Recent Stock Purchase II – April 2015

With the month of April winding down I wanted to make a few more buys in my accounts before May officially rolled in. As you will see from my buys below I made several smaller purchases than usual as all trades were covered by promotional offers and thus were commission free.

 

As mentioned in my April stock considerations post I was looking to expand my portfolio with new industrial holding Dover Corporation (DOV). I had discussed DOV’s long dividend history as well as the diversified nature of its operations which is similar to Illinois Tool Works Inc. (ITW). There’s no doubt that DOV’s share price has been hammered in recent months because of its oil and gas products and services divisions which has seen declines in revenue because of the oil sector slow down. I was looking to add DOV at around $70 but as oil has climbed in the last week so has DOV’s share price. No matter, I intend this holding to be a long term position and will average down if necessary. The beauty of a commission free trade is that it allows you to truly nibble on a new stock without having to commit a large amount of fresh capital. In this way I get the exposure and added diversity to my portfolio from an industrial name I was eyeing.

 

Last week, when highlighting my recent buy, I also mentioned that I would like to add agricultural processor Archer-Daniels-Midland Company (ADM) to my portfolio. As many of you know, I have been heavily adding to my large Canadian banks (TD, BNS, RY) in my ROTH for several months, averaging down my purchase price and wanted to expand my portfolio holdings beyond the banks by adding an additional industrial name (DOV) and consumer staple (ADM). While both have extensive dividend histories I feel that they can act as a diversified proxy for the oil and gas sector (DOV) as well as have some farm exposure (ADM) without buying an oil and gas major such as XOM or CVX nor a focused agricultural play like DE. As you know from my portfolio I like to take a fairly conservative route with my long term holdings and ease into certain sectors.

 

As if adding two new positions to my taxable account weren’t enough I have added, for the first time, a totally new investment vehicle to my newly rolled over IRA account, the REIT. A little background first. Earlier this year I had a five year CD mature that was placed in my IRA which was earning just under 5%. Of course, once the CD matured and rolled into my IRA at my brokerage I immediately wanted to do a conversion into my ROTH as, quite frankly, I’m looking to simplify life and hold fewer accounts if possible. That being said, my accountant had advised me that an IRA to ROTH conversion will have a tax consequence which would amount to approximately $4,000! NO WAY! I work too hard for my money to simply give such a large chunk to the government. And so, I am now the proud owner of an IRA for stocks. I guess it’s not that big of a deal to hold a taxable, ROTH and IRA account as everything is electronic these days but just the idea of keeping track of another account didn’t excite me. Of course, paying a $4,000 tax bill simply to convert an IRA to ROTH really didn’t excite me and so began the mental conversation of what I should place in my new IRA account.

 

Back in September, I had mentioned, and added to my watch list, my interest in health REITs. Again, with promotional offers from my broker I had several commission free trades available which allowed me to nibble on the big three health REITs, Health Care REIT, Inc. (HCN), HCP, Inc. (HCP) and Ventas, Inc. (VTR). I understand the potential headwinds that may arise with interest rate hikes as well as the tenant and questionable billing issues that HCP is currently facing, however I feel the long term prospects for these large REITs are much better simply because of demographics. As I plan to invest for the next twenty to thirty years I’m willing to risk potential short term issues for long term slow growth and yield. I realize that other health REITs, such as Omega Healthcare Investors Inc. (OHI), National Health Investors Inc. (NHI) and LTC Properties Inc. (LTC) can offer faster growth but my “conservative” nature had me opt for the big three instead. To tell you the truth I am considering making my IRA an exclusive REIT portfolio. I think it would be interesting to see how an all REIT play might perform over the long haul and I would only fill it with names I deem to be of quality such as W. P. Carey Inc. (WPC), Realty Income Corporation (O) or even Digital Realty Trust Inc. (DLR). Over time I may create a mini Vanguard REIT ETF (VNQ) with an obvious concentration on just a handful of names. We’ll see. For now I feel totally comfortable buying these small dollar amounts in HCN, HCP and VTR which, at the very least gives me a little exposure to the REIT world and allows me to get my feet wet. In all, I’ll be comfortable with my total REIT holdings to be in the 5% range of all my portfolio values.

