Recent Buy: March 11th, 2015
March continues to be a volatile month with stock price declines almost everywhere. Even consumer stocks that haven’t moved in months, like KO and PG, are inching toward fair value. My portfolio could greatly benefit from more exposure to that sector, but I’m still stubbornly hoping for better opportunities to come. I had some extra cash to deploy, and today several of my holdings were in the red. Typically, it’s a good idea to average down on a holding when it goes below 5% of your cost basis. It’s a great way to earn even more dividends for less than you originally paid in businesses that you’re holding for the long term anyway. I had 6 holdings overall that met that qualification during the day. Here they are in order from the largest percentage change in value:
When I rounded out my top 3 negative holdings they were BP, IBM and BNS. I’m still looking away from energy at the moment even though my BP position is down considerably. I already have a larger weight in that risky company, but I could get interested again in the low $30’s. When I look at IBM I hope it will linger at these prices or even drop lower. I’m interested at today’s prices, but it’s also already a larger weight in my portfolio and when I consider the fact that BP and IBM already pay dividends this month, I decided it was best to average down on BNS.
I added 30 shares of Bank of Nova Scotia (BNS) to my Sharebuilder ROTH IRA at $49.08 a share and a $6.95 commission for a total of $1,479.35. The trailing P/E was just under 11 with a forward P/E of only 8. The purchase yields 4.40% and adds $67.20 to my 12-month forward dividends for a new yearly total of $1,606.65. My yield on cost (YOC) jumped up from 4.09% to 4.31% and the position value changed from -10.28% to -5.41%. Here’s an image of the changes this made to my portfolio:
I first purchased this Canadian banking powerhouse in January, and I have yet to receive a dividend from them. Today’s investment comes with plenty of time to make that first payment a whole lot bigger. BNS recently announced its latest semi-annual dividend increase of 3% and the current entry yield is at a 5 year high. Take a look at this basic YCharts graph:
Here’s an updated fastgraph of BNS looking at forward two year estimates based on its normal 6 year P/E of 12.1:
It was a fun coincidence picking up my mail after work today and finding a couple large booklets from BNS. I’ve never received a physical copy of anything like this from any of my other holdings and thought this was neat, even though the prudent shareholder in me secretly doesn’t like the associated costs of these mailings. The packet contains a thick 2014 Annual Report, a shareholder voter sheet, and another large book regarding voting instructions. There are detailed descriptions for several propositions including board elections, directors compensation, phasing out stock options, and executive pension plans. So far in my short investing career I’ve abstained from voting on all of my holdings, and these books now have me second guessing that decision. Since I try to keep up in research on each of my businesses anyway, I plan to exercise that shareholder right more often in the future.
What do you think of BNS? Do you express your right to vote as a shareholder?