Tuesday, February 12, 2019

Reaching A Dividend Milestone & Recent Purchases

In order to achieve my financial goals for 2019, I need to aggressively invest whenever I am presented with an opportunity. As such, I made a couple investments recently.



As I've detailed before, I believe the recent volatility has provided investors with many compelling opportunities.

Of those investment opportunities, I believe the tobacco industry to be one of the most attractive spaces for investment, which led me to add to my positions in Altria Group (MO) and Philip Morris International (PM) yet again.

I won't delve too far into specifics on each company as I've already recently analyzed both Altria and Philip Morris International on Seeking Alpha. I will refer interested readers to the links provided further in this post.

Regarding Altria, I view the 7%+ dividend yield from a soon to be Dividend King that grows its dividend in the mid to high single digits to be too good of an opportunity to pass up. That 7% yield is well above the historical average. Despite the risks of smoking volume declines continuing to accelerate, the regulatory risks with the FDA taking aim at JUUL, and the considerable premiums paid by Altria for stakes in JUUL and Cronos Group, I also believe management is taking the steps necessary to continue on the past 49 years of dividend increases. Since I wrote about Altria last December, the company has also announced an agreement with Lexaria Bioscience to explore innovation in oral, reduced risk nicotine products. Quite simply, management is continuing to implement its strategy to diversify revenues. I believe my thesis remains intact and the continued decline in Altria since my article has allowed me to lower my cost basis from $62.25 a share to $56.47 a share. Although I'm sitting on huge paper losses currently, I believe in the medium to long-term, I will be just fine with this position.

Like Altria, I also believe the 6%+ dividend yield of Philip Morris International is one heck of a bargain while giving investors international exposure.

Though the company is facing currency headwinds for the past 5 years, I believe internationally, the market for Tobacco remaibs strong. Philip Morris also has a tremendous opportunity to convert smokers of other brands to their IQOS device, which I discuss in more detail in my analysis of Philip Morris International over at Seeking Alpha.

Both of these companies offer above average dividend yields historically speaking, as well as trounce the 2% yield of the S&P 500. This should reward investors with safe, strong, and growing dividends for years to come while also offering investors capital appreciation eventually.

Overall, the share of MO added and the share of PM contributed another $7.76 in forward annual dividends, bringing my forward annual dividends to $505.99 (as of January 26, 2019).

Discussion:

What purchases have you made lately? What sectors do you find most attractive currently? As always, thanks for reading and replying to my thoughts and I look forward to reading and replying to yours.


1 comment:

  1. Continue chugging along and smoking your milestones (see what I did there)! Congrats on the buys Kody!

    Bert

    ReplyDelete