Ok, so it is not exactly today’s trade, but a week ago (last Friday) I pulled the trigger to start a small position (100 shares) in Wells Fargo (WFC). As I’ve mentioned elsewhere, I am still solidly in the accumulation phase of my DG life, and WFC represents the 19th individual stock I own. I added it for several reasons. First, my portfolio is currently very light on financial/insurance stocks, so this buy adds some desired diversity. Second, after a fair amount of research and reading, I’ve become convinced that WFC is a top-of-class financial stock, in terms of both management, performance, and potential.
Most importantly, WFC scores very well on most of the criteria I consider in evaluating (you can read here all about how I evaluate dividend growth stocks). I locked in a respectable starting yield of 3.16 percent. WFC has a very solid 5 year average earnings growth over 20 percent (even including the tank from 2007 to 2008), and a sustainable payout ratio below 35 percent. P/E ratio is in the 10-11 range. The blotch on WFC’s record as a dividend growth stock was the dividend cut during the 2008-2009 financial crisis. This might disqualify the stock from the portfolio of some DG investors who apply strict (rigid) rules. I tend to agree with the authors who praise WFC’s management through the crisis, however, and the dividend growth since 2010 has been impressive. Here is a good, and exciting, recent article about WFC’s dividend prospects. For all of these reasons, I think that WFC is one of a rapidly shrinking pool of high-quality DG stocks that is not fully valued at today’s increasing prices.
With the commission, I got in at a per-share price of $38.02. Only time will tell how I do with this, but I’m feeling good about the buy.
Most importantly, WFC scores very well on most of the criteria I consider in evaluating (you can read here all about how I evaluate dividend growth stocks). I locked in a respectable starting yield of 3.16 percent. WFC has a very solid 5 year average earnings growth over 20 percent (even including the tank from 2007 to 2008), and a sustainable payout ratio below 35 percent. P/E ratio is in the 10-11 range. The blotch on WFC’s record as a dividend growth stock was the dividend cut during the 2008-2009 financial crisis. This might disqualify the stock from the portfolio of some DG investors who apply strict (rigid) rules. I tend to agree with the authors who praise WFC’s management through the crisis, however, and the dividend growth since 2010 has been impressive. Here is a good, and exciting, recent article about WFC’s dividend prospects. For all of these reasons, I think that WFC is one of a rapidly shrinking pool of high-quality DG stocks that is not fully valued at today’s increasing prices.
With the commission, I got in at a per-share price of $38.02. Only time will tell how I do with this, but I’m feeling good about the buy.