After the Trump rally in the end of 2016, now it just seems a lot of people don’t know yet what to expect. Very recent events has shown us that nothing is certain anymore and some very strange things are only just starting to surface. Nevertheless, the markets perform on all time highs. And with the possibility of more interest rate hikes, the coming year would most definitely an interesting (and a bit weird) year.
But what does this change for our investments? Nothing…
Like always, we are not aiming on finding the right momentum or timing the market. We haven’t made a new buy in the past 7 weeks. It has been a while, but found we should make some moves. So, we used our cash position to grow our stock portfolio a bit more.
In January we purchased stocks of 2 different companies, both are new additions in our portfolio. And while one was quite in favor not too long ago, the other has yet to make it’s first dividend payment.
Ok, why on earth would we buy a company which has never paid a dividend?
Well, within our strategy we allocate 75% of our portfolio to strong dividend paying companies, with a solid track record and a financially attractive position. This gives us some space, 25% to be exact, to open up ‘other’ positions that might not fit in the standard dividend growth strategy. We hereby try to follow the core-satellite strategy, which enables us to find off-beat companies that we are willing to take a bit more risk with.
In the past week we welcomed 38 shares of Starbucks $SBUX, for €55.87 per share and with a worth of €1966.81. And 10 shares Allergan $AGN, for €211.47 per share and with a worth of €1959.01.
Starbucks – $SBUX
Probably well known to many of you. Who doesn’t drink their coffee nowadays? Fed by the Millennial lifestyle, Starbucks published some solid results past quarter. They are very active in the US and Europe, operative in 75 countries, and are still seeking out for more expansion. Especially in the Asian markets. We really like this company because of their strong brand name and frontrunners position compared to their competitors.
The valuation of the company might still be a bit high, against a P/E ratio of 28. But for a company with a steady double digit growth this isn’t that bad. Last year their stock price went down, making it a perfect buying opportunity. And we already noticed several other PF blogger picking up some shares. We aimed to buy it, back in 2016, but after their better-than-expected earnings and dividend increase of a whopping 25% in October, the price went up, and we were left behind.
The last few weeks the price came into more attractive territory again. Most likely this was because of the ample growth of their global comparable-store sales. Later they announced this was due the effects of their own success: long waiting lines drove customers off.
The forecast for 2017 however is more in line, with 8% to 10% expected revenue growth. Along with their high growth possibilities, we decided to initiate a stake in this company.
Last week we bought 38 shares of Starbucks. With a $0.25 dividend per share, and converted to euro and net income, this buy adds €30.20 to our yearly dividends.
Allergan – $AGN
Allergan is a pharmaceutical company focused on developing, manufacturing and commercializing branded pharmaceuticals, devices and biologic products for patients around the world. Or better known by one of their products: Botox.
In the past years M&A’s were a big thing in the pharmaceutical industry, Allergan was definitely no exception. It fought of a hostile take-over by Valeant, was then been taken over by Actavis, made some acquisitions of their own and in the beginning of 2016 they announced the biggest merger ever with Pfizer (but failed).
Their pipeline is very impressive and is, with 70+ mid to late stage programs in development, one of the broadest on the market. However, since 2015 this stock has been lagging a bit and is performing in a long-term downtrend since. Which could mean a interesting buying opportunity, since many (and us too) are still believing their is still much more room to grow.
Their cash flow and profits are quite impressive. However it’s also included with a high debt to equity ratio, probably because of all the take-overs. They expanded their business very fast and very big. And now that has to pay off, according to analysts. We will see what happens.
This company has been on our watchlist for quite some time. And after their spree of taking over other companies, they now announced to return some profit to the shareholders in the form of a share repurchase program and initiated a dividend. The first initial dividend payment will be made in march of 2017 with a worth of 70 cents per share.
This step triggered us, and we thought it might make a good addition to our portfolio.
So, we bought 10 shares of Allergan 2 days ago. With a dividend of $0.70, this adds a total of €20 per year (in euro and in net income).
In total we allocated almost €4000 in fresh capital towards our portfolio, by buying shares of Starbucks and Allergan. With these buys we are adding €50.20 of expected dividend for 2017.Our forward dividend income for this year now stands on a total of €1003*. And the year has only just begon :).
We still hold our eyes open for several other stocks, like Johnson & Johnson, Sanofi and Unilever, among others. It will take a while before we will make a buy again, since our capital position is almost zero. Unless we finally make that sale on our car of course!
*Because we track our dividend in net income it might change due to currency swings.