I Bought Campbell Soup Shares In Compensation For My Heinz Stake

Yesterday was a bad day because Warren took one of my long-term investments, Heinz (HNZ), to take the company private. He paid a price of $72.50 and gave me a total return including FX-Gains of 24 percent. The total purchase price is 23.25 billion. Most of the value goes on Buffett’s accounts.

Warren buys Heinz at a P/E of 22.73 and a yield of 2.84%. All price ratios are not cheap especially when you look at mid-term growth rates. But more interesting is the alternative in a low interest environment. I believe that the current yield covers a big part of the long-term loan of the deal and as a private company, there are much more possibilities.

However, as I heard the news yesterday, I needed to search alternatives for the free money. I decided to pull the trigger for a buy of 100 Campbell Soup (CPB) shares. My CPB stake is worth a little bit more than the old Heinz position. I am really worried about the lower possibilities on the market. In my niche, good investment vehicles getting rare and I must focus or concentrate more money on less stocks.

The whole industry realized a quick cash injection yesterday. I don’t know why exactly. Mostly because Warren's buy is a clear signal from one of the most trusted investors. Beyond, there are now $23 billion of additional cash in the market which must be invested on the rest of the industry players. As a result, prices for all competitors must increase.

Heinz was bought for an EV/EBITDA ratio of 13x. CPB has a ratio of 9.64x. The current P/E is 16.41 and the yield amounts to 3.0 percent. I still own several major players from the industry. CPB was a lack in my portfolio. That’s the main reason.

Damn! Warren Buffett Snaffled Heinz

A few months before, I bought a small position of 50 Heinz Shares for my private accounts. It was on December 3, 2012. The purchase price was around $64.

Today, the company will be taken over by Warren Buffett and the investment firm 3G for a price of $72.50 in cash, a premium of 20%. This is also the return for around 10 weeks of owing the stock.

My gain should be around $600. I am not happy because I couldn’t increase my stake. I bought only a few shares and wanted to increase the position over the next years to a core investment share of 2-3% of my full portfolio worth.

Warren bought several stocks I own and I purchased some he had. So, I believe he has a great taste in searching for the best stocks. This year I received two takeover offers: NYX and HNZ. Normally I get 2-4 per year.

Investing is a hard fight for the best companies. Heinz was not expensive but growth of the company is also not in a double-digit region. Heinz has a great international diversification and the market for sauces is developed. So, it's very hard for competitors to enter.

Who will be next?

Unilever: A Great Foods and Consumer Stock Added To My Dividend Yield Passive Income Portfolio

Last Friday I bought 35 Unilever (UL) shares for the Dividend Yield Passive Income Portfolio (DYPI). The full purchase amount was $1,392.75 and represents roughly 1.3 percent of the portfolio worth.

Unilever is a major diversified food company with headquarter in the United Kingdom. Unilever PLC operates as a fast-moving consumer goods company in Asia, Africa, Europe, and the Americas. It offers personal care products, including skin care and hair care products, deodorants, and oral care products.

UL has a strong market position is several markets worldwide and is one of the dominant global player in the emerging markets. 32.82 percent of sales are generated in the Americans nations, 31.83 percent in Europe and 32.33 percent in Asian/Pacific countries. With this in mind, Unilever is behind Nestlé one of the world best diversified foods and consumer goods distributor.

Dividends and EPS

The new stake will give me additional $50 in dividends per year. The full expected portfolio dividend income is now $1,016.08. The passive income should grow to a total amount of 3k – 4k by the end of this year. This should be possible with my current cash position.

I paid $26,377.20 for all 19 stocks combined. Now, they are worth $27,581.25. Not enough, I still have $73.7k in cash for further investments and I plan to increase the current stock holdings to a total number of 50-70 shares. So I try to put every Friday one position with an attractive yield into the portfolio. I follow a buy and hold strategy and like to use the dividends for further investments. The investment horizon is long-term, 10 years or more.

