Monday, August 17, 2015

Recent Buy, August 2015

Investor Gremlin here to talk about a recent buy.  As some of you know, I recently received a large special dividend from Kraft-Heinz (KHC), and I was able to use that to fuel a new purchase in my Roth IRA.  My Roth IRA has been growing at a staggering rate of late, and will continue to do some with the KHC merger and the recent Chubb (CB) news, focused around it being acquired by ACE Insurance (ACE) for cash and shares early next year.

I have been eying a wide variety of companies for this move, because there are so many good opportunities in the market.  To say the least, this was a hard choice to make.  On one hand there were a lot of nice financial and industrial companies sitting out there undervalued.  However, once in a while you see the price slashed on quality items and that only comes along once a decade or less.  For this reason I enhanced my holdings in the energy sector.

Today I seized the initiative and acquired Exxon Mobile (XOM).  I received 14 shares at $78.85 / share, with a commission of $6.95.  The current P/E ratio is approximately 14.01 and yield is 3.73% (on current cost).  Looking at past dividend payouts, XOM has managed to double payments approximately 7-9 years on average.  Looking through all of the statistics on XOM it is easy to see these guys are a juggernaut.  This purchase adds $40.88 to my forward 12-month dividend income.

Despite the great numbers in terms of ratios and history, this was still a hard choice to make.  Oil has been roughed up quite a bit since the start of the year, and there is no way to expect that to end immediately.  Many oil companies sport super high payout ratios, though XOM is currently sitting at a 70+% payout ratio and is generally considered to have one of the lower payout ratios.   Their dividend is extremely well covered with current profits and cash on hand for years to come.  Even with these concerns, there is a reason XOM is a 5 star pick on Morningstar.

Oil is not going anywhere anytime soon, it just isn't.  Naturally when people think of companies like XOM they think gasoline, kerosene, and diesel.  Few people remember all the other industries impacted such as cosmetics, plastics, etc.  The value of XOM is so much more than the oil flowing from wells into refineries to us, the end users.  XOM has tendrils everywhere, advanced materials, alternative energy, so on and so forth.  Without a doubt, XOM is now the single largest company in my Roth, in fact the only Mega-Cap company.
On another interesting side note I have initiated a new Loyal3 position as well with WalMart (WMT).  It is small at the moment, but Loyal3 has been growing rapidly for me, and there is no reason to suggest that will stop.

I will update my portfolio page at the end of the month, keep enjoying August everyone.
- Gremlin
- Newly long XOM and WMT!
- Long KHC and CB


  1. Keeping busy with some quality additions. I think many people forget about all the different uses for oil. It's true that we often think of oil and gas but between the plastics that are used every single day and other petroleum products I do agree that the need for oil is not going away any time soon. Stay busy with these quality buys even though I don't own either XOM or WMT. Thanks for sharing.

    1. DivHut,
      Thanks for the kind words. I agree that petroleum has such a wide array of uses its not going anywhere. Keep up the good work as well investing in solid companies.

  2. Hi DG!

    I just found your blog from a post on Dividend Diplomats. I publish a weekly summary of buys from the community. I have added you to my list so I will catch your buys.

    Now about the buy... you cant go wrong with XOM. They are the leaders and even though the other names in this sector will recover as well, I dont think it will be as easy for them. Congrats!


    1. Adam,

      Thanks for the add! Thanks for the perspective on the buy. Recovery will take time, but I am confident they will.

      - Gremlin