Buying Altria (MO) For Dividends and Growth

I just executed a limit order for 8 shares of Altria (MO) at $34.15.

 

MO closed up at $34.24 yesterday.  The same day the DOW Jones closed at 14,253.77. This is the DOW Jones' new all-time high.

 

Therefore, I anticipated some profit taking so I predicted that MO would at least go down to $34.15 maybe even lower.  My gambit paid off and my limit order was completed earlier today.  I could have gone lower since MO went as low as $34.01 but I think my conservative bet was good enough.  I just want to almost guarantee that I would get those 8 shares of MO.  The main reason why is because we're approaching MO's Ex-Dividend date of March 13, 2013.  The next valid Automatic Investment Plan date is on Tuesday, March 12, 2013.  That is cutting it close since I have to buy the shares a day before the Ex-Dividend date in order to qualify for the dividend pay out.  I decided to execute it early just to make sure plus the trading fees are now $6.95 (down from $9.95) so the $3 difference would be paid for by the dividends.

 

So why Altria (MO)?  First, the dividend pay day is coming.  Second, MO's dividend pay outs increased from $0.41/share in July 2012 to $0.44/share from October 2012.  I love stocks of companies who increase their dividend payments because it tells me their earnings are doing well (after reviewing their financials of course) and they want to reward their investors with more cash. Finally, I am counting on Altria's growth prospects as the global economy improves.  As the global economy improves, MO's customers would be more willing to spend money to buy MO's E-Cigarettes, high-end cigars and wine products.  Even if MO's regular customers do not feel the improvement, they'll still continue buying Marlboro cigarettes (and other MO brands).  If there's one thing I've learned from my siblings (and Mad Men), cigarette smokers have brand loyalty. 

 

So that's pretty much my Altria thesis.  I'll buy more shares in the future and as long as smokers smoke, I'm bullish on Altria's growth prospects.

Automatic Investment Plan for March 27, 2012 And Some Updates

I was able to beat Kraft's (KFT) Ex-Dividend date of March 28, 2012.  My order of $350.00 worth of KFT stock posted on March 27, 2012.  I locked in 9.0937 shares at $38.49 a piece.

Also, on March 23, 2012, Waste Management (WM) paid a dividend to their investors.  I received $1.84 and reinvested it to get more shares.  The dividend bought me 0.05727 shares at $34.91.  It is so nice to get paid just by investing in a company.

To recap, our portfolio looks like this:

AAPL  = 2.1473 shares   = $1,331.11 (Market value as of 10:45 am 04/04/2012)
ETP     = 6.7367 shares   = $313.12 (Market value as of 10:45 am 04/04/2012)
GLD    = 2.1581 shares   = $338.77 (Market value as of 10:45 am 04/04/2012)
KFT    = 11.6030 shares = $443.47 (Market value as of 10:45 am 04/04/2012)
LULU  = 7.3301 shares   = $548.36 (Market value as of 10:45 am 04/04/2012)
MO     = 10.3151 shares = $321.83 (Market value as of 10:45 am 04/04/2012)
WM    = 5.2271 shares   = $182.69 (Market value as of 10:45 am 04/04/2012)
XLNX = 6.2860 shares   = $221.90 (Market value as of 10:45 am 04/04/2012)

Cash available = $225.68
Total Portfolio Value = $3,926.92 (Market value as of 10:45 am 04/04/2012)

If I were to play Jim Cramer's Am I Diversified Game where I look at my top 5 positions:
1. AAPL - Tech
2. LULU - Retail
3. KFT - Consumer Staple (Food)
4. GLD - Gold ETF
5. MO - Consumer Staple (Vice)
You will see that KFT and MO are overlapping sectors.  Normally I would have to switch out the weaker stock and replace it with either an energy, biotech of financial stock.  However, I can argue that KFT is more of a food and household pantry play and MO is more of my consumer vices play.  Also, both positions pay healthy dividends and are great recession plays.  People would still eat food (probably pre-packed like Kraft's Mac & Cheese) and addicted smokers will still smoke (as shown by my brother and sister).  So perhaps, I can get away with the overlapping sectors.

