July 9, 2009

I bought Bristol-Meyers Squibb

Disclaimer: Investing in individual stocks is risky and I wouldn't take my comments here as investment advice in any way shape or form.

Yesterday I bought some shares of Bristol-Meyers Squibb (BMY) for my Roth IRA. I bought 25 shares of BMY today at $19.60 or $490 worth. Not a huge stake.

Previously I mentioned that I had decided on a high dividend stock strategy for my Roth IRA. I've used this strategy for my 2008 & 2009 Roth IRA contributions, so thats $10,000 total. I had about $200 in cash around the start of the year and I've been accumulating some cash from the dividend payments. I had over $500 in cash so I decided to go ahead and buy something.

Reasons I bought BMY:

1) 6% yield on dividends -- My strategy for my Roth is to get high dividend paying holdings and build a cash flow plus hopefully gain in equity value. 6% yield is pretty good for a solid company.
2) PE of 7.5 -- They are trading relatively low given earnings.
3) Solid financials -- Their revenue and profits have been growing steadily in the past few years. They have more cash than debt.
4) I wanted to add pharmaceutical -- I didn't have any healthcare or drug related stocks in my IRA yet so I wanted to add something in this industry. I think health related businesses are only going to keep growing as the need for their goods and services will not go away.
5) They aren't a one-trick pony -- the company has several drugs on the market and many in development. So I'm not worried about their future depending on FDA approval of a single drug.

Those reasons are not in priority order. The solid financials are a make or break decider for me. If a company doesn't have solid financials then I'm not buying it. The other reasons I bought all add up to make BMY more attractive to me than its peers.

My Roth IRA holdings

Overall my strategy has been to mix high quality individual stocks with decent dividends: AT&T (T), GE (GE) and Harley Davidson (HOG), high dividend REITs : HRPT properties trust (HRP) and Hospitality Property Trust (HPT) and high dividend ETF : Vanguard High Dividend Yield Index (VYM).

The yields based on my purchase prices are:
T = 5.5%
GE = 1.9%
HOG = 2.3%
HRP = 13%
HPT = 0% ?
VYM = 3.6%

So far GE & Harley Davidson have both dropped dividends significantly since I bought them. The HPT REIT suspended dividends and I'm not sure what if anything I'll get out of that one for the year. REITs have to pay out 90% of their profits in dividends but I don't know what they'll have for profits if anything.

So far I've gotten about $300 in dividends from about $10,000 in holdings in the first half of the year. I'm on track for a total 6% annual return at that rate in 2009. Not bad.

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