Recent Buy: September 4th, 2014
I recently put more capital to work by initiating a position in International Business Machines (IBM). I’m now invested in 16 businesses. It’s also my first technology stock, and I’m happy to diversify into a new sector. I bought 8 shares at a price of $191.47 each with a $6.95 commision for a total cost of $1538.71. The trailing P/E is 12 and the forward P/E is around 9.7. I got in at a yield of 2.3% and the purchase adds $35.20 to my annual forward dividends for a new 12 month total of $1,024.20. It feels great to break that 1k barrier in forward income. That money will go right back into more shares, and I’m excited to see the compounding take off in bigger amounts.
IBM is a love or hate stock and gets criticized for it’s flat revenue, high debt, and lack of innovation. I love the low payout ratio, stock buybacks, 5 year average dividend growth rate of 14.33%, and 19 years of dividend increases. I got in above the 5 year average yield of 1.90%, but at a higher price than we’ve seen recently. This was a testament to my recent commitment to not worry about the exact price as long as the valuation make sense. I believe IBM is still quite undervalued at the price I paid, even though it was as low as $180 a share just a month ago. I have no way of knowing if the price will go up or down, but I do love the company in the long term.
I’ve enjoyed a few articles on IBM recently that helped with my investment:
Chuck Carnivale posted a great bullish article on Seeking Alpha called “I Feel Like A Thief Buying IBM At Today’s Low Valuation”
As a salute to Chuck, I’ll also include a recent fast graph of IBM:
Do you think IBM is too pricey and risky? What’s on your watchlist?