A small note:
Last week's Mega Millions Lottery price peaked at $656 Million dollars.  As millions of hopefuls lined up for hours and spent hundreds (some even thousands) of dollars on tickets with the hope of winning that record prize.  In spite of the lousy 1 to 176 million odds, people still hoped and prayed that they win the lotto.  Majority spent most of their disposable incomes (or worse, borrowed money) to gamble where the odds just plain suck.  If only they used some of the money to invest in a ROTH IRA or buying stocks, they would probably beat 99.9% of the Mega Millions hopefuls and made some money.

I for one, made some real money and only "lost" $1 in a Mega Millions Office Pool (Hey, it doesn't hurt.. All I needed was to be the 1 in 176 million).

Actual Shares Bought, WM Announces Dividend, ETP and XLNX Are Paying Me Dividends and LULU Achieves Cult Status

Automatic Investment Plan kicked in. Just like before, my picks went up a bit and my purchased shares were smaller by a few fractions.  Again, no big deal.

Here's what my $300 did today:

Fees: $8 ($4 per stock transaction)
GLD = 1.1232 shares @ $174.49
WM  = 3.0625 shares @ $31.35

Here's my current portfolio allocation:
AAPL  = 38.3%
LULU  = 18.3%
GLD    = 16.6%
XLNX = 9.0%
ETP     = 7.9%
WM    = 7.1%
cash     = 2.8%

As mentioned in previous posts, I outperformed the market mainly because of AAPL.  In the near future, I would like to rely less on AAPL and spread out my portfolio gains across the board either by having more LULU and GLD or adding new positions.  I think AAPL should be around 15-20% of my portfolio and be big enough to make a dent in my gains but not too big that I crash and burn when they are down a quarter or two.  I came up with this thesis in light of the death of Steve Jobs.  Even though his death was already priced in with the stock price, you can never doubt that his vision was a huge part of what made Apple great.  However, I am still bullish on Apple.  My bullishness was reinforced after reading Walter Isaacson's Steve Jobs Biography.  It highlight how the top management of Apple fought with Steve Jobs on some directions of the business which was beneficial for Apple.  It detailed how Tim Cook controlled the supply chains, Phil Schiller suggested to Steve Jobs to port iTunes to Windows and how Jony Ive worked closely with Steve and produced beautiful and amazing products that even Steve Jobs loved.  I think as long as the current management team is intact, AAPL still has a bright future ahead of them.

I would also like to add more dividend paying stocks.  I think this will help my portfolio grow just by waiting and doubling down on great dividend paying stocks.

Speaking of dividends, WM just announced their cash dividend.  It will pay $0.34 per share payable on December 16, 2011.  I still have until November 30, 2011 (Ex-Dividend Date) to buy more if I want to get in more dividends. This dividend pay out would bring WM's yield to 4.30%. Not bad right?  This is my way of making another man's into money in my pocket.

ETP will be paying out dividends on November 13, 2011.  They will pay $0.89375 per share. This will bring ETP's yield to 7.78%.  Again, not bad.  XLNX will be paying $0.19 on November 30, 2011.  XLNX's yield will be 2.31%.  Not bad... not great.  I will have to review my thesis for XLNX.  Perhaps there may be other stocks that pays a dividend and appreciates in price that would yield more for my money.

The other star performer in my portfolio, LULU will be huge within the next few months.  They just announced a new online store for iviwa (Iviwa Athletica is a new sports apparel line target to young girls ages 6-12).  Iviwa initially launched in 3 Canadian cities and now it will launch in the US via the online store.  The timing is perfect because they just made it right before the holiday spending season and I believe the US market would be huge for Iviwa (I mean, just look at how many soccer moms are out there).  Speaking of the US market, LULU has achieved a cult status in the US and it's even more popular in Canada.  LULU enjoys brand loyalty in Canada as shown by their sales reports (Canada makes up almost 50% of their sales).  Meanwhile, in the US, LULU is poised to reach critical mass if we take San Francisco, LA and New York as a barometer.  Brand recognition and loyalty is high.  I can verify this because every time I'm at the gym, all I see are LULU tank tops, yoga pants and sweats.  I believe LULU will be the next Nike within the next few years.  LULU not only is a great product to work out in but it is also a fashion statement for most consumers.

