Recent Stock Purchase – July 2014

Recently, I wrote a post about my July stock considerations and was focusing on two sectors I felt represented the best value in the high priced market of the day. The first sector I was considering was the financial sector with AFLAC Inc. (AFL), Wells Fargo & Company (WFC) and U.S. Bancorp (USB) being my top three considerations. It’s no surprise that I really like AFLAC Inc. (AFL). A stock that currently yields 2.30% with a low payout ratio of 23.7% and a very long and generous rising dividend history going back over three decades. With an annualized ten year dividend growth rate of 19.97% and a low PE of 9.7 what’s not to like?

 

The second area I was considering was the energy sector with BP plc (BP) and Total SA (TOT) being the front-runners I was considering. Both BP and TOT present decent values in the current market, even though BP had a pretty nice recent run up, and great yield which is something every dividend investor seeks. BP and TOT both offer a very generous 4.40% and 4.60% yield respectively.

 

So, where have I decided to invest in July? The answer… AFL. I guess it’s no surprise I went with AFL. I have been investing in this particular stock since May and personally, find it to provide the best value among all the high multiple stocks out there. AFL’s current PE at only 9.7 is much lower than the S&P, lower than industry peers and lower than its five year average PE. Forward PE is only 9.5 too. To me, as our market keeps marching higher and stocks get more expensive, AFL presented a “reasonable” value to invest.

 

I added 12.6739 shares at $62.81 for a total investment of $800.00.

 

I have updated my portfolio to reflect the addition of AFL shares to my brokerage account.

 

What do you think about my July stock purchase? I may buy more before July is over.

24 thoughts on “Recent Stock Purchase – July 2014

    • Hi DD,

      Glad you like my recent buy. I agree with you that 6% is low compared to historical increases but longer term I know that most things “revert to the mean.” In other words, low increases and high increases always seem to average out over time. Still, going back 25 years AFL has an amazing dividend growth rate. I won’t let one year put a bad taste in my mouth.

      For many of my numbers I go to http://longrundata.com/index.php Thanks for commenting.

    • Hi PIP,

      AFL is a great stock and the Japanese exposure just gives you some diversification in my opinion. I am very heavy in pretty much only American companies and when I own an American company that does a lot of business outside the USA I am happy for that added exposure. Think of MDLZ, YUM, KO that have so much of their sales and growth outside the USA. Thanks for sharing your opinion.

    • Hi IS,

      Would love to welcome you as a fellow shareholder of AFL. Sometimes you just need to pull the trigger yourself and not split hairs over buying AFL at a dollar or so less than the current share price. Remember, when investing for decades out it’s not really relevant if buying AFL at $62 or $60. If you like a stock and it seems to present a decent current fair value then it’s time to buy. Think of the missed dividend income opportunity during the time sitting on the sideline. Thanks for your comment.

    • Hi DD,

      Another reason I bought some back in 2007 when I was first building my dividend growth portfolio. There is no denying the decades of dividends AFL has paid out and the annualized dividend growth rate has also surpassed the inflation rate for as long too. Thanks for stopping by.

  1. Congrats on the purchase. Insurance sector is something that I don’t have exposure in (except little bit of AET) and AFL does sound interesting.
    I have lot of exposure in the oil/energy sector with COP, CVX. PSX and KMP. So that is something I won’t be looking at for a while now.
    Dividend Growth Journey recently posted…New Brokerage Account?My Profile

    • Hi DGJ,

      Thanks for sharing your investments with me. I can see why you might not be interested in the energy sector as you are already quite loaded with several stocks from that space. Besides AFL, you might want to look at CB as well. Appreciate the comment!

  2. DivHut.
    I like AFL. It is my largest holding in the “financials” sector as determined by S&P. Aside from REITs which are also classified as financials, the only other stock that I own is WFC (so I was intrigued that it was on your list). As JC wrote, the heavy Japanese exposure is a risk, but it can also help with diversification.

    Side note: after selling BP a couple weeks ago to buy WFC, the price of BP dropped. This gave me an opportunity to correct a mistake and buy back 3/4 of the shares that I sold. Sometimes it pays to be lucky.
    Good luck,
    KeithX

    • Hi KeithX,

      AFL happens to be my largest holding overall even though as a whole I’m light on the financial sector in my portfolio. My two biggest investments sector-wise is consumer staples and industrial. I’m not too worried about the Japanese exposure of AFL for the same reason you mention about diversification. As my portfolio pretty much holds only American stocks it’s nice when a company has international exposure too. Thank you for your comment and nice move with BP.

  3. Cant go wrong with AFL at these levels. I am considering it as I dont have any insurance companies in my portfolio. I am also very tempted to pick up some WFC as its at an attractive level. But I am already overweight in financials, so I’ll be focusing on investing elsewhere.

    Best wishes with your investment.
    Roadmap2Retire recently posted…Omega Healthcare (OHI) Dividend IncreaseMy Profile

    • Hi R2R,

      One of the other reasons I picked AFL over other stocks was because I also happened to be light in the financial sector. Regarding insurance another favorite of mine is CB. Thanks for your input.

  4. I agree with others on the AFL purchase, I actually just initiated a position last Friday (I have been lazy on getting a post up on my purchases). WFC is another financial stock I am interested in adding in the future as I begin my portfolio.
    I agree on the P/E ratio for AFL, I think it gives plenty of upside.
    Kipp recently posted…3% Interest in a Checking Account!?My Profile

    • Hi Kipp,

      It seems that AFL has been getting a lot of love in the blog world which is understandable. Looking at the crazy valuations of other stocks it is hard not to see many of the financial companies as compelling investments in the current market. Thanks for stopping by.

    • Hi AFFJ,

      All the points you hit are the same reasons I have been buying AFL since May. There aren’t too many outs out there that boast such a low multiple with the prospect for growth. Here’s to another 31 years of dividend growth.

    • Hi J,

      Thank you. It’s not just a low PE that AFL has but also some great forward growth prospects. It has been with me for many years and I plan on keeping it for a lot longer. Thanks for stopping by.

    • Hi FJ,

      As I have noted to others, AFL has been a long term holding of mine and I plan to keep it for while. It seems that a lot of the “fair values” can be found in the financial sector these days. With so many consumer or industrial stocks trading at very high valuations it can be difficult finding a place to park your money. This is the third month in a row I have added to my AFL position. It’s now my largest holding and I might want to spread my money out elsewhere next. Thanks for commenting.

    • Hi LAH,

      Thank you. AFL seems to be a popular pick among the dividend bloggers and I have been buying it up in May and June as well. Let’s see what the future brings. Thanks for commenting.

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