New stock purchase

It’s been a while since I’ve an individual stock purchase as I’ve been selling some holdings over the last two months instead. But last Friday (even though it was April Fool’s Day), I finally reversed that trend and added to one of my existing positions. Click on to see why and what…

I had reason to celebrate in March, not only from the higher dividend income and tax refund that I received, but also because my brokerage my reduced stock trading fees from $7 a trade down to $2!

This is because I finally achieved the next premium tier at Vanguard. Due to the assets that I hold there, which includes my Traditional and Roth IRAs, I now qualify for the Voyager Select status where one of the perks is $2 trades. It’ll take longer to reach the next level which requires $1 million in assets (excluding individual stocks) but I’m patient and I know I’ll get there eventually.

Note: There are other (and potentially cheaper) ways to get free trades e.g. the Merrill Edge Rewards Program but I’ll take this reduction.

My purchase

I prefer buying stocks with P/E values under 20 and I only hold a few companies whose P/E is below those levels right now. One of them is JPM and I decided to buy $1,200 worth to complete a position based on an arbitrary position size of $2,000. So I bought 20 shares at $59.90 which, with the $2 commission, came to exactly $1,200.

Together with my existing cost basis of $859.82, I now own 36.4125 shares for a total cost basis of $2,059.85 with a market value of $2,180.02.

My reasons for buying (in no particular order) were:

  • Low P/E of 10
  • Low Dividend Payout Ratio of 28%
  • Good dividend yield of 2.8%
  • Strong free cash-flow of $73B.
  • Meets my diversification criteria (under 5% weight)
  • Valuation looks reasonable based on historical values
  • Adding to existing position
  • I’m a customer and have had good experiences with them

JPM, along with most banks, should benefit from rising interest rates over the long-term, so the current price was a good opportunity to settle in for the interest rate ride that’s expected to start later this year.

I’ll be making more fund purchases for the remainder of this month so my overall asset allocation at the end of April will still show a decrease in individual stocks despite this purchase.


Quote of the Day

Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver.

0 thoughts on “New stock purchase”

  1. I own a bit of JPM as well that I bought back in 2011 and it’s been great for me so far. I’m interested to see how the dividend growth gets to be when the capital allocation plan gets approved. WFC is my other large bank holding and they’re unfortunately under the same restrictions of needing their plan approved by the Fed. Although that should be coming up either this month or next.

    Also that’s awesome that you’re down to $2 a trade. That’s pretty damn low and really helps to reduce the cost. Every little bit helps.

    1. Hi JC,

      Thanks for the feedback! I’ve not owned my first JPM shares as long as you – 3 years today as it happens, but they’ve been fairly steady. I think over the long haul this will be a good company to own.

      WFC does seem to be the more popular US bank stock although the Canadian banks are even more so. WFC is the 5th largest holding in VHDYX with around 3% weight so I’m already holding nearly $2000 of it. JPM is the 8th largest holding for that matter.

      Best wishes,
      -DL

    1. Hi Tawcan,
      I was just in time for the next dividend payment too as they went ex-div today. What factors have put you off buying any? I’m happy with the purchase and look forward to more years of ownership + dividends.

      Best wishes,
      -DL

  2. JPM has been quite lately. Not many DGI bloggers are buying this stock. I suspect it’s because most of us are grabbing Canadian banks at a discount. I like this buy. I especially like that it only cost you $2 to trade now. This will allow you to buy smaller lots of stock without worrying about excess fees.

    1. Hi IH,
      Yes the Canadian banks are in the blogs monthly it seems! I know they’re considered much more stable than the US banks. I bank at Chase so their dividend payment is a way of improving the 0.00% interest rate they pay my checking account 🙂

      Being able to reduce the trading fee percentage will be a big help, I plan to keep a fairly high minimum purchase level so I expect stock purchases will be the exception than the rule this year, but we’ll see!

      Best wishes,
      -DL

  3. The reasons look very solid to me. I do agree that banks should be able to profit from rising interest rates. I have been doing some put writing against the banking sector. It means I do believe they are undervalued.
    In your case, the dividend adds to that story.

    2$ a trade, that is amazing… I am not even close!

    1. Hi atl,

      I hope the put options go well – I’m too hesitant to do options trading but I’m glad it’s working out for you and providing some additional income!

      Best wishes,
      -DL

      1. We all should invest in assets and strategies that make us feel good.
        the one thing I can not get myself to: do stock selection for DGI… I like reading the blogs on it, seethe progress of other people…

        1. Hi atl,
          Yes I agree – I like indexing, even if my Income Fund isn’t pure indexing (it’d be in Total Stock Market funds if it were) since it’s so much more convenient / abstract. But I do like holding some individual company stocks too although I’m slowly reducing that percentage of my portfolio.
          Best wishes,
          -DL

    1. Hi DFG,
      I have the Capital One account still and it contains most of my individual stocks – I’m not actively buying any stocks there now however. The Merrill offer seems to imply that you need a BoA checking account which I don’t have. It also looks like it’d take me a long time to recoup an account transfer cost: The transfer fee is $50 which would be 25 trades at Vanguard and around 4 years of trading assuming one trade every 2 months.
      Best wishes,
      -DL

  4. It took me a while between my early Feb. buy and my March buy so I can understand the longer time span in between buys as values and yields became less compelling with the market rise. I now JPM is fairly popular among the dividend bloggers but not for me. Don’t get me wrong, I think you bought well as the numbers indicate but for my long term dollars I’ll only invest in WFC and USB on the American side and TD, BNS and RY (for now) on the Canadian side. Those are the only banks I like at this time. Thanks for sharing.

    1. Hi DH,
      Yes it’s definitely harder to find cheaper stocks. My mortgage is at WFC so I’ve been tempted to purchase shares but I decided to limit my individual stocks to one bank only; WFC is the 5th largest holding in VHDYX (JPM is 8th) so I already hold a fair amount, although the fund doesn’t hold USB. Similarly RY and TD are the 14th and 17th holdings in VIHAX with BNS at 33rd.
      Best wishes,
      -DL

  5. Wow I wish my broker would lower the cost of trades. My broker charges $10/trade which is too darn much considering many of their competitors charge much less these days. I have considered changing brokers but I’m really not wanting to deal with that hassle.

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