 

Now for the numbers:

 

I have added to my taxable account 6.6111 shares at $75.63 for a total investment of $500 in Dover Corporation (DOV). This is a new position.

 

I have added to my taxable account 10.3434 shares at $48.34 for a total investment of $500 in Archer-Daniels-Midland Company (ADM). This is a new position.

 

I have added to my IRA account 6.9992 shares at $75.73 for a total investment of $534 in Health Care REIT, Inc. (HCN). This is a new position.

 

I have added to my IRA account 12.6049 shares at $42.29 for a total investment of $533 in HCP, Inc. (HCP). This is a new position.

 

I have added to my IRA account 7.3659 shares at $72.36 for a total investment of $533 in Ventas, Inc. (VTR). This is a new position.

 

What do you think about my recent purchases? This is the first time I had spread my buys among so many different names. I guess commission free trades enables this type of activity and allows one to initiate minimal exposure and take the first step in building out a position without great risk. Please let me know below.

 

Disclosure: Long, DOV, ADM, HCN, HCP, VTR, TD, BNS, RY, ITW

34 thoughts on “Recent Stock Purchase II – April 2015

    • Hi DE,

      I usually don’t buy so many different stocks at once in such small amounts but as I mentioned I had quite a few free trades set to expire and this was reason enough for me to initiate small positions in several companies that I have been watching. DOV just last week was around $69 and it just jumped since then. Thank you for stopping by and commenting.

  1. Keith,
    I don’t know enough about DOV or ADM to comment, but I have been invested in REITs for a couple years and recently added some funds to the sector.

    The first 2 REITs that I bought were HCN and O. HCN has been a very good investment and is up 25% since I bought it. O is only up about 10%. Both have done fine.

    ARCP had extensively covered issues with accounting inaccuracies that caused the management team to be let go and new personnel put into place. I hold a token position in ARCP since I sold the majority when the accounting issues arose. I will continue to monitor ARCP and may add funds if things settle out this year and a dividend (and investor confidence) is restored.

    I added 2 new REITs this month, OHI and WPC. The valuation is good on both of these, but the ones that you choose are good, too. I don’t know if you follow Brad Thomas on Seeking Alpha, but he is an expert on REITs and his articles are very valuable. I know that Brad is very fond of the 3 that you bought.
    Best wishes,
    KeithX

    • Hi KeithX,

      This is my first taste of REIT ownership in my long term dividend growth portfolio. I have been wanting to jump into REITs for a long time but have been focused on buying more “traditional” dividend growth stocks instead. I definitely think that having a real estate component to any long term portfolio is advisable. Of course, REIT ownership is a lot more passive than actual rental properties which is another reason I wanted to buy into these investments as I do not own a home. Now I can say I have an interest in some real estate holdings.

      I have read many Brad Thomas articles on Seeking Alpha and know of his affinity towards the REIT sector. As mentioned in the post I wouldn’t mind building up a mini VNQ in my IRA with other REIT holdings and feel comfortable starting with my small allocation into the big three health REITs. As always, I appreciate your comment and insights.

  2. Great purchases DivHut!

    I own ADM (fantastic company) and have been looking at HCN, HCP and VTR as a second healthcare reit position in my portfolio to complement my OHI holding. Cant go wrong with them. I am not too familiar with DOV…will need to look up some details on it.

    Best wishes
    R2R
    Roadmap2Retire recently posted…Apple Inc (AAPL) Dividend IncreaseMy Profile

    • Hi R2R,

      Happy to be a fellow shareholder with you in ADM. I’ll always have my consumer staples and industrial portion of my portfolio as the largest sector holdings which is why I wanted to add ADM and DOV this round. OHI is also on my radar going forward but I’ll want to see how my big three health REITs perform in the short term before adding anything new. As mentioned in the article I feel very comfortable initiating small positions to start, with the option to average down should prices tumble. Thank you for sharing your thoughts.

  3. I like ADM and have written puts open on them. Long term, I think the biggest theme of the next twenty years is going to be roughly a billion people in India and China entering the middle class. They will eat more meat and more processed grains. ADM is a winner even if it can’t secure significant China/India market share as there is going to be upward pressure on grain prices.
    Financial Velociraptor recently posted…Insurance Part 5 of 6 W.R. Berkley Corporation (WRB)My Profile

    • Hi FV,

      These recent buys all had a general theme associated with the future world demographic. First, there are more of us each year on the planet competing for food resources and second more of us are living longer and will require ongoing medical care/supervision whether at outpatient facilities, hospitals or senior living spaces. The next twenty to thirty years will have a major shift to the graying of our population along with more middle class individuals consuming processed foods. I couldn’t agree with your assessment more. Thank you for stopping by and commenting.

