Today I added shares to my GM position.
- 100 shares @ $31.33 --- Yield 4.60%
Total capital invested is $3139.95 which will increase my yearly dividends by $144.00.
Well here I go again chasing another ugly duckling. I know this company is probably not on anyone's radar, therefore it is smack dab in the middle of mine. :-)
GM's original IPO price was $35 way back in 2010. It has gone from paying no dividend to a $.30 quarterly dividend. Earlier this year GM raised its dividend 20% making its new quarterly dividend $.36.
Last year it had a seemingly endless list of recalls that resulted in many deaths and impacted around 20 million vehicles.
DEFY MEDIOCRITY
MDP,
ReplyDeleteGutsy purchase :) GM has been on my radar since it's last dance around $30 a share. It seems riskier than other options given the volatility of car sales and risks, such as recalls, but those risks also present opportunity.
I'm staying on the fence -- for now, anyway -- but still awesome that you added nearly $150 of annual income with the purchase!
Best,
DWC
DWC,
DeleteGutsy may be a euphemism for stupid! :-) I originally bought shares right after last year's recalls when the price fell from $40 to around $30. The company rebounded nicely and has said it is committed to returning capital via dividends to the shareholders. Time will tell.
There have been many times when I have told myself set Sharebuilder automatic purchases to add JNJ, KO, PG, WMT and XOM. Don't ever change the choices. Do this for 5 years and be a happy camper. Every once in while I will make safe purchase like this, but not often enough.
MDP
I think this is a safer purchase than what you might think. This new-GM is no longer a health care/pension company that also happened to make cars like the old-GM, its now a true manufacturer first with a growing customer base (for example: Total GM China sales for all brands was up 5.1% for the year in the first 5 months per Cadillac's press releases...even with China's Stock Market Issues I can't see them falling off a cliff anytime soon!) .
ReplyDeleteEnjoy the blog MDP!
Anon,
DeleteThanks for the input! You are correct about GM being much leaner and meaner than ten years ago. I think GM's recent decline in price is a by-product of China. At 4.6% yield I believe this to be a pretty solid value even though there could be more turbulence ahead.
MDP
Nice purchase MDP. I hold Ford and have been looking to see if I want to add GM to my portfolio. Between the two, how do you see the stocks playing out in the next few years?
ReplyDeleteDGJ,
DeleteI favor GM right now. Time will tell but I think the products are superior and they are more deeply entrenched in China.
MDP
MDP,
ReplyDeleteYou lost me with this one. In very rare cases do I simply not believe consensus EPS estimates, but GM is one of those. EPS is slated to rise by 50% over the next 3 years to $6.50/share in 2018. I see that as a bridge too far. You're talking about a company that will likely be dealing with outsized recall and litigation costs for many years to come, in an industry highly dependent on a growing economy with wage growth--two things that I'm skeptical we'll see in a macro sense.
Good luck with this one. The yield is pretty sweet, though. What kind of dividend growth are you hoping for?
Retire 29,
DeleteConsidering GM just started paying a dividend again last year, I can't say for certain. Like many deep cyclical industries GM's payout ratio could fluctuate from 20% of earnings to 120% of earnings very quickly.
While there are many uncertainties with GM, I actually think that if oil prices continue to stay low or even drop further, Trucks and SUVs will continue to surge and that mean $$$$$. Also activist investors are all over GM to continue increasing dividends.
My current basis is about $32 so my YOC is 4.5%. If I can get 5% long term growth that would be fantastic!
Also don't underestimate GMs progress in China. That can be a huge wild card going forward. I like the prospects.
MDP
I agree with a lot of your investments, particularly the ones in the big oil companies. However, U.S. auto manufacturers have been such poor investments over the past 20+ years that I could never bring myself to invest in them now. If you had bought in 2010, you would be sitting on a loss even accounting for the reinvestment of dividends.
ReplyDeleteJim,
DeleteYes buying them in 2010 would not be good. I'm glad I have bought them more recently. :-) With that said GE was trading at $60 in 2000, Intel at $70 in 2000, and MSFT over $100 in 2000 and I believe KO was around $40 right where it is today. Those companies are pretty blue. Even the bluest of blue chips can have bad years or even decades.
MDP