Lockheed Martin has been added to my dividend portfolio. As I am rebuilding my portfolio, I had to re-evaluate all the companies that I was holding. For some reason, I wasn’t really happy with CSCO and wanted to substitute the stock for another. Also, I figure having 20 stocks is a good round number. The goal was to have each stock worth equally weighted at 5%.
But then I came across Lockheed Martin. According to Seeking Alpha, Lookheed Martin (LMT) has a 17-year dividend growth history with a yield of 2.5%. I don’t already have any stocks in the Defense sector, so this will be a nice addition to my dividend portfolio.
Cisco Systems Stock Sold
Generally, I’m not a fan of selling stocks. But, I am in the very early stages of rebuilding my portfolio. I would normally sell stocks if I had a need for the money, as when I had to sell to buy the condo or when a company cuts its dividends or doesn’t grow them. That’s the reason I got rid of General Mills (GIS) earlier on, but which I’m just announcing now. GIS didn’t grow its dividends from 2017 to 2018. But, none of the above reasons applied in this particular case to CSCO.
However, as I was re-evaluating my portfolio, it’s not that I didn’t like CSCO, which only has a 9-year dividend growth history. It’s that, after some consideration, I liked Microsoft (MSFT) and International Business Machines (IBM) better. I decided to add MSFT and IBM to my portfolio. Honestly, I’m having second thoughts as to whether it was the right decision to sell the $60 that I had in CSCO. But I think it won’t matter much in the long run.
I still have two more stocks I can add to get to the magic number of 25 stocks total in the portfolio, and I may again consider CSCO in the future. But I figure, right now, I have enough Tech related stocks.
MSFT & IBM Stocks Bought
When I first looked at Microsoft, I wasn’t a fan of it’s 1.17% yield. But, I had to remember that I was investing for the long haul and that chasing yield was never really my strategy. Microsoft is a great company that has grown its dividends for the past 16 years. I expect the company to do well in the next recession just like it did in the last.
I also bought IBM. As indicated by The Motley Fool, IBM Recently Became a Dividend Aristocrat, increasing its dividend for the 25th consecutive year. I’m a huge fan of dividend aristocrats and IBM is a welcome addition to my portfolio.
Conclusion
I just wanted to quickly provide this update that I bought 3 stocks and sold one stock to round up the total number of stocks in my portfolio to 23. I’m sure I will eventually get to 25, but this seems sufficient for now.
All I have left to do is fund my portfolio every month using the dollar cost averaging strategy so that the dividends keep compounding month after month and year after year.
What do you think of my stock trades? Let me know your thoughts by commenting below.
Hm im considering to add CSCO at tech sector. Had INTC before but sold it when yield became to low. MSFT looks overvalued. Did not checked metrix today but some time ago it was aroung 30x P/E and this is no Telsa, Facebook or Google with huge growth potential. MSFT to my view is quite mature bussiness.
Hey p2035. I honestly don’t think CSCO is a bad stock, and quite frankly, like I wrote in the post, I may add it again in the portfolio. Everything I take a look at MSFT, I was wondering why it is not in my portfolio. I finally got tired of wondering.
In terms of valuation, there are several ways to determine whether a stock is undervalued or overvalued. One such way is by comparing the current yield to the average of the 5-year yield. If the current yield is higher than the average 5-year yield, the stock can said be to be undervalued. If the current yield is lower than the average 5-year yield, the stock can be said to be overvalued. I’ll write about this later. In the case of MSFT, the current annual yield is 1.12%. The average 5-year yield is 1.95%. This is according to Yahoo Finance. So, since the current yield (1.12%) is lower than the average 5-year yield (1.95%), I would agree with you that the stock appears to be overvalued.
But, and here is the important point, I don’t care! Haha. Microsoft is a great company. I understand what the company does. I prefer to use Microsoft Windows over MAC. I’m familiar with the company and I think it’s going to be around for the long haul. Granted, those qualifications aren’t exact as mathematics and financials, they are nonetheless important to me before I invest in a company. Quite frankly, I understand what MSFT does moreso than I ever did CSCO.
But that is not a knock on CSCO. I may very well add it back into my portfolio as well.
Lastly, I’m working on using the above valuation to reinvigorate my adopt-a-stock project. So stay tuned. Good to hear from you as always, and stay safe.
Well yes since you incest in small amounts regulary it does not matter 🙂 As I invest 1-2 times / quaryer I have to look for soms good spots. Yes its a good compang bu 1% dividend yield is just too dam low for me. Guess we all have our own strategies 😉
Hey P2035, I don’t blame you. I was really hesitant with MSFT at first mainly because of the low dividend yield. While the current yield drags the overall yield of my portfolio down, I’m banking on the fact that raises in dividends will improve the yield on cost statistic and that I’ll be better off for it in the end. You’re also right in that investing small amounts over time helps reduce the negative impact associated with buying an otherwise overvalued stock.
I have decent position in CSCO when i added it few years ago and recently again added it .Looking for a entry point to LMT. Missed it few day ago ,holding for few more days to see if its comes to the price.
desidividend recently posted…2020 April Dividend Report
I hope you find that entry point desidend. I think LMT is a great buy. My perspective is that since I’m going to be holding the stock for the very long term, I’m not sure it matters much if I purchase it while it’s overvalued initially. I think I’ll still come out on top in the end. So, if I like the stock, I’m going for it.
Its hard. All the companies listed in this article are great dividend growth stocks. So I can’t say that you invested in a bad company here. All that matters is that you are happy with the companies in your portfolio!
Enjoy those dividends.
Bert
Thanks Bert. I am definitely happy with all the companies. And honestly, as I am thinking about CSCO more, I might add it right back into my portfolio. Only time will tell! Haha. However, as a matter of practice, I don’t readily go in and out of stocks. But, because my portfolio is really at the infancy stage (again), I figured it wasn’t a bad time to re-assess, so to speak. Thanks as always for stopping by.
It’s hard to move on from a stock eh? I’m not totally convinced with Cisco’s software model. I think MSFT is a great pickup.
Thanks, plus there is plenty of time to tell how CSCO will do. It’s not like I can’t buy the stock back later! haha.
All good stocks. Own them all and plan to stay with Cisco also DP. Tom
Tom @ Dividends Diversify recently posted…How To Build Wealth From Nothing
It’s all good Tom. CSCO may very well be added back in my portfolio someday.
I like the MSFT pick up. I have been focusing on large cash rich tech the last couple of month with MSFT and AAPL entering my pirtfolio. I like LMT too but went with GD instead. Keep on buying!
DivHut recently posted…Recent Stock Purchase May 2020
That’s the plan DH. Good luck with your pick ups as well.