Logic: never leave home without it


Monday, March 27, 2017

No dividends today (womp, womp), but I did add to my portfolio by scooping up a share of Dow Chemical (DOW) … and no, it wasn’t entirely due to the clearing of a major mega-merger hurdle.

You’ve probably heard by now that EU regulators approved a bizillion dollar merger between Dow and DuPont, but, honestly, I don’t know what the heck that means. The companies want to merge and someone has to make sure that doesn’t create competition problems – that I get (for the most part) – but beyond that I’m admittedly oblivious.

How will the potential merger help Dow? I dunno. How will DuPont benefit? I wish I knew.

I’m not at all proud of that, by the way. I want to know everything about every one of my investments. I want to pour over all the financial reports and read about the ins and outs of every deal, but I have a life outside of investing. I want to build a portfolio that appreciates over time and build a passive income stream while I’m at it, but I also want to play with my kids, spend time with my wife, hang with friends and catch the game. Oh, and I already have a full-time job and, newsflash, it’s not blogging or investing.

That said, more often than not I rely on my good friend logic to help me make investment decisions. When I heard regulators gave the thumbs up to a merger between two big-time companies, one of which I already owned a handful of shares of, I decided to add another. I look at it like this: the duo wouldn’t want to merge if they didn’t think it would be good for business. There’s a lot of money involved … and a lot of money to be made. Also, anytime you need regulators to approve a merger, which I realize still may not happen, it means there are plenty of people out there who think it will create an unfair advantage, erode competition, etc. Those people probably aren’t entirely wrong, either, so the approval, if you listen to logic, means good things for Dow and DuPont.

Here’s what the purchase, which I made for $62.93, means for my portfolio.

  • It increased my position in DOW to six shares worth about $380 (average cost of $59.83).
  • The six shares make up 4.04% of my portfolio.
  • It increased my projected annual dividend income by $1.84.

I bought DOW for a handful of reasons. First, I wanted to add to my April dividend income, which I did, if only slightly, thanks to its $0.46 quarterly payment set for the 28th. Second, it has an almost 3% yield, a P/E ratio I can live with (17.92) and lowish payout ratio of 52.27%. It’s also been raising its dividend for the past six years and, well, with a total return of 6.64% since I opened the position, DOW has been a good stock for me in the short time I’ve been investing.

That’s why I used a good chunk of the $100 I automatically invest every week into my Robinhood account to increase my position in DOW. I’d like the potential merger to create some significant gains down the road, but, due to my admitted lack of info on the whole thing, am not banking on it. I’m simply banking on a solid dividend stock to keep being solid.

Logic says it will do just that.

Drink of choice during the writing of this post

Platform Beer Company’s High Brow Barsita – an American Pale Ale brewed with Rye malt for a spicey character and dry finish. Moderately hopped and dry beaned with coffee.

Music of Choice

The Delta Saints. Badass!

 

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