Recent Purchase – Wells Fargo (WFC)

Apart from my weekly sharebuilder purchases, I try to make big purchases here and there in order to meet my goal of investing $35,000 this year. I have been behind in that as witnessed in the recent goals update. The last big purchase was towards the end of May when I initiated a position in Exxon-Mobil.

So on Monday when the market dropped, I used the opportunity to make another purchase. Of course, it is impossible to time the market and I made the purchase at the middle of the day after it had recovered. But the market continued to drop yesterday as well and not sure how it is going to behave in the near future. Maybe I could have waited, but you never know.

I purchased 30 shares of WFC at $51.46 on 8/24/2014. With commission, the total cost comes to $1,548.75. With a quarterly dividend of $0.375/share, the yield on cost comes to 2.90% and this purchase adds $45.00 to my forward annual dividends.

Between 2005 and 2014, the financials of the company are as follows:

  • Revenue increased from 32,949 Mil to 84,347 Mil which amounts to a 11% CAGR
  • Net income increased from 7,671 Mil to 23,057 Mil which amounts to a 13% CAGR
  • EPS increased from $2.25/share to $4.1/share which amounts to a 6.89% CAGR

Those are great numbers and includes the drop in numbers during the financial crisis. During the last 5 years, the bank has increased dividends consistently and with a low payout ratio of 32, the company is positioned to increase the dividends in the future as well. The current yield of 2.9% is also higher the company’s recent 5 year average of 1.90% yield. This is due to higher than average dividend increases in the last 5 years.

My portfolio has very low exposure to banking stocks. I hold a very small position in Citi (C). So I have been looking to add to this sector for a while now and used this opportunity to add to this stock. With uncertainties in the market and also the interest rates hike from Fed, this may not be the right time to purchase banking stock. But Wells Fargo is one of the biggest banks in the US and is also well run. It is a good stock to be invested in for the long-term.

Morningstar has a fair value of $61.00 for the stock and it is rated 4 stars.

This purchases increases my total annual projected dividends to $2,986.47.

The portfolio page will be updated soon to reflect this purchase.

Disclosure: Long on all stocks mentioned above

Advertisements

2 thoughts on “Recent Purchase – Wells Fargo (WFC)

  1. Great purchase! I havent added to WFC in more than 2 years…I need to take a look at the position again – now that it has come down quite a bit.

    Best
    R2R

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s