Investing

This is my buy for May 2017

Mr. Robot

So talk about a last minute change of heart! As part of my diversification strategy I wanted to start a position in the Healthcare sector. For the past month I have been trying to make a choice between Pfizer and Johnson&Johnson. With a lot of reading blogs in the DGI community and seeing other people buyíng (for example WDYR) I thought I was ready to pull the trigger on one of these.

As I transferred the (fixed) monthly amount in my brokerage account I saw a pretty nice dip on Realty Income Corp (O) which has been on my watchlist for a while (and seems to be part of a LOT of other DGI’s stock portfolios) and decided to go for that one instead for this month.

realty_income

  • 91 Dividend Increases Since 1994 NYSE Listing
  • 78 Consecutive Quarterly Increases
  • Compound Average Annual Growth Rate of Approximately 4.7%
  • Dividends paid for 48 years = over $4.6 billion

I’ve bought 5 shares @ $55,35 which should add $0.211 * 5 = $1,055 monthly to my passive income. Total for 2017 should then be $1,055 * 6 (months) = $6,33 (before taxes). My forward annual income should increase with (ofcourse) twice that amount $12,66. After the tax (-15%) this should result in $10,76 of free money!

Small but steady increases in my portfolio towards my 2017 goal of €130,-!

Published by Mr. Robot

21 thoughts on “This is my buy for May 2017”

  2. Nice buy. As you know, I recently picked up some O on the dip as well. Been wanting it for a long time and was glad to finally pull the trigger on it. Not necessarily on this stock, but I have done the same thing as you on a few occasions. Have my head set on a stock then when I get to the point of actually buying, Mr. Market throws a wrench in the plan and makes something even more appealing. Either way, if you are making quality buys the passive income snowball just keeps getting bigger. Keep up the good work!

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  6. Nice pick up. I don’t hold any O but know it’s very popular in the DGI world. Sometimes you look to invest one sector and end up in another when better prices and values present themselves.

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  8. REITs definitely have a place in a dividend income portfolio. This looks like a small initial purchase that many more will follow on the way and getting paid on a monthly basis is something that you can get used to easily. From my side I have PSEC and an emerging market bond ETF (PCY) that pay monthly dividends and I really enjoy it 🙂

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  9. Nice buy. The best part about O is the monthly dividend. I think the stock price will be bumpy over the next few months. There should be some good buy points as interest rate talks continue.

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  10. So which did you bought JNJ or PFE? Both quite good, but PFE has bigger P/E and their div payout is almost at 100%, but JNJ has smaller dividends. Looking from business perspective I would bet on JNJ in long term as they are financially stronger then PFE (more equity, more cash, less debt ect).

    Regarding O I have took a quick look at what is living there and honestly I did not like what I have found. Yes they are growing, but they P/E is sky high almost 50. From where they pay almost 5% yield that makes payout ratio of >200%. Amortization/EBITDA yes, but they need Capex for expansion, which they finance by… sale of shares of increase of capital, so you high dividends is financed from… capital increase. First thing that comes to my mind – financial pyramid. You get paid as long as there are people buying their newly issued shares… Personally I would not buy that, but hey the growth can go on for another 5-10 years and in that time they will accumulate enough real rental income to cover the dividends, but personally I would not bet on that. But this is just my thoughts 🙂

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    1. I bought neither and went for O instead. 🙂

      “Back in March, the company announced its 78th consecutive quarterly increase in its dividend.” They call themselves the “Monthly dividend company” for a reason

      REITS always have a higher payout ratio so this doesn’t really bother me. Evaluation of REITS differ somewhat then traditional dividend stocks (check http://www.investopedia.com/articles/04/112204.asp). Share price has been fluctuating a lot recently high in the $72 and as low as $54,89 at the moment. Wat attracted me (next to the high presence in other DGI portfolios and current track record) is the fact that even during recessions their tennant rate never dropped below 95%. Which I believe is a great score for a REIT. Also there presence in retail brick & mortal is low providing them some cover from the “Amazon-effect”. (Although Amazon is also opening offline stores now 🙂 )

      Thank you for your insightful post, it really got me thinking and re-evaluating.

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      1. Yes but do you understand that this company is based on “house of cards”. As long as it holds it ok, but fundamentaly its house of cards. In pas 5y it has paid and grow its dividends partly from funds gathered from capital increase. That just what I saw when alalyzed their financials. Yes it can hold for some yeas maybe even in very long term and maybe all will work out fine, but fundamentaly of wrong.

        REIT, banks whatever. All comanies are in general the same. For ex bank have huve leverage. They put 5-10% of their equity and use ×10-20 borrowed funds (deposits) and lenf the money for 0,something margin. This os the nature of their bussines, but as investor I have to understand the risk behind it. And when lemman brother stuf comed everone get shocked “hey this was supersafe AAA raring” No thing was a natural increased risk bussines. Same with REIT. By evaluating it differently from other sectord you are ignoring the sector specific risk 🙂

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