September Stock Purchases

I didn’t make any stock purchases in August (excluding my usual fund investments anyway) – this was more about not making a decision on what to buy than any specific plan not to buy. I made two purchases in September to compensate; both added to existing positions and were made via my CapitalOne account.

Read on to see what my September stock purchases were and why.

Energy sector – Exxon Mobil (XOM)

It’s been a while since I last bought Exxon stock; 6 months in fact since my last purchase was in March. The energy sector is one sector that wasn’t meeting my planned dividend allocation, so I thought it was a reasonable time to pick up some more stock at prices below my original purchases.

Exxon Mobil (XOM) is the world’s fifth largest company valued by its market capitalization of $309B, beaten by Apple, Google, Microsoft and Berkshire Hathaway. It operates in three segments – Upstream (oil & gas extraction), Downstream (refining and processing) and Chemicals (manufacturing of a wide range of industrial chemicals). It has a major focus on oil, but it is expanding in liquid natural gas. It’s also undergoing a major stock repurchase strategy and is providing shareholders with a lot of money through both dividends and stock buybacks.

Exxon is a Dividend Champion having increased its dividend for the last 33 years and it currently pays $0.73 for a yield of 3.8%. Its current TTM payout ratio of 52% is above its typical range of 20-30%. The last 5 years’ annualized dividend growth from 2009 to 2015 is about 10%.

It has been consistent in dividend increases; increasing them in May each year since 2006. This year’s increase to $0.73 from $0.69 was 6%. XOM currently pays 3.7% of my total stock dividends, below my 5% limit.

Its P/E of 13 is below the S&P 500 average of 18.4. Over the last ten years, the P/E value has been consistently lower than the S&P average; and typically falling in a range from 9 to 15. The gap has decreased this year with XOM gaining on the index. XOM is a mature, low-growth company and its projected EPS growth over the next 5-years has been marked down to -7% with the low price of oil a large factor no doubt.

I own both Chevron (CVX) and Exxon (XOM) in my portfolio; however I think XOM are more diversified and less reliant on oil prices than CVX who froze their dividend this year. The energy sector as a whole pays 9.2% of my stock dividends; I’m aiming for around 10%.

Industrial sector – Emerson (EMR)

Emerson Electric’s stock (EMR) has been taking a beating recently and it’s down markedly from previous levels. Which makes for a great bargain for this Dividend Champion, in my opinion, as well as in a number of other bloggers’ views this month. The industrial sector was also below my target dividend income level at 9.3% vs 10% so I wanted to take advantage of the current lows giving some higher yields. My last EMR purchase was 5 months ago in April.

Emerson is a $31B company with 5 segments – Process Management, Industrial Automation, Climate Technologies, Commercial and Residential Solutions and Network Power. They are looking to spin off the former division where I worked, Emerson Network Power, which contributed about 20% of sales in 2014.

EMR is justifiably proud of its dividend history, having increased its dividend for the last 58 years. Its shares currently give a yield of 3.9% from a dividend of $0.47 per share. The payout ratio of 52% is in line with the 50-60% range held over the last few years. The dividend growth over the last 5 years has been 5.8%.

It has a consistent increase pattern, raising dividends each November and the stock currently plays 4.6% of my total stock dividends, below my 5% limit. The increase at the end of last year into this year was from $0.43 to $0.47 or 9%.

The current P/E of 12 is lower than the S&P average of 18.4 and this hasn’t occurred in any of the prior ten years; its P/E has always been higher than the S&P’s average for each year since 2004. Its projected EPS growth over the next 5 years is 4.6%

Emerson is a long term investment in my view; a slow and steady company. They have a solid commitment to their shareholders and are heavily focused on their financial targets.

My purchases

+ 16 shares of EMR @ $43.85 for $708.55
+ 10 shares of XOM @ $73.24 for $739.35

Together these purchases should provide $59 total annual income.

 

Quote of the day

Never spend your money before you have earned it.

0 thoughts on “September Stock Purchases”

  1. Great purchases DL! I’m currently investigating US shares because I’m probably going to open a second SIPP with foreign trading facilities. Emerson has been one on my list…

    Cheers

    1. Hi M,
      Thanks! I look forward to reading about your pension research and I’m curious what else is on your list 🙂 Emerson certainly get noticed because of their long dividend growth history. The prior CEO, Charles Knight, even published a book about their management strategy called Performance without Compromise although I’ve not read it.

      Hope everything is going well with you, take care!
      -DL

      1. Thanks, I’ll look into that book. I recently read the book about ‘go’, which was British Airways’ low cost carrier. It was an absolutely fascinating story about how Barbara Cassani brought the company from nothing to hundreds of millions of £ in just a few of years. Well worth a read!

        1. Hi M,
          So the book you mention is “Go: An Adventure Airline”? I’ll see if I can find it at the local library although it looks to be a UK import on Amazon. Looks interesting though!

          Cheers,
          -DL

  2. Ciao DL,

    EMR seems to be on everyone’s radar and yet it keeps falling in price more and more… I have stopped the repurchases because I do not want to be too much weighted on them, but it’s a very interesting stock nonetheless.
    Same story about XOM, I own CVX but not them, before adding I need to clean up something or I’ll end up owning too many stocks… :/

    They both look really good hoping that oil will rebound of course…

    ciao ciao

    Stal

    1. Hi Stal,

      Yes EMR’s price is certainly on a downward trend right now. It has a lot of exposure to the energy market (process control equipment) and also to China, both of which are in decline and EMR’s growth has been reduced.

      I’m with you on the over-allocation. With this purchase of EMR, they now contribute ~ 7% of my dividend income from stocks, so I won’t be purchasing any more for a while until that amount is reduced to < 5% by stock purchases in other sectors. Likewise I'll be shying away from Energy stocks for a little while as they're now exceeding my target dividend income of 10%. I'll be looking more at Utilities, Tech and Finance for my next few purchases. Cheers, -DL

    1. Hi DFG,

      Do you know what part of your screen is filtering it out? I’m guessing it’s due to low growth?

      It’s certainly a popular stock in the dividend blogs because it’s a stable / mature company which has a long history of paying shareholders back via dividends / stock purchases.

      Best wishes,
      -DL

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