Recent Buy: September 26th, 2014

Today I furthered the accumulation stage by initiating a position in Visa Inc. (V).  I now own a piece of 18 completely different companies that consistently grow their dividends.  I purchased 8 shares at $211.70 each and a $6.95 commission for a total of $1700.55 in new capital invested.  The trailing P/E was about 24 and the forward P/E around 20, which compares favorably to the company’s 5 year average P/E of 29.  My initial dividend yield is a low 0.76%, but also favorable compared to the 5 year average of 0.60%.  This purchase adds just $12.80 to my 12-year forward dividends for a new total of $1,077.78, and a dividend raise is expected next month. 

Visa is a heavyweight global electronic payments technology company that I use almost every time I buy something;  I own Visa credit and debit cards.  They dominate this industry, servicing about half of all credit card transactions, three quarters of debit card transactions, and they make a ton of money on service and processing fees.  They’re always in the news: recently for announcing a new large technology center in India, partnering with Apple Pay, lingering lawsuits and more. 

Visa became publicly traded recently in 2008, but has grown earnings exceptionally fast since then.  Let’s take a look at a fast graphs that plots just the adjusted operating earnings growth (orange line) in that time frame. 

fastgraphs_september_v_onlyearnings

 I absolutely love seeing straight up growth like that.  But since I love dividends even more, I’m very excited at how Visa has grown its dividends for five straight years at lightning speed right along with earnings and revenue.  The five year average dividend growth rate is just over 31%!   Visa still has a very low payout ratio of 18% with plenty of room for further increases.  Take a look at the fast graph when we add dividends.  The pink line is the dividend amount and payout ratio, while the light blue represents dividends paid out from earnings.

fastgraphs_september_v_onlydividends

 I always look for that pink line to keep inching upward, and this company impressively achieves that.  Now to take a closer look at the historic performance results.  Look at some of the crazy percentages of dividend increases!

fastgraphs_september_v_8yearperformance

 My  takeaway from this graph is that in 2009 someone could have started reinvesting dividends with my similar cost basis of $1,700 and yield of 0.7%, and already by 2013 the yield on cost would be 2.3%  The position would have paid about $12 on the first year, but just 4 years later it’s almost $40.  While past results can never predict the future, my young portfolio is a perfect place to put a dividend grower like this.  I have a long time horizon and I think a lot about YOC over long periods of time when I make these lower yield purchases.  I typically would never buy a stock with a trailing P/E as high as V’s; however, this is a very special company, growing at a rate that seems to justify the premium.  Currently the valuation is right in line with the past.  Check out how the current price (black line) tracks against the normal average P/E ratio (dark blue line).

fastgraphs_september_v1

 What does the future hold?  Obviously I feel there is a lot of growth.  Here is a predication that fast graphs makes based on analyst and consensus information.

fastgraphs_september_v_future

fastgraphs_september_v_future2

You can easily see why I’m excited to be a shareholder of a massive everyday company that is growing at an exceptional pace.  I’m not alone either, check out some of these wonderful posts about Visa from blogs I read: 

Dividend Mantra bought Visa in July and here’s an excellent post about the company: Recent Buy.

 Tim McAleenan Jr. recently posted: Visa: Probably The Best Investment You Can Make Today.

JC put together another great valuation piece: Visa Dividend Stock Analysis.

 What do you think of Visa?  Have you initiated or added to any positions lately?

 

 

My Dividend Growth

http://www.mydividendgrowth.com

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18 thoughts on “Recent Buy: September 26th, 2014
  1. Dividend Mantra

    Ryan,

    Nice purchase! I think Visa is a fantastic opportunity if you’re in it for the long haul. Doesn’t pay out a ton of dividend income right now, but I believe the growth will continue to be outstanding. I’m very interested/excited to see what the next dividend raise this fall looks like in October. 🙂

    Glad to have you on board as a fellow shareholder. I truly believe we’ll be happy with this investment 10 years from now and beyond.

    Best wishes!