Portfolio Holdings (Click to enlarge)

Latest Portfolio Transactions (Click to enlarge)

This is my investment approach. If you like to make money by trading stocks and realizing a quick return, this is the wrong investment site. Dividend growth stocks will not make you rich in a short period but they can deliver you a solid return over the long-run. I talk about a performance of around 8% in average.

The DYPI portfolio was funded with 100k virtual on October 03, 2012. The aim is to show how long-term dividend growth stock investing works. I personally made huge amount of money only by buying dividend stocks, receiving dividends and selling them in order to invest the new money into more attractive stocks. This strategy resulted in a yearly double-digit return.

Well, Unilever is a great stock but also not really cheap. The current P/E is at 19.34 and the forward P/E is 15.80. The yield is at 3.25%, that’s ok in my view. You might think that I am betting on the foods and consumer sector and a strong gaining momentum. That’s not right. I believe that the sector has great values for long-term investors. Most of the best and safest dividend stocks come from the consumer and foods sector.

The full DYPI portfolio is up 1.34% since the funding date. The stocks alone generated a return of 4.56%. That’s a slightly underperformance but the volatility was also much lower. What do you think about Unilever? Do you own some shares of the company or do you like competitors of Unilever much more? Let me know by leaving a comment.

The income perspective:

Sym	Name	P/E Ratio	Dividend Yield		Buy	# Shrs	Income	Value
TRI	Thomson Reuters C	N/A	4.17		28.90	50	$64.00	$1,534.50
LMT	Lockheed Martin C	10.53	4.72		92.72	20	$83.00	$1,760.20
INTC	Intel Corporation	9.86	4.21		21.27	50	$44.25	$1,050.00
MCD	McDonald's Corpor	17.71	3.03		87.33	15	$43.05	$1,423.05
WU	Western Union Com	7.26	2.9		11.95	100	$42.50	$1,466.00
PM	Philip Morris Int	17.5	3.63		85.42	20	$65.58	$1,809.00
JNJ	Johnson & Johnson	19.56	3.18		69.19	20	$48.00	$1,509.60
MO	Altria Group Inc	16.85	4.9		33.48	40	$68.00	$1,387.60
SYY	Sysco Corporation	17.37	3.45		31.65	40	$43.60	$1,264.40
DRI	Darden Restaurant	13.53	4.08		46.66	30	$57.90	$1,420.80
CA	CA Inc.	12.72	3		21.86	50	$37.50	$1,251.00
PG	Procter & Gamble	17.19	2.97		68.72	25	$56.20	$1,893.75
KRFT	Kraft Foods Group	14.32	4.26		44.41	40	$80.00	$1,876.00
MAT	Mattel Inc.	18.15	3.08		36.45	40	$49.60	$1,612.80
PEP	Pepsico Inc. Com	19.33	2.93		70.88	20	$42.56	$1,452.00
KMB	Kimberly-Clark Co	20.57	3.26		86.82	15	$44.40	$1,363.50
COP	ConocoPhillips Co	8.61	4.56		61.06	20	$52.80	$1,157.40
GIS	General Mills In	15.72	3.04		42.13	30	$38.85	$1,278.00
UL	Unilever PLC Comm	19.88	3.25		39.65	35	$54.29	$1,387.75
							$1,016.08	$27,897.35
							Average Yield	3.64%
							Yield On Cost	3.82%

General Mills: A Solid Dividend Growth Pick For The Dividend Yield Passive Income Portfolio

Last Friday, on February 01, I purchased 30 shares of General Mills (GIS) for my Dividend Yield Passive Income Portfolio (DYPI).

The company manufactures and markets branded consumer foods worldwide. GIS also supplies branded and unbranded food products to the foodservice and commercial baking industries.

General Mills has managed to raise dividends over a period of 9 consecutive years and is a Dividend Challenger on the edge to become a Dividend Contender.

The full DYPI-Portfolio has now 18 members with a total cost of $24,984.45. Stocks from the portfolio are up 4.09 percent since October 05, 2012 – The date of funding. Total capital gain amounts to $1,021.30. 

