Recent stock buys (+ analysis): August + September

As the stock market has mostly been going up in August, it was a little harder to find undervalued stocks at first sight. Yet, after some more profounded research, I decided to go with 2 companies out of many: Gilead Sciences Inc. and Walt Disney Co. .

My first choice was to strengthen my position in Gilead Sciences by 15 shares at $78. This brings my total position in GILD up to 50 shares in total. The net current annual dividend income from these extra 15 shares should be around €15,62.

14800

This was the 3rd time I bought myself into GILD. Why? The stock has been struggling for more than a year now. The last 5 years, the stock price has quadrupled. Thanks to their 2 multibillion dollar treatments Harvoni and Sovaldi, their earnings have skyrocketed. Unfortunately, due to more competition in the hepatitis C market and declining sales, the stock has fallen out of favor to most investors. This is what intrests me.

GILD trades at less than 7 times earnings and yields around 2,4% in dividend with a payout rate of only 15%.  This means there’s a lot of room left for future increases or investments. Their cash flow is huge and their operation margin is over 50%. The company has been very busy buying back shares the latest years. In January 2016, the company authorized a share buyback of $12 billion. This is more than 10% of the company’s total worth. Some analysts criticize Gilead for not using the cash for other purposes such as acquisitions. As I think the GILD stock is undervalued, so the share buyback is a good move. If they keep buying and reduce the share count untill my 50 shares, it would even be better.

However, acquisitions are a necessity, especially in that sector. Overpaying billions for a company in a bid war, is just a bad strategical move. They made fair offer for Medivation, but Pfizer outbid them by almost 70%. Recently CEO John F. Milligan stated that Gilead is waiting patiently to acquire new companies when the time comes. With more than $25 billion in cash (and equivalents), they surely have some buying power.

In my view, Gilead is losing some battles but will end up winning the war. The shares at their current price reflect a lot of negativity and few good perspectives. They still have a rather big pipeline in development and some alliances with smaller companies. These potential next big hitters are completely forgotten in the price of the stock.

According to me, if Gilead could acquire some strategical companies and keep growing (even at a slower pace), long-term value will be achieved.

For a more thoroughly analysis of the GILD stock, I would refer you to http://seekingalpha.com/article/4004410-gilead-sciences-snooze-lose
images

The other buy I made was The Walt Disney Co. I bought 14 shares of $93 which should add another €11,40 to my annual dividend income. Not a high amount, due to Disney’s dividend policy. Yet this doesn’t bother me, since Disney’s IPO they were able to make an average yearly return of 18%, including dividend reinvestments. Knowing it seems like a Hercules’ task to outperform this, it’s better to let Disney use the earnings to raise future profits and return capital to their shareholders this way. Trading at a P/E of 16,5 which is not so common for a similar company, it looks like a good addition to my portfolio.

Of course the bad stock performance has had its reasons. Investors have been worried that the ESPN Channel is losing customers. However, Disney is taking action to keep their growth on track. They recently built a huge new theme park in Shanghai which should bring in some nice cash and reported more than 1 million visitors the first 2 months.

disney-shanghai-park

Also, they took a stake in BAMTech, a streaming network, for about 33% equalling $1 billion. They have also made a deal with Netflix to broadcast more Disney movies. These actions should help compensating the losses of customers at ESPN.

Eventually, what’s not to like about the good old Mickey Mouse behemoth? Some bad news causing a lower stock price, perfect buy opportunity according to me.

So far my latest buys in the almighty stock market…

Currently I am looking to buy shares of Apple or IBM… depending on the share price when my new paycheck comes in. I hope Apple has some lack in their earnings report so the stock price goes down a little more.

What are your thoughts on the mentioned stocks?

The €100,000 milestone: Check!

Time goes by, we work, do our daily activities, earn money and sometimes we just forget about how things are advancing. Last month, I suddenly realized I hit one of the most memorable milestones in my investing career. The €100,000 net worth mark.
€103,000 to be exactly.