  4. DviHut,

    Holy Crap, NICE! Next time you have a conglomerate of purchases – definitely do an overall “Summary” of your investment say: Total Cash Outlay was $5,000 to an average yield of 2.34% for an additional $117 added to my forward looking income – something along those lines.

    Congrats, great names, great yields, looking forward to the fruit it bears for you!

    -Lanny
    Dividend Diplomats recently posted…Bert’s Recent Purchase – NSCMy Profile

    • Hi DD,

      Yup, a little overwhelming if you ask me. Sure these weren’t huge amounts in each stock but it was a “conglomerate of purchases.” These purchases totalled $2,600 which is a good amount to invest at once. The yield from the health REITs are pretty healthy assuming the distributions can continue at these paces while my DOV and ADM buys, though lower yielding, have much safer and more predictable dividend payments. You know, I never post how much forward dividend income is added in my articles. Call me superstitious but I always feel like that’s counting your eggs before they hatch. As we all know, dividends, no matter how reliable and dependable, no matter how long they have been paid out, no matter how many years of consecutive raises are given are not guaranteed. All I know for certain is when is dividend has been paid. Thank you for the comment and I look forward to seeing and reporting these first dividend fruits in the coming months.

  5. Like the buys and really like the free trades so you can nibble into positions. Thats a great way to build the positions over time. What broker do you use? Unfortunately mine does nothing like that at least not that I’ve seen. As long as people are around ADM will remain profitable barring some sweeping government regulation change so I think theyre a solid pick. I need to do more research on DOV and HCN. I own HCP and VTR so I like both. Lots of really solid REITs you were pondering. I initiated a new position today. It wasnt for the best valuation and I plan to average down when possible but I wanted this company in my portfolio. Best of luck with the new buys.
    JC recently posted…Qualcomm, Inc. Dividend Stock AnalysisMy Profile

    • Hi JC,

      If I didn’t have all these free trades I would not have bought as many stocks at once nor in such small amounts. These purchases were made through Sharebuilder. As I commented earlier these buys reflected upon the general theme of people and their demographic shift. As you stated, as long as people are around ADM will remain profitable and though it’s no guarantee that a company will remain profitable there’s no question that people will always require the foods and services that ADM offers. These people are also living longer and will require more medical attention and living assistance, hence the health REITs. Judging by the comments it seems that many dividend bloggers already own either the large health REITs and/or small health REITs too. Because I started with such small positions in each REIT I’ll be watching to see what happens in the coming weeks and months and will plan to average down should a tumble occur. Of course, every time the Fed meets and there is a cough or sneeze hinting at interest rate increases, REITs all tumble. No worries as I have a long term investment horizon measured in decades for these REITs. As always, I appreciate your comment.

  6. Hello DivHut san

    Congratulations on your new purchase. What you wrote is really informative to me. I was considering some REIT stocks to my portfolio. Three big Healthcare REIT you mentioned are obviously to be considered.

    In Japan, we will have a golden week from this weekend, so I have already felt relaxed. Enjoy the rest of this week.

    • Hi DS,

      This is my first time in about eight years that I am investing in REITs. As you can see from my portfolio I exclusively invest in lower yielding but growing dividend companies. I never chased current yield rather chased quality and long term dividend growth. Though I have been looking at REITs for many months I finally decided to pull the trigger and buy focusing only on health REITs and only on the big three to start and as you can see I invested very small amounts in each. I like to feel comfortable with my buys especially if it’s a new sector or different investment vehicle. These purchases allows me to get my feet wet with little risk.

      Enjoy golden week in Japan. When you commented about golden week I immediately remembered Kinkaku-ji in Kyoto. It was beautiful. Thank you for stopping by and commenting.

