April 2014 – Stock Purchase (2)

I buy investments twice a month; around the 5th and the 15th of each month. This is a way of averaging out spikes in the market and it also allows some minor tweaking on my individual stock weighting since I buy shares from the lowest performing sector in my portfolio at that point in time.

With that out of the way, read on to see my last purchase in April.

For individual stocks, I buy dividend paying companies with what I consider to be strong brands or that have a large moat. I plan on holding these stocks for life through thick and thin [1].

My taxable portfolio consists of some bond funds, some stock funds and individual stocks. I’ll describe my complete portfolio in a separate post, but here’s what I’ll be buying this week.

$450 Vanguard High-Yield Dividend Fund (VHDYX)
$125 Vanguard High-Yield Corporate Fund (VWHEX)
$150 Sharebuilder Account [2]

These investments should increase my yearly dividend income by about $19.

So my individual stock portfolio looks like this

This is a screenshot from my portfolio excel file [3] which groups my stocks into their sectors (I’ll publish a more traditional portfolio view at the end of each month). It shows their value relative to each other, the target value needed for equal weighting and highlights the lowest performing sectors in nice warming colors – red for 10th place, and orange for runners up in 8th & 9th place.

If you look closely enough you’ll even notice for a couple of sectors that I picked VPU and VDE ETFs where I wanted further diversification.

The screenshot shows that I’m overweight in Technology and that my lowest performing sector this time around is Financial Services where I have both AXP and JPM. So I’m going to buy some more of those two stocks and move a little closer to an equal weighting.

AXP has increased its dividend for the last 2 years, and its dividend is $0.23 a share with a yield of 1.09%. It pays next month in May but the shares I buy this week will be after the ex-dividend date (02-Apr) so they won’t count in next month’s payout. AXP’s payout ratio is 16.8% so it has room to grow.

I originally chose to invest in AXP since I use their credit cards extensively and they have such a strong brand recognition. Plus nearly everybody uses credit cards.

JPM has increased its dividend for the last 3 years and its dividend is $0.38 a share with a yield of 2.75%. It pays at the end of the month but the shares I buy this week will be after the ex-dividend date (02-Apr) so also they won’t count in the payout at the end of the month. JPM’s payout ratio is 25.9%. Its share price fell last week due to lower than expected earnings.

I originally chose JPM for similar reasons as AXP – they have a strong brand and in the world of banking, big is good [4]. I’m also a customer of theirs for my checking account and a mortgage.

My holdings in AXP are $28 less than JPM, so I’ll buy proportionally more AXP to balance them out. My sharebuilder account is set to purchase $89 of AXP and $61 of JPM this week.

Questions? Comments?

That which does not kill us makes us stronger.

[1] The phrase originated as ‘through thicket and thin wood’, which was a straightforward literal description of any determined progress through the forested English countryside.

[2] Over time I’ll be pivoting more to individual stocks and increasing this amount as a proportion of my monthly purchases. I’ll get around to explaining why this is so in a future post.

[3] I seriously love Excel and writing macros, especially now that I’ve found out how to download stock prices automatically.

[4] Except of course when they become too big to fail. Or when they take a page out of Moby Dick and go whale hunting. I trust they’ve learned from this and added mechanisms to prevent it happening again.

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