100000-euro-biljet

How did I suddenly reach that mark? As my portfolio says, I only have €47,500 invested in stocks. Well…

  • Stocks: €47,500
  • Personal savings + emergency fund: €21,500
  • Bonds & Obligations: €8,00023018853-Piggy-bank-wearing-sunglasses-with-money-sign--Stock-Photo-pig
  • Retirement & tax plan: €4,500
  • Parents piggy bank: €21,500 

–> Total net worth: €103,000

 

Let’s put every section under the scope.
My stocks are pretty clear, the paycheck almost completely goes there. My precious babies :D.

Personal savings: I am not a fan of putting money in the bank without it working for you. Although, sometimes, you need a soft pillow to fall on if necessary. Future doesn’t look too bad for me, so it might not be necessary. But, I have another point of view on this. My current dividend growth strategy consists of buying each month stocks that look undervalued in my opinion. Now, what if the markets go down for a longer time? What if we witness a major stock market crash like the one in 2002 or 2008? I would only be able to buy for let’s say €1,500 a month. So, the real advantage for me would then be to transfer the money and start buying big. Let’s call it some kind of crash insurance. When there’s blood on the streets…

Bonds & Obligations: When I was 16 years old, my dad bought some obligations with my spare money. These yield around 3,2% net a year. These expire in August 2018 and with that money I will most likely buy stocks too. I am not a fan of obligations and don’t plan to buy any myself. Dads make mistakes too, you know :D.

Retirement and tax plan: Belgian people have the possibility to do some kind of retirement saving plan, which leads to less taxes to pay. More concretely, I invest a small €2,000 yearly which are put on a seperate account. These deposits make sure I have to pay €500-€600 less taxes a year. Pretty nice return on investment. Of course this has some disadvantages too, like paying taxes on the end amount when you finally retire. This is a bit too much offroad to go more in detail.

 

kids-for-cash

Parents piggy bank: Say what?! In Belgium, some parents decide to save up a small amount of money each month to put it on a seperate bank account in benefit of their kid(s). Knowing this started when I was born, this piled up to a nice sum of €21,500. Normally this plan will continue untill I am 24 years old, but if really necessary I can access it. It feels a bit like dividends coming from the parents every month.

 
Knowing that I just turned 21 years old, I am very happy that I reach this memorable milestone so early. Of course this is thanks to the fact that I started getting a salary since I were 18.

Kidsparty

Dividend Report YTD2016

Hello fellow dividend investors,

Let’s take a look at the dividend income I received since January 1st 2016. Some pretty important information: I only started investing in August 2015, so don’t expect massive dividend income numbers (yet).

Afbeelding1

Looking at the graph, we notice 2 things: February and August don’t bring in dividends. Although I like seeing dividends hitting my bank account, I’m not gonna buy stocks only because they would pay me in February or August.
On the other hand, May is like Christmas for me. Netting me around €375, it really is a motivating month to keep on investing. The rest of the months are all quite similar, bringing in around €70 each.

January:
Solvay: €51,63
Wal-Mart: €11,56

February: /

March:
Royal Dutch Shell: €50,29
IBM: €7,25
Gilead Sciences: €4,00

April:
Vanguard S&P500 ETF: €9,27
Melexis: €26,28
Wal-Mart: €11,79
Novartis Inc.: €23,22

May:
BASF: €38,97
Ageas SA: €54,20
Sofina SA: €32,22
Solvay: €101,97
Euronav: €52,75
Intervest Offices & Warehouses: €93,62

June:
Vanguard S&P500 ETF: €7,99
Royal Dutch Shell: €47,38
Wal-Mart: €11,78
IBM: €7,82
Gilead Sciences: €4,37

July:
HSBC: €41,24

August: /

Total dividend income YTD: €689,60

8712470-truck-with-money

For as far as I see my passive income so far, I can’t complain. I set the personal goal to receive €1,000 in dividends the first full year of dividend investing. I don’t know if I’m gonna hit that goal, time shall tell me. I think there’s a chance I can make it.

During the year, buying new stocks, I created extra income that will come in next year. Most European stocks only pay dividend once a year so I missed a couple of them. According to my calculations, I should be able to get €1,275 in dividend income next year if I would stop investing now. Of course I will keep on buying stocks to the amount will keep going up :).

How is your dividend income going so far?