Now for my 3rd purchase of the week. Actually the 3rd purchase made just on Tuesday – it’s taking me a while to catch up on writing up all of these buys!
After buying Ford (F) and Emerson Electric (EMR) for my Dividend Empire portfolio Tuesday morning, I set my sights on adding to my retirement portfolio. There are plenty of stocks on my buy list right now with names like WMT, SO, BBL and QCOM topping the list.
I have a huge limit order on WMT set to $65 and I also have a small bit of cash reserved to start a smaller position if WMT falls back to around $70. SO jumped up on me so I’m waiting for another pullback and I don’t think BBL is quite done falling. That left Qualcomm Inc (QCOM) for me to study in detail.
QCOM’s stock price has taken a pretty big hit over the past couple of weeks, dropping from around $67.50 to below $62. After looking at QCOM’s fundamentals and dividend strength I felt that QCOM’s pullback offered an excellent buying opportunity, and therefore I purchased a 45 share stake.
Company overview courtesy of TradeKing.com
QUALCOMM, Inc. engages in the development, design, manufacture, and marketing of digital telecommunications products and services. It operates through the following segments: Qualcomm CDMA Technologies, Qualcomm Technology Licensing, and Qualcomm Strategic Initiatives. The Qualcomm CDMA Technologies segment develops and supplies integrated circuits and system software based on technologies for the use in voice and data communications, networking, application processing, multimedia, and global positioning system products. The Qualcomm Technology Licensing segment provides rights to use portions of the firm’s intellectual property portfolio. The Qualcomm Strategic Initiatives segment invests in the technology, design, and introduction of products and services for voice and data communications.
QCOM first caught my eye and made my watch list because of my most recent dividend growth stock ranking screen, where QCOM scored a very respectable 7.75 points out of 10.
Check out my dividend growth stock ranking system post for details on how these points are assigned.
QCOM could have easily been the highest ranking stock from the July screen if not for a few technicalities. The next 5y earnings parameter in the financial strength category should be 12.6% according to analysts. This would have earned QCOM a full point (8.25 total) which would have been a tie for the lead with TROW, TEL, AMAT and LECO.
Also, the recent dividend increase was not greater than the 5 year increase (Rec / 5y – my measure of dividend acceleration). The 5-year dividend growth rate is almost 20% though which is a tough mark to beat. The most recent increase was 14% which is something I would be very happy with. Add another 0.5 points for that parameter and all of a sudden QCOM is at 8.75 points – a record for my ranking screen!
The yield is over 3%, the growth rate is phenomenal, the payout ratio is a manageable 46% and QCOM has increased the dividend 13 consecutive years. I’d say their dividend is extremely strong.
The projected 2015 dividend is $1.86 assuming no increase (or decrease) for the rest of the year. This seems likely since QCOM typically raises their divvy in June. $1.86 would represent a 15.5% increase over 2014 and a 20.2% 5-year CAGR.
QCOM’s earnings growth has been incredible over the past 5 years, coming in at 32.7%. I’ve seen some conflicting data regarding the next 5-year growth estimates. The CCC list reports 6.5% growth while the consensus estimate on Nasdaq.com reports 12.6%. QCOM has almost no debt with a debt/equity ratio of 0.03.
To make things even more appealing I think the shares are very undervalued right now. The PE ratio is 14.8 which is close to historical lows. The consensus analyst price target is $77 per share and S&P Capital IQ has a buy rating on QCOM with a 12 month target price of $80. Plus the recent pullback has left QCOM in oversold territory, with a RSI value in the low 20s.
Qualcomm reported great Q2 results back in April. Earnings beat Q2 2014 by 7% if you exclude a $1 billion charge related to the NDRC investigation. Catalysts for future growth include increased growth in smart phones in emerging markets and increased demand for high-end headsets.
Qualcomm (QCOM) Purchase Details
- Sector: Technology
- Industry: Communications Equipment
- Purchase date: 7/7/2015
- Portfolio: Dividend Retirement Portfolio
- Shares purchased: 45
- Cost per share: $62.65
- Commissions: $14.95
- Cost basis: $2834.20
- Yield on cost: 3.05%
- Forward income: $86.40
This purchase adds $86.40 worth of dividend income to my Dividend Retirement portfolio, bringing the total up to $1818.34 annual income. My new portfolio yield on cost after this purchase is 3.33%.
My Dividend Retirement portfolio has been updated to reflect the addition of 45 shares of QCOM.
Anyone else looking at QCOM? What have you bought recently? Please let me know in the comments section below!