Earlier this week I was ready to make a decision on which stock to purchase for my portfolio.
I had thoughts on a few different companies and was mostly set on adding some more shares to my Chevron (CVX) position. I was also considering buying more shares of Wells Fargo (WFC), Wal-Mart (WMT) or Deere & Co. (DE) as I believe those companies are trading at pretty decent valuations currently.
The truth is there are quite a few companies I want to own in my portfolio, 35 to be exact. Unfortunately, I don’t have enough income coming in to make all the stock buys I would like to every month. So I have to make choices.
Over the weekend I did a stock analysis of the Coca-Cola Company (KO) and I really liked what I saw. Coca-Cola is a steady growing company with great results throughout history. They have a very long dividend growth streak of 51 years. As far as companies one would want to own, I think people would be hard pressed of coming up with many better.
As I was doing the stock analysis of KO I realized this is exactly the kind of company I want to own forever. This company seems to be doing everything right. When I looked over my portfolio, I realized I have a pretty small position in KO which I initiated over 2 years ago back in 2011.
I wasn’t super excited about KO’s current valuation as it is currently trading at a P/E of around 20. I definately feel like the other companies I was considering (CVX, WMT, WFC, DE) are currently trading at better valuations. However, I also feel that a company as strong as Coca-Cola doesn’t often trade at those wonderfully bargain basement valuations.
For a company like KO you sometimes have to be willing to pay a premium. In fact if you look over historic valuations of KO, you will rarely find the company trading with a P/E much below 20.
So with that thought and the idea that I wanted a larger position in this great company, I took advantage of the weakening stock market earlier this week to make a purchase. I picked up my Coke shares at a price of $39.61 which gives me a starting dividend yield of 2.83%.
Since my purchase, astute readers will realize that KO has continued to drop in price the rest of the week. In fact you can now go out and grab some shares in the low $39 range. This just shows that you are never going to time your purchases perfect. If a company is trading at a price that you are happy paying, then don’t ever look back and say “Dang I could have gotten it cheaper had I just waited a few days.” Nobody is perfect. Sometimes you will make buys and a stock will subsequently drop over the short term. Sometimes you will make buys and the stock will subsequently increase.
The short term does not matter. All that matters is the long term and I am fairly confident that long term from now (20+ years) my KO shares will be worth considerably more than I paid for them. Along the way I will own one of the best businesses in the world and will collect dividend checks quarterly to do with as I please.
If the price of KO continues to drop (which I actually would hope for) I will snag up some even better valued shares next time I have money available.
As dividend growth investors it is important to realize we need to take a long term viewpoint. Leave the short term for the traders. Over the long term, we will be successful and much better off financially.
Did you make any recent dividend growth buys or sells? Share with us in the comments below!
P.S. I recently came across a forumn dedicated to dividend growth investing that I am very excited to take part in. Currently membership is small but I think this can become a great place for dividend growth investors to congregate and have some good conversations! Check it out at http://www.dividendgrowthforum.com.