This week’s Sharebuilder purchase is another small step along the path towards Financial Independence. I decided to split my automatic purchase among three companies in different sectors this week, and I will be adding to an ETF position at Vanguard.
I used to work at Emerson Electric (EMR) before moving to Detroit last year. It’s a $40B company with 5 segments – Process Management (44% of FY14 Earnings), Industrial Automation (18%), Climate Technologies (17%), Commercial and Residential Solutions (10%) and Network Power (11%). Emerson isn’t particularly aimed at consumers but you may have come across the company from its popular InSinkerator brand.
EMR is justifiably proud of its dividend history, having increased its dividend for the last 58 years. Its shares currently give a yield of 3.1% from a dividend of $0.47 per share. It has a consistent increase pattern, raising dividends each November. The payout ratio decreased 3% from 2013 to 2014 and is currently 58% which is the high end of its range over the last 5 years. The dividend growth over the last 5 years has been 5.8%.
Its P/E of 19.6 is higher than the industry average (18.6) and S&P Average of 18.6. The P/E has always been higher than the S&P’s average for each year since 2004 however and the current value is lower than last year’s 20 and 2013’s value of 25. Its projected EPS growth of at 8.1% over the next 5 years is down 1% from last November’s value.
EMR pays 3.9% of my projected annual dividend income, below my 5% limit.
JP Morgan Chase
JPMorgan Chase (JPM) is a $215B bank and financial services company. Notable for its colorful CEO, it looks to have its legal troubles under control after a $13B settlement last year. The company has increased its dividend since 2010 when it cut them and so this year it achieves a 5-year dividend growth history. Its payout ratio is 29% with a current dividend yield of 2.9%. The last 5 years’ annualized dividend growth from 2009 to 2014 is 24%.
Its P/E of 10.2 is lower than the industry average of 14 and the S&P 500 average of 18.6. For the most part of the last ten years, the P/E has been significantly below the S&P average; exceptions being 2004 & 2008 when low earnings increased the P/E ratio to 22 and 38 respectively. The current P/E value continues the downward trend since 2013. The 5 year EPS growth estimate is up 3% since last August to 7.1%.
JPM currently contributes 2.7% of my projected annual dividend income. I won’t add to a position if it exceeds 5% of projected dividend income, so JPM passes that test.
BBL currently contributes 0.9% of my projected annual dividend income.
Vanguard Utilities ETF
Vanguard Utilities ETF (VPU) is an ETF which holds 79 utility stocks, the top 10 being Duke Energy, NextEra Energy, Dominion Resources, Southern Company, Exelon Corp, American Electric Power, Sempra Energy, PPL Corp, PG&E Corp and Public Service Enterprise Group. These 10 companies occupy about 50% of total net assets.
It’s low cost (0.12% ER), commission-free and currently yielding around 3.8% in qualified dividends. Its dividend growth has been about 4.9% since 2009 and has increased every year since 2007. VPU contributes 2.6% of my projected annual dividend income.
January Stock Purchase
So this week’s purchase will be
VPU (3 shares @ ~ $105)
With an average yield of 3%, the Sharebuilder purchases add $11 to my projected annual dividend income plus another $12 from VPU.
Quote of the day
If owning stocks is a long-term project for you, following their changes constantly is a very, very bad idea. It’s the worst possible thing you can do, because people are so sensitive to short-term losses. If you count your money every day, you’ll be miserable.