I know it has been almost 2 months since I have posted anything. Not really something to be proud of but as matter of fact there has been a lot going on in those 2 months for me. A quick summary; I had exams, then had to leave for some weeks of army training non-stop. I made a citytrip to France, decided to take on supplementary studies about accountancy and finance in addition to my current ones and the last 2 weeks I have been everyday at work except one. As you can see, my days have been pretty busy.
Now what did I miss in the meantime? I missed the February dip and the whole panic scene about stocks going down etc etc. I remember I used to be checking the markets several times a day, reading almost every article available… Now I don’t anymore. I read some macro-economic data about the intrest rates and some news about my particular stocks. This is enough and it helps me sleep at night. I found out it’s better for me not to check the prices too often and not to see all the doom articles. Doesn’t change a single thing in the end. As these kittens beneath, I like to sleep without worries.
Let’s take a look at my stock market transactions the past 2 months. As I said in my previous post, I was going to increase my position in Shell B shares. I bought 65 additional shares for a total sum of €1296. I bought them on the LSE to avoid the double taxes on the dividend. This buy brought my position in RDShell up to 165 shares. If they would go down in price again (I’m thinking to a €20), I would buy again. Love their dividend (history) and I think their acquisition of BG is a strategical move for a long-term investor. These 65 shares will raise my yearly net dividend income by €79,76. Sweet.
This week I have been a big-spender. I had €5000+ sitting in cash waiting to be invested so my shopping lust came up. I looked at my watchlist for stocks and picked 2 companies. First buy was 6 shares of Allergan for a price of $287 a piece. But hey, they don’t give dividend, do they? Indeed, they don’t pay-out dividends. So why? As announced in November 2015, Pfizer is going to merge with Allergan. A marriage of Viagra and Botox. Pfizer is taking some hits on the market because of ending patents and worries about them, & Allergan has an innovative pipeline with fast-growing revenue of upcoming products. The power of a Dow Jones heavyweight combined with an upcoming power is a first positive point. Second, there will be some significant tax benefits as it’s a reverse merger. By moving Pfizer’s HQ to Ireland, taxes will be more concurrential with other health companies based in UK/Ireland. The reason I bought Allergan shares and not immediately Pfizer, is the following: Per share Allergan, I will receive 11,3 shares of Pfizer. At the current price for a Pfizer share, the value of 1 Allergan share would be $328. So my profit is 6x$41 dollar = $246. Of course I will have a little opportunity cost of 1 or max 2 missed Pfizer dividends, but this is a small amount compared to the profit made by buying Allergan shares and their future dividends. Another positive point is that Pfizer is starting an accelerated stock buyback program of $5 billion. This shows their management thinks the stock is worth buying at the current price and the value per share will also go up. Unfortunately, Allergan dropped almost another $20 at the end of the week but you never know in advance of course. If they keep dropping, I’ll just buy some more. Once the merger is done, I will own 67,8 shares of the combined company. Pfizer now pays $1,20 dividend a year/share. Assuming the amount stays the same, this buy raises my yearly net dividend income by €45,07.
Not done yet! At the end of 2015 I took a first position in Novartis by buying 18 shares on the NYSE. As the pharma & health industry are taking some hits, the price for the stock went down and I bought 22 additional shares for $73 a piece. Novartis has a track record of raising its dividend for 18 consecutive years and this year they pay a dividend of $2,76 a share. Currently they are trading at P/E +- 14. For a company like Novartis, this is undervalued in my opinion. In total I’m owning 40 Novartis shares at the moment. The additional shares raise my net dividend income by €33,64.
So far my recent buys and activity on the stock market. In total I increased my yearly net dividend income by a nice €158,47 if every company maintains it’s dividend. This will depend mostly on the oil price as Shell is a good investment for dividends. In a next post I will write about the dividends I received in January-February.
To conclude a little hindsight: In my last post I was hesitating to buy PZ Cussons and Smiths Group. Eventually I didn’t buy them because I thought they could go down just a little more. Turned out they didn’t and they went up 15-20%. Too bad I missed the opportunity window but hindsight is 20/20. At least I know now my view of the shares being undervalued was quite correct.