     
    Reply
    1. My Dividend Growth

      Jason,

      Thanks for helping open my eyes to an investment in this great company. I’ve wanted to start a position for a while now and am so happy to finally pull the trigger. I definitely don’t need the income now, so this is a perfect fit for me to let blossom over time. I also can’t wait to see the size of the increase next month. Target’s 21% increase was my biggest this year, but maybe Visa can top that. I wanted to tell you I was so happy to read you’re moving back to Florida to be with the girlfriend and her son. You should be so proud to be someone who works for himself this time around and can visit family whenever you want to. You’re going to back to a much better situation and I hope you’ll post about it soon and I’ll be sure to stop by and officially congratulate you!

      Have a great weekend!
      Ryan

       
      Reply
  2. writing2reality

    Great purchase Ryan, and a position I’ve been eyeing myself. I am considering a few options right now, and will likely make a couple of purchases in October outside of my regular Loyal3 activity.

     
    Reply
    1. My Dividend Growth

      W2R,

      Thank you much! I’m hoping I’ll do very well with this investment in the long term and it would be awesome to see you on board as a shareholder too. I’m curious to see what you choose in October as you’ve been on fire lately 🙂 I hope this week treats you well!

      Best,
      Ryan

       
      Reply
  3. Mr. SFZ

    Nice analysis and purchase Ryan. I picked up some shares in Visa earlier this week when it started to dip below $215. As long as it stays near that price I’d like to add some more next month though I’m also eyeing Deere which has pulled back quite a bit since my last purchase.

    Have a great weekend!
    SFZ

     
    Reply
    1. My Dividend Growth

      Mr. SFZ,

      I had a great weekend, thanks for the well wishes and support. I know you’ve been on board with Visa for a while now and I’m happy to see you adding more. I’m hoping to double down on it if prices can stay deflated. I can’t think of a better candidate for someone with as long a time horizon as you, it’s a great pick. I hear you on DE, it’s trading way below my cost basis, but I’m a little hesitant to add more because I’m wondering if this is really the bottom. Also, I never planned for DE to have a huge weight in the portfolio, but we shall see if prices become too irresistible I will have to add more.

      Have a great week ahead!
      ~Ryan

       
      Reply
  4. DividendMongrel

    Ryan,
    I really like this buy and I am sure you will do well on this investment over the long term. The dividend will surely grow for years to come. I also use a Visa credit card for all transactions. I actually thought about buying V this week but I decided to go for some higher yielders. Thanks for sharing!

     
    Reply
    1. My Dividend Growth

      DM,

      I appreciate you signing off on this purchase! I love these sort of companies that I actually use frequently. I’m so pumped for the dividend raise next month, it could be a big one. I think you chose some very wise investments with those higher yields. WMT and DPS seem especially attractive to me right now. Thanks as always for the comment and have a nice week!

      Best Wishes,
      Ryan

       
      Reply
  5. Dividend Gremlin

    Ryan,

    Visa is truly everywhere you want to be. I know some people who use cash when buying things, but overall that will probably continue to decrease and Visa will become even more ubiquitous. They also make money off so many other things. They are a true financial heavyweight, and a great buy. That yield should rocket up and provide some serious punch in a few years.

    Nice buy,

    Gremlin

     
    Reply
    1. My Dividend Growth

      DG,

      What a great slogan! Visa IS everywhere I want to be, especially because I want to be living off of my dividends in a decade and now this company is going to help a ton in getting me there. My parents still buy most things with cash. They’re very conservative with money, but I buy with credit cards, pay them off each month and get those sweet cash rewards. I can’t wait for my first dividend increase from this company next month. While I’m not expect growth to be as high as in the past, I hope you’re right about the rocket upwards. Always great to hear from you and have a nice week!

      Take care,
      Ryan

       
      Reply
  6. DivHut

    V has made the rounds among many of the dividend bloggers. It’s a great stock for anyone with a long term horizon as the dividend growth rate will give you an amazing yield on cost in years to come. I know many dividend bloggers love to chase yield and look to 6% – 10% yields many REITs and MLPs provide but I prefer going the dividend growth route. It helps me sleep at night not having to think about dividend cuts or sustainability. Good purchase. Look forward to your next update.