  7. Good buys DivHUT, I like the REITS and Dover as long term plays. Healthcare is only going to grow and I am looking to add a few healthcare players in the future. To get the promotion for the free trade, which company did you go with? I know some have a minimum requirement to begin trading.
    EL @ Moneywatch101 recently posted…Saver or SpenderMy Profile

    • Hi EL,

      Thanks for the vote of confidence with my recent buys. I can’t believe how fast DOV has climbed in about a week. It was at $69 and change a short while back. It’s all good… that’s why I nibbled on it with a free trade along with my REITs. I like health care for the next couple of decades. I agree that it’s a sector that has room to grow worldwide.

      My free trades were all at Sharebuilder. Between birthday trades and simple Google searches for ‘sharebuilder free trade’ I had collected seven free trades that were expiring soon which is why there were multiple buys. I usually buy one or two stocks at a time. FYI – if you are a Costco member you can sign up with Sharebuilder and get $2 automatic trades or they have a $10 monthly plan that gives you 12 trades a month or $0.83 a trade if you buy 12 different stocks. https://www.sharebuilder.com/costco Thank you for stopping by and commenting.

  8. DivHut,
    Very interesting plays. I like your DOV and ADM moves, and those definitely will be great long term moves. They are in great industries that are nothing but great and built to last.

    I find an all IRA REIT account very interesting indeed, and look forward to seeing how it performs. Personally, I would have avoided HCP – the noise around them might be more than noise. HCN and VTR do seem like excellent moves. Still as long as HCP continues to perform as they historically have, all three of those purchases should net you an excellent amount of cash over time. Also all three are healthcare sector, so it would be shocking for any of them to really drop off or disappear.

    Of the mentioned REITs I own O. WPC is probably the highest REIT on my watch list outside of O.
    – Gremlin
    Dividend Gremlin recently posted…Advertising…My Profile

    • Hi DG,

      DOV and ADM fall into my “regular” types of dividend stocks that I usually buy. Nothing fancy, no excessive high yield just good old fashioned “boring” stocks that have a very reliable business with decades of growth behind them.

      The REITs are something that I have been considering for a long time and now I have finally taken a little nibble with the big three health REITs. I know that HCP is potentially going through a rough patch these days with tenant issues and questionable billing practices and being investigated by the DOJ however, I am reminded that many companies go through rough patches and usually come out smelling like roses on the other side. I know nothing is guaranteed but not that long ago JNJ had serious recall issues, MCD about ten years ago traded in the teens, big oil has taken a tumble, etc. etc. If HCP can get through these rough patches it will definitely have a strong tailwind at its back for decades to come. Thank you for stopping by and sharing your thoughts.

    • Hi Tawcan,

      Life goes on and does not stop with a new child. Sure, things might take a little longer to accomplish and I am operating on minimal sleep but it’s all good and I would not trade this new experience for anything. Happy to read that you like my recent buys. Thank you for stopping by and commenting.

    • Hi TP,

      Yup, all this money was from a CD I started five years ago. There still is more and I plan to slowly invest the rest of it in these REITs and potentially other ones as well. I’m sure there will be a knee jerk reaction for all REITs once interest rates rise. Money will flow out, stock prices will drop and it will be a great time to load up on these types of investments. Most REITs have already operated through periods of rising interest rates and costs were always adjusted. Looking out twenty to thirty years I’m not overly concerned about short term gyrations in stock prices nor the inevitable rise and eventual fall in interest rates that will occur over that time period. Thank you for stopping by and sharing your thoughts.

    • Hi FD,

      It was a busy week for new stock buys. With several free trades expiring I thought it would be a great chance for me to nibble on several stocks that I have been considering for a long time. With several small purchases in each I can easily average down should a big tumble occur. I guess the point of these buys was to get my feet wet and initiate a REIT position. I know some dividend bloggers are a little worried about HCP at current levels because of some some tenant occupancy issues they are facing as well as a DOJ investigation into questionable billing practices. For my money, I am comfortable with these small positions to start and slowly build them up over time. Thank you for stopping by and commenting.

  9. Good buy DH,

    I own OHI but wouldn’t mind adding other healthcare reits on the downturn. Brad Thomas at Seeking Alpha had an interesting article about healthcare reit.

    “Kim at BMO suggests that the “tidal wave behind the healthcare real estate sector will occur over the next 35 years, during which time the U.S. population aged 80 years and older is expected to grow by 173%, outpacing overall U.S. population growth by a multiple of seven.””