Anyway, I look forward into adding more LULU in my portfolio.  Perhaps, it would help balance out the AAPL juggernaut.

Getting In on APPLE (AAPL)

The market has been down lately... especially on Tech Stocks.

Today, AAPL closed 15.33 down off it's 52-week high. Over 4% drop from the high and from today's range, almost broke the 5% pullback.

I think it's time to get in on AAPL.

Here's why:
1. Close to 5% pullback.
2. WWDC 2011 is coming up in June where Apple is expected to release it's new OS (Mac OSX Lion).  Also, the iPhone 5 might make an appearance (although highly doubtful per analysts and sources close to the matter).
3. A version of the iMac just came out with 2 Thunderbolt ports.
4. The white iPhone 4 finally came out and on WWDC, Apple would probably announce how much white iPhone 4's they sold.
5. RIMM is bringing Black Berry Messenger (BBM) to Android and iOS. This might convince BB users to finally switch to iOS or Android.  Either way, AAPL will have a greater profit margin since they control hardware and software distribution of the iOS devices.
6. Analysts and project AAPL to reach $400 in the next few months.

Therefore, I took $1000.00 from my reserves (which I will not do often) and put in my new Automatic Investment  Plan (to be executed on Tuesday, May 10).  I put in $750 for AAPL which would buy me 2.13 shares (@$350/share + $4 fee).  The $140 will be used to buy LULU that would fetch me 1.44 shares (@$94/share + $4 fee).  LULU is down 9.33% off it's 52-week high of $102.83.  A great way to buy some more LULU ahead of it's expected 2 for 1 stock split and Annual Stockholder's Meeting.  Finally, I allocated $110 to buy 2.94 shares of XLNX (@$36/share + $4 fee).  XLNX has bee rebounding lately and the X-Dividend date is coming up (May 16).  Might as well get those juicy dividends.

I know with my AAPL purchase, I may have 2 tech stocks and would unbalance my diversification.  However, with XLNX rebounding and the dividend distribution coming up, it makes good sense to keep XLNX and AAPL is also a great long term investment.

I will review my opinion of XLNX after the dividend distribution and earnings call.

New Rules

My Automatic Investment Plan just Posted.

Here's a summary of the transaction:
04/12/2011 - Transaction History - Buy
Ticker             Price/ Principal Amount               Fee                     Total
GLD              $141.08/ $146.00                    $4.00                     $150.00  (GLD Closed at $141.61 - Good!)
XLNX           $30.69/ $36.00                        $4.00                     $40.00    (XLNX Closed at $30.64 - Down)
WM              $37.75/ $76.00                        $4.00                     $80.00    (WM Closed at $37.67 - Down)

So I learned that Sharebuilder will collection commissions (fees) within the investment amount I put in for each position.  Basically, I could have invested my $300 and the fees would have been included within the $300 investment rather than getting charged the fee after.  This is good for those who are a bit cash strapped.  However, the $4 per investment could have bought some more "mini" shares of my stock positions.

Anyway, I just have to put in some NEW RULES for our Investment Strategy:

1. I will always keep 10% of my portfolio in CASH.  The reason is to have some cash on hand to catch bargain stocks and have some liquid cash for other purposes.

2. I will have ONLY 10% of my portfolio in Gold (GLD).  Gold is just a hedge for me. I do not plan to get rich off gold.

3. Each position will ONLY cover 20-25% of my portfolio.  This is to keep my diversity and spread out my risk across my portfolio.