Wednesday, September 28, 2016

Recent Buys Part 2, Sept. 2016

Relaxed Gremlin here to talk about some more recent buys.  Before I get started, let it be known that the reason I am relaxed is because I did a good number on one of my ankles recently, I won't be moving at a pace faster than a hop for a little while.  So, after much deliberation and thinking I have decided to keep all of my old 401K as pre-tax money.  I view my future retirement as something best dealt with by attacking from multiple angles, akin to a Hydra.  The cool thing is that one day my other retirement accounts will need to be dumped, and they will have a home waiting for them.  So let's get to it, what did I buy and why?  For starters these are definitely different companies than I bought in my last round a little over a week ago.  They are strong, but as I said different.

First I added shares of Westlake Chemical Corp. (WLK), which is a new position in my IRA account, and it is my first Basic Materials sector stock.  I bought 25 shares, with commission.  The current yield is 1.50% (on current cost).  I like WLK a lot, they have been aggressive in expansion and done a nice job at growing the dividend over the past few years with a growth streak of 13 years.  They have low P/E and payout ratios compared to the rest of the industry, 12.3 and 18% respectively.  These are excellent numbers.  To build on that they just acquired rival Axiall.  From what I read about them I see they have good leadership, an eye on growth and they exist in a boring - but needed - industry.  Here is a brief description from them:

"Westlake Chemical Corp was founded in 1986. It is a manufacturer and marketer of basic chemicals, vinyls, polymers and fabricated products. The Company's products include some of the chemicals, which are fundamental to many diverse consumer and industrial markets, including flexible and rigid packaging, automotive products, coatings, residential and commercial construction as well as other durable and non-durable goods. The Company operates in two principal business segments, Olefins and Vinyls, and it is one of the few North American integrated producers of vinyls with downstream integration into polyvinyl chloride, or PVC, fabricated products."

Second I added shares of CVS Health Corp (CVS), which is a new position in my IRA account (note they will be classified as Healthcare in terms of sector, because that is their largest segment).  I bought 25 shares, with commission.  The current yield is 1.90% (on current cost).  The P/E ratio is just around fair to slightly high at 20, but the payout ratio on the yield is a sweet 35%.  CVS needs a lot less of an introduction, though it should be said it has paid dividends at an increasing rate for 13 years too.  CVS is almost on as many street corners as Starbucks these days.  They also just inked a huge deal to manage and run Target's (TGT) in store pharmacy.

What I like most about CVS is just that, their pharmacy department.  The amount, type, and reliance on certain types of medicine seems to only be trending in one direction, and that is higher.  Few others are poised to do this at the capacity of CVS (though RiteAid and Walgreens certainly can).  In addition, that income is augmented by strong retail and consumer staples sales.  What is even crazier is how much room they have to grow and it does not even touch the amount of sales growth that their division of TGT pharmacies can bring to the table.

All in all, both buys are not going to be golden eggs layers today, but they may be tomorrow.  They also represent growth in the face of economic downturn.  After all both increased their payouts during the recent recession.

What do you think of WLK and CVS?

I will update my portfolio page at the end of the month.

- Gremlin
- Long WLK, CVS, and TGT
- Fuller disclosure, my first part time job was at a CVS many years ago.


  1. Nice to see some of our fellow dividend bloggers continuing to make buys in this market even as others are partially selling or totally selling their dividend income portfolios. I'm not a fan of the retail segment and haven't really considered CVS so I do not know much about their metrics. Same goes for WLK. But as you mentioned, these are buys that can lay future golden eggs. Get some rest, stay off that ankle and before you know it you'll be running around again.

    1. DH,

      Always appreciate your comment. I see no point in selling things, though in the past there have been exceptions (one was DuPont [DD] prior to their merger). As far as CVS goes, I can't really call it a pure retail play. Part of its sales are certainly retail, but even on that side they are primarily a healthcare stock. Pharmacies these days are as much part of the healthcare sector as the manufacturers. WLK is under the radar, and worth the look!

      The ankle is working staying elevated, and I am getting extra reading in!
      - Gremlin