Wednesday, April 6, 2016

Recent Buy, April 2016

I <3 Finance Gremlin here to talk about a recent buy.  Tomorrow I leave for a long weekend in Minnesota - for fun, but before I head out I decided to made a purchase in my Roth IRA.  My stocks' dividends combined with extra income, savings, and a higher tax refund than expected allowed me to push this purchase to today.  Originally I though I'd have to wait until May, but the sooner my money gets to work for me the better.

It has been stated before on other blogs and echoed here that time in the market is superior to timing the market.  I am no oracle nor do I possess a crystal ball or mystical foresight.  Also lacking is a high power trading computer, that many of the big boys have at their disposal.  Time is my most trusted and faithful ally.

Today I added shares of Prudential Financial Inc. (PRU), which is a new position in my Roth account.  I bought 15 shares at $71.87 / share, with a $6.95.  The current P/E ratio is approximately 5.89 and yield is 3.82% (on current cost).  Looking at past dividend payouts, PRU has managed a 5 year DGR of 15.5%  with approximate payout ratio of 21%.  PRU has a seven (7) year history of dividend growth, and sports Tweed and Chowder factors of 15.2 and 20.5, respectively.  This purchase adds $42.00 to my forward 12-month dividend income.

PRU paid its first dividend in 2002, starting with an annual dividend.  In 2007 the payout was an annual $1.15, then in 2008 it was slashed to $0.58, slightly less than a 50% decrease.  Since 2008 the dividend has steadily increased; equaling 2007 in 2010 and surpassing it in 2011.  In 2013, PRU moved to a quarterly payment system.  This may seem like a checkered past to an outsider, but note it took 2 years to get back to where they were in 2008.  Many that cut or reduced dividends in the US took longer to restore them to prior levels.  In addition, their dividend has a huge amount of room to grow.

PRU also has an exceptionally long history.  It was first a listed stock in 1915, and it is a $30+ billion dollar company.  In terms of industries it has insurance, investments/retirements, and other financial services providing a decent bit of diversification in an industry that does not often feature such flexibility.

I was really close to buying Archer Daniels Midland (ADM) instead.  I went with PRU because of the numbers, room for growth of the dividend, and short / long term resourcefulness.  That being said ADM does have superior track record of dividend payments and a great history as well.  Both companies have had their bad periods and good times.  Growth is not always a perfect line trending upwards, it often has fits and starts.  That being said both stocks would have helped me sleep well at night, too bad I couldn't get both. This will likely be my final financial stock in my Roth account for awhile, unless prices continue to be exceptional in that sector.

What do you think of PRU?

I will update my portfolio page at the end of the month, get ready for summer!  Also expect a brewery review from Minnesota.

- Gremlin
- Long PRU

8 comments:

  1. Great buy Gremlin. I had Prudential on my shortlist of stocks to buy earlier this year. In the end I went with PFG and AMP, but I really like PRU.

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    1. IH,

      Thanks for the comment! It really feels like a strong value buy. I have AMP as well and have looked at PFG (who does my work 401K0).

      - Gremlin

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  2. That looks like a really nice good value buy. They should be good for a long time, though ADM would have been good too. I hope you enjoy the brewery :)

    Tristan

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    1. Tristan,

      Thanks for the comment! I hope PRU is a great value, looks like it is right now, but of course only time will tell. ADM is a pretty great choice in the future as well. I did enjoy breweries, but none worth reviewing sadly.

      - Gremlin

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  3. Thanks for sharing your recent buy with us. I know of PRU but haven't looked at them from an investment perspective. If I was going the insurance route, other than AFL and CB that I have, I'd look at TRV. I htink you made a good buy instead of ADM at this point in time. ADM really came up a lot from their Feb. lows but still sport good value.

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    1. KP,
      Thanks for the comment. TRV is a solid play, and I have looked at AFL before and likely would look at both. I am waiting to see what CB does with its new structure before I jump back though. I agree ADM is still good, but not as good as it was a few months ago.
      Always appreciate the comment,
      Gremlin

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  4. I need to take a closer look at the PRU financials but I like Insurance Companies (I own AFL) since they have that reliable monthly income of people paying insurance.

    It's the investment management that I worry about with financial companies. Personally, I'm a little more comfortable with products like life insurance rather than services like what are delivered with financial management. It's definitely good that they maintain both for diversity, but like I said I'll have to do more research. Looks like your comfortable with it so I'll give it a closer look. Thanks!


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    1. WS,

      I like insurance companies too, and I like the diversification of PRU. Also their really low P/E ratio and dividend payout ratio jumped out at me. I am comfortable with their investment side because of their diversification. Check it out, never hurts to have info on a bunch of companies. Thanks for the comment!

      - Gremlin

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