Week started nicely with Microsoft (MSFT) issuing a 10.7% raise.
Markets continued on their slow journey of going down and wall street experts are declaring we are experiencing a rolling correction (a correction of one sector at a time) and I agree as quite few stocks are more than 10% off their 52 week high which is creating some buying opportunities. Here are my trades for the week:
- Lockheed Martin (LMT) – increased position – Every week the price gets better. Grabbed 1 share @ $346.84 and 1 share @ $342.90 for a 2.97% yield.
- Leggett and Platt (LEG) – increased position – When it drops below $47/share I’ll nibble. Grabbed 4 shares @ $46.60 for a 3.61% yield.
- Merck (MRK) – increased position – Not sure how long this will stay in the low 70s. Grabbed 2 shares @ $72.22 and a 3.60% yield.
- Unilever (UL) – increased position – Selling pressure from state pension funds over Ben N Jerrys keeping the stock price down. Grabbed 3 shares @ $54.53 and 3 shares @ $54.01 and a 3.70% yield
- AbbVie (ABBV) – increased position – Keep adding to this 1 share at a time. Grabbed 1 share @ $107.19 and a 4.85% yield.
- Verizon (VZ) – increased position – Working on getting this to a triple digit payout in the 2nd month of a quarter so every share helps and still a ways to go. Grabbed 3 shares @ $54.28 and a 4.72% yield.
Simple Dividend Growth 
Interesting buys SDG. I bought some LMT and VZ myself. What do you think about the debt profile for ABBV?
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Pharmaceuticals tend to have a lot of debt due to the large amounts of R&D. ABBV has spent more lately because of their tactic with Humira. The Humira patent was slated to expire in 2018. But ABBV tried a different tactic of applying for Humira patents for different illnesses which over the last 4 years has yielded circa 250 new patents with some that go out to 2034 for expiration. Back in 2018 I was unsure if this approach could work as this required additional debt to fund the research over & above their normal R&D cycle. But 3 years later I am partially convinced it has worked as Humira remains the worlds #1 selling drug and would like to see some cash flow redirected to paying down some debt which if they do will most likely see dividend growth come down to the 3-5% range.
So question is how much yield would you need to compensate for the risks? For me a Biopharma company starts with a base yield of 3.5% as they have larger risk factors from patent expiration, regulation, and litigation. For ABBV I see additional risks with competition from biosimilars and high debt. For me to feel comfortable taking on these additional risks as well as a reduced dividend growth rate my min yield would be 4.5% (max $115 share price).
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