    If this prediction holds true, our portfolio is about to explode.
    The Broke Dividend Investor recently posted…Second Half of April BuysMy Profile

    • Hi TBDI,

      I have OHI on my watch list as well as some others I mentioned in the post. I know the smaller players have greater potential for growth but for my money I wanted to start with the big three health REITs.

      Regarding that quote you mentioned I fully agree that a sea change in demographics will propel pretty much anything health much higher in the decades to come whether it’s pharma stocks, health REITs, consumer health or bio-tech stocks. The tidal wave of gray is already starting to hit and will only swell in the coming decades. As always, thank you for commenting.

  10. I took a REIT position earlier this year. While I enjoy the monthly dividend, but I found out after the fact that the dividend income from a REIT is not qualified dividend, therefore I’m subject to be taxed at my earn income tax bracket. So for a REIT that earn 5%, 28-35% tax! it falls below the 4% mark, so I might off. To buy GE or something.

    With that said, create a mini vanguard sounds terrific to me!
    Vivianne recently posted…Recent buyMy Profile

    • Hi Vivianne,

      It’s true what you state about REIT dividends which is why I placed all my REITs in an IRA. If you plan to make REITs a substantial portion of your portfolio it would be wise to place them in tax advantaged accounts such as an IRA or ROTH this way they can compound tax free for decades. I’m still thinking about creating a mini Vanguard as I have been looking at some other REITs besides the health sector. There are quite a few great names that exist and in the coming months and years I may delve into other REIT sectors. For now, I’ll stick with the big three health REITs. Thank you for sharing your thoughts.

  11. Good buy DivHut! I own several of REITs: O, DLR, HCP, OHI and recently WPC, along with VNQ. However, I’m keeping my fingers crossed due to Fed action sometime in future that could introduce breakdown in these prices, providing some buying opportunity at that point.

    Keep it going!
    PIM
    Passive Income Mavericks recently posted…Recent BuyMy Profile

    • Hi PIM,

      Oh wow… you have a lot of REITs. I have been a little gun shy about buying REITs as you can see from my portfolio. I like to stick to the real “boring” dividend growth stocks but after much deliberation I decided that it was an important sector that deserves some attention and a place in my long term portfolio. I started with the health REITs because I like their long term prospects over the coming decades and decided to go with the big three health REITs even though I can see myself buying some smaller higher growth names like OHI, NHI or LTC. With only about $500 in each to start my position I’d welcome some Fed noise to slam prices further. Let’s see what happens in the coming months though I wouldn’t bet on a Fed raise any time soon. Thank you for stopping by and sharing your REIT holdings.

  12. Now that is investing! Great job getting your money working for you in such a diversified manner. Commission free trades are definitely an enabler and you got some solid companies there. ADM is definitely a good buy. I remembered looking into HCP, but bought OHI. I might go back and look at HCP again, but then again I do have my VGSLX fund, as well as O and EXR. I’m glad to see you’ve bought some REIT’s though, I think they round out a solid portfolio. Thanks for sharing.

    – HMB
    HMB recently posted…Recent BuyMy Profile

    • Hi HMB,

      I think it was finally time to buy into REITs. They have been on my watch list for a long, long time and I thought they could complement my portfolio which is already loaded with a lot of solid, boring, more traditional dividend growth stocks. As you saw from my buys I went very small with my initial purchases and stuck to the big three health REITs to start. OHI is on my watch list and I’m sure in the coming months I’ll be adding to my REIT portfolio as there are quite a few solid payers that exist. I won’t buy into mREITs it looks like. Thanks for sharing your REIT holdings with us. Curious to know why you went with EXR versus PSA. Thank you for commenting.

      • Hi DivHut,

        I learned about storage REIT’s after reverse engineering the VGSLX fund. PSA is part of that fund and it is very pricey, so I started looking at other storage REIT’s and found EXR. At the time it was attractively priced and from my initial research seemed a solid growing company. It’s been good to me thus far and has appreciated really well.

        – HMB
        HMB recently posted…Recent BuyMy Profile

        • Hi HMB,

          Thanks for the reasoning behind your EXR buy versus PSA. I’m always interested to learn about the thought process a person has before making a certain buy.

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