How I Change My Buy Price – PNW as an Example

A watch list…every investor has one and each investor has some method of determining a buy price. But do you ever increase the buy price? For myself I used to adjust occasionally but with no real consistency. Worst yet, if a stock’s share price had a significant run up in share price I was even more reluctant to change my buy price thinking it was over-valued.

Last November I had a discussion on this topic with fellow blogger Divs4Jesus in my comments section about AbbVie (ABBV) which experienced a run up into the low $100 range. Up to this point I was used to buying shares of ABBV in the $65 to $80 so when it shot up to just above $100 I stopped buying shares. Our discussion for the most part concluded that even in the low $100s with its current dividend yield and dividend growth it was still a good buy. However, at the time I had this price bias for any stock that had a significant run-up making me hesitant to add more shares.

In January of this year, I resolved to address this and decided to take a different approach. The beautiful thing about dividend growth is that companies are so consistent you can confidently set your calendar knowing when they will announce a dividend increase. It was this piece of knowledge I decided to use to my advantage and create a system that increases my buy price for a position.

The approach I now use is I set a minimum dividend yield I expect for a stock and that sets my initial buy price. Then 2 months before a company announces a dividend increase, I estimate what I think the dividend raise will be and calculate the new share price based on a higher dividend payout and then readjust it when the actual dividend raise is announced.

I very briefly explained this approach to fellow blogger Life with Dividends justifying why I bought Lockheed Martin (LMT) throughout July & August and thought it would be good to share other companies where I see my buy prices changing and to start it off here is my take on Pinnacle West Capital Corporation (PNW).

PNW is an electric utility company operating in Arizona and has been growing their dividend for 10 straight years. They have a 10-year average dividend growth rate of 4.54% with its most recent raise of 6.08% and their next dividend increase is set to be announced this October.

DGR 1YRDGR 3YRDGR 5YRDGR 10YR
6.08%6.10%5.79%4.54%

For a utility a utility stock to make it into my portfolio they need a minimum dividend yield of 4.2%. With the current annual dividend of $3.32 per share that sets my current buy price at $79/share.

Currently I am projecting PNW to increase their dividend 3.2% to 5%, being this is an estimate I will use my low end projection. A 3.2% raise will increase their annual dividend to $3.43 and if you divided that by my expected dividend yield of 4.2% then my new buy price is $81.66/share. Based on Friday’s close of $77.31/share that represents a 5.33% discount to my new buy price.

There you have it, not the most complicated approach but it works for me. For transparency, I will continue to regularly post companies where I adjust my pricing upwards and hopefully you find the posts helpful.

Buys and Sells for the Week 8/27

Always feels good getting a dividend raise; First American Financial (FAF) gave me a 10.86% raise and Williams-Sonoma (WSM) gave me a whopping 20% increase.

I also received my first ever referral reward on M1 finance. Referrals are not something I push for or ask readers to do so I was really appreciative of someone out there thinking of me, whoever you are I tip my hat to you.

The cash balance in my Fidelity brokerage account is down to just $21 after this week’s transactions, time to let it build up again. Here are my trades for the week:

  1. J.M. Smucker (SJM) – increased position –Inflation fears pushed yet another consumer stock lower. Grabbed 2 shares $123.19 for a 3.2% yield.

Buys and Sells for the Week 8/20

Consumer spending was below expectations, FOMC minutes hinting at tapering, inflation impacts and a resurgence of COVID kept negative pressure on the markets all week. Still no screaming value out there but some retreat on stock prices is always welcome. Here are my trades for the week:

  1. Oil-Dri Corp. of America (ODC) – increased position – A small price pullback led to a small purchase. Grabbed 3 shares @ $34.65 and a 3.12% yield.
  2. Leggett and Platt (LEG) – increased position – Just enough of a price pullback to let me add to my industrials sector. Grabbed 4 shares @ $47.41 and 4 shares @ $46.90 for a 3.58% yield.
  3. Lockheed Martin (LMT) – increased position – Third week in a row buying this bad boy. Problem is the account I buy this in is now out of cash…what to do? Grabbed 1 share @ $355 and a 2.93% yield.
  4. Walgreen Boots Alliance (WBA)  – increased position – Not the best price but P/E touched 18 which seems reasonable in this market. Grabbed 4 shares @ $47.71 and a 4% yield

Buys and Sells for the Week 8/13

Markets had no fear of Friday the 13th, guess Jason goes back to his watery grave empty handed. Inflation stayed steady, unemployment numbers met expectations, and positive earning reports kept rolling in as markets continue to bump up against all time highs.

I received a dividend surprise on Thursday as Organon (OGN) initiated a dividend program with their very first quarterly payment of $0.28 per share and an annual yield of 3.34% . Here are my trades for the week:

  1. Lockheed Martin (LMT) – increased position – As long as LMT stays below $370/share it has my attention. Grabbed 1 share @ $359.86 and 2 shares @ 357.84 with a 2.90% yield.
  2. Nationwide Risk-Managed Income ETF (NUSI) – new position – This is the last reinvestment from my PPL sale last week. Grabbed 69 share @ $28.74 and 7.4% yield.

Buys and Sells for the Week 8/6

Dog days of summer are here and no major market changes, may as well start a little overdue housekeeping with the portfolio. Here are my trades for the week:

  1. PPL Corp. (PPL) – sold position – Finally got around to reducing my exposure to PPL who will probably cut their dividend soon. Sold 350 shares @ $28.58 and 313 shares @28.88.
  2. Enbridge (ENB) – increased position – Partial reinvestment of my PPL sale. Grabbed 255 shares @ $39.11 and a 6.83% yield.
  3. Verizon (VZ) – increased position – Partial reinvestment of my PPL sale. Grabbed 40 shares @ $55.33 and a 4.53% yield.
  4. BCE Inc (BC) – increased position – Partial reinvestment of my PPL sale and this was my last buy for the week with PPL funds and a few $$ left over for next week. Grabbed 98 shares @ $50.70 and a 5.53% yield.
  5. Pinnacle West Capital Corp (PNW) – new position – PNW finally dropped below $80 and dividend increase should be coming shortly. Grabbed 75 shares @ $78.45 and a 4.23% yield.
  6. Lockheed Martin (LMT) – increased position – A little share weakness on Wednesday and expecting a dividend raise from them next month. Grabbed 1 share @ $362.58 and a 2.87% yield.
  7. Walgreens Boots Alliance (WBA) – increased position – Dipped below $47 and I’m a buyer. Grabbed 4 shares @ $46.50 and a 4.12% yield.
  8. General Mills (GIS) – increased position – GIS is expanding their pet food line and just completed acquiring Tyson Foods pet business. Grabbed 8 shares @ $57.71 and a 3.53% yield.