own both COP and AFL. I don’t know how much I like COP since the PSX spinoff, but my entry price is so low that I am hanging on to it. AFLAC has so many great qualities, but yes I buy in when it’s much lower, around $40. Seeking Alpha has a good article on AFL’s balance sheet and hidden sources of value identified from the balance sheet. It’s at http://seekingalpha.com/article/1032911-aflac-s-hidden-source-of-value

    • Dan Mac says:

      Thanks for the feedback Craig. I like COP for the high dividend yield. I’ll be interested to see how the company does now that they’ve spun off PSX and am hoping this turns out to be a good investment. I bought AFL last year in the $40′s but do you think we’ll really see those price levels again? I can see it dipping down to the upper $40′s but lower $40′s would be quite a drop and a really low P/E valuation.

  3. Martin says:

    I have AFL in my watch list, but not buying it at this point, since its yield is below 3%. However, the growth at 12% is impressive. COP is good one.

    • Dan Mac says:

      Hey Martin, my initial yield requirement is at least 2.5%. I don’t mind the slightly lower current yield as long as I feel there is a good amount of expected future dividend growth to support it. Time will tell how these investments turn out but I’m pretty confident over the long run things will look pretty good.

  4. [...] Mac at Dividend Growth Stock Investing discusses his first stock buys of 2013. You’ll have to check out his recent posts as well, he has really been writing some great posts [...]

  5. Dan Mac,

    Great buys here.

    I really like AFL and picked some up very recently as well. My first couple purchases were in the low $30′s…but it still represents some solid value in this expensive market.

    COP is an interesting pick. I like them, but less so due to the fact that they’re less diversified since they spun-off the downstream assets. Now that they focus on E&P, oil prices will make this company even more volatile. Still, I think it’s a solid pick.

    Best wishes!

    • Dan Mac says:

      Thanks Dividend Mantra. I think both these buys will turn out well over the long term. COP was the one I was more hesitent on but I really liked the higher yield compared to the other oil giants. Like you said the market price of this company will be more volatile with oil prices but I also feel over time oil prices have nowhere to go but up. Energy isn’t going to get any cheaper in quite awhile.

      Thanks for the commments!

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