     
    Reply
    1. My Dividend Growth

      DivHut,

      Glad to hear you like this buy. It’s very reassuring to research companies like this and know that others in the community have bought them too, I wonder if you’ll join us at some point! I absolutely agree about finding those great dividend growers and not worrying so much about current yield. It shows too as my portfolio has a lower yield than a lot of other DGIers out there. I’m pretty obsessively thinking about my YOC in several years and can’t wait to see how all this work I’ve been doing will pay off. I do have a few higher yields sprinkled in because of the company behind them and not so much the yield or even dividend growth. I have one REIT in O and want to add OHI eventually, but only in my IRA. I very much appreciate hearing from you as I go through these beginning stages of my journey. I hope this week is a fun one for you!

      Best Wishes,
      Ryan

       
      Reply
  7. JC

    I really like V for the higher growth aspect. Even more so after Apple announced they are teaming up with the big players instead of trying to interrupt the space. Good news all around. I’m getting tempted to buy some more V myself and might add somewhere under $210. Nice buy!

     
    Reply
    1. My Dividend Growth

      JC,

      I appreciate all the research you did on Visa, it was an excellent read. I’m excited to have a high growth play along with the potential of an amazing YOC in just a few years. I’m with you about the partnership, so much good news is coming from this company lately it’s been fun to keep up with. I can’t wait to build on this position and am looking forward to seeing you do the same. Thanks for taking the time to comment, it’s always great to hear from you.

      Best Regards,
      Ryan

       
      Reply
  8. My Dividend Growth

    I’m not sure what happened, but somehow I lost a comment today. It was from ‘No More Waffles’ who makes a great blog I’ve now found at http://www.nomorewaffles.com. If anyone reads this and hasn’t checked it out yet, do yourself a favor and head over there, what an inspiring journey this young 25 year old from Belgium is on. Be sure to check out the cool spreadsheets! Luckily I have an email alert of the comment and he wrote:

    “Ryan,

    Thank you for the great analysis! I’m definitely adding Visa to my watchlist now.

    Even though the current dividend yield is quite low, it’ll be exciting to see it grow over the next couple of years. From your and DM’s analysis it seems that Visa will probably be able to keep its excellent track record since 2008 going. High growth is what dividend growth investing is all about in the long run, so I’m sure you’ve made an excellent purchase.

    Also, fun blog you have! Lots of interesting articles and engaging writing style.

    Cheers,
    NMW”

    NMW,

    Let me know what you think when you dig into Visa, I’m glad to help get you excited about it. Thank you for the very kind words and for stopping by to read up on my progress. I’ll be happy watching you now as well. 🙂

    Wishing you the best,
    Ryan

     
    Reply
  9. DividendDeveloper

    Hey, good choice, and nice to see another FAST Graphs subscriber. It’s an awesome tool! I’d like V to drop a bit before initiating a position, but I agree with DividendMantra and others, that if you’re in it for the long haul, you won’t regret it! Best of luck.

    BTW, looked at your portfolio page. You’re the only other blogger I know who’s taken a look at AOS! I wrote an analysis of it very recently. Seems like a decent buy as well!

     
    Reply
    1. My Dividend Growth

      DividendDeveloper,

      It’s great to see another young person setting up a blog. You’ve had such an impressive start already and it’ll be fun to watch your journey. I hope we both get a chance to pick Visa up at a discount, I think it’ll be a great long term investment. I absolutely love fast graphs, it saves me so much time and energy. The fast graph of AOS looks promising as well and you did an awesome analysis of this company, clearly I like them a lot. They’re making excellent progress with water purification as well which I think will be a huge way to grow in the future. The market is presenting some deals lately, I’ll be watching to see what you go with! Appreciate you commenting and take care!

      ~Ryan

       
      Reply

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