Recent Purchase of IBM

On November 8th, 2013 I purchased 12 shares of IBM. I believe it is fairly valued at the moment with a PE 12.49. While it only pays a dividend of 2.11%, IBM has been raising their dividends quite a lot over the last few years. In fact, the 1-year, 3-year, 5-year, and 10-year dividend growth rates are 12.5%, 15.4%, 15.1%, and 22.10%, respectively. While I doubt they can continue at the same pace for the next 10-year period, I’d be happy with a 6+% annual increase sustained in the future. With a payout ratio of only 25% and a share buyback rate of 4.9%, I think the dividend growth rate will be sustainable for awhile longer. This data is according to gurufocus, which also calculates a 5-year yield on cost of 4.24%. IBM also makes up approximately 14.6% of Buffett’s portfolio (Seeking Alpha article), which is always a good model for a value investor to replicate.

This purchase will add about $45.60 in annual dividends. My estimated annual dividend is now $1670.84 ($139.24/month).

My portfolio now includes 18 companies.

Full disclosure: Long IBM