As a result, $75,147.55 of cash is still available for further stock purchases. With this money I plan to increase the total number of stock holdings to a figure of 50-70 by the end of the year 2013.

Dividend Yield Passive Income Portfolio (Click to enlarge)

Latest Portfolio Transactions (Click to enlarge)

Income is king for the asset allocation: The current estimated portfolio income after the General Mills buy amounts to $963.04. If I complete the acquisition process, the total dividend portfolio income should grow to a value of $3,000 – $4,000 per year.

For the time being, it seems that it’s getting harder to find cheap higher yielding stocks with solid growth perspectives. The market is hot and asset prices too. It could be possible that I need to look at stocks with a yield around the 2% mark.

The DYPI-Portfolio has a current yield of 3.66% and the yield on cost is slightly higher because of the capital gains - The amount is 3.82%. With growing stock holdings, the average yield should decrease to a value of around 3%.

Friday’s pick of General Mills is not a cheap solution. The company has a P/E of 15.55 and forward P/E is expected at 14.53. A solid growth of 8.21% is estimated for the next year with a slightly lower mid-term forecast for the next five years (7.98%).

However, price ratios are ok for a high quality dividend growth stock. The only problem could be the low international diversification as well as the high debt amount. GIS generates only 17 percent of its revenue abroad. That’s too low in a world were China is the only growth solution for many companies. The market position within the United States is solid.

Earnings and Dividends

Because of the high debt of $5.5 billion at $1.5 billion net income, the company must act careful when it wants to be consolidation winner.

The current portfolio performance is good but compared to the return of the whole market, it’s a clear underperformance because the Dow Jones is up 5.12% and the S&P 500 gained 5.61%. What the heck - There are worse happenings.

The approach of the DYPI-Portfolio is not to show you how to get quick rich or to show how you can make fast money by trading stocks. There are so many other tools to realize a quick return. But those tools are also more risky and you need to take a steady look at your prices and assets.

Dividend Yield Portfolio Performance (Click to enlarge)

With a passive income portfolio, you can place your money into solid dividend growth stocks and participate on the long-term business success. It’s a strategy with an investment horizon of at least 10 years or more.

I personally invested money into dividend stocks and other assets for more than 10 years and my annualized return is on average in a double-digit range.

Dividend growth will not make you quick rich but it could hedge your assets against inflation and provide you a good return of at least 8%. All you need is a wise investment strategy and a long investment horizon.

Here is the portfolio:

Sym	Name	P/E Ratio	Dividend Yield		Buy	# Shrs	Income	Value
TRI	Thomson Reuters C	N/A	4.18		28.90	50	$64.00	$1,546.50
LMT	Lockheed Martin C	10.39	4.78		92.72	20	$83.00	$1,744.40
INTC	Intel Corporation	9.88	3.14		21.27	50	$33.00	$1,067.75
MCD	McDonald's Corpor	17.79	3.01		87.33	15	$43.05	$1,439.25
WU	Western Union Com	7.04	2.99		11.95	100	$42.50	$1,438.00
PM	Philip Morris Int	17.63	3.72		85.42	20	$65.58	$1,762.60
JNJ	Johnson & Johnson	19.16	3.25		69.19	20	$48.00	$1,483.60
MO	Altria Group Inc	16.35	5.05		33.48	40	$68.00	$1,368.00
SYY	Sysco Corporation	16.9	3.43		31.65	40	$43.60	$1,283.60
DRI	Darden Restaurant	13.29	4.15		46.66	30	$57.90	$1,405.20
CA	CA Inc.	12.62	4.03		21.86	50	$50.00	$1,251.50
PG	Procter & Gamble	17.06	2.99		68.72	25	$56.20	$1,898.00
KRFT	Kraft Foods Group	14.11	4.29		44.41	40	$80.00	$1,864.00
MAT	Mattel Inc.	15.61	3.3		36.45	40	$49.60	$1,530.40
PEP	Pepsico Inc. Com	19.4	2.92		70.88	20	$42.56	$1,453.40
KMB	Kimberly-Clark Co	20.26	3.31		86.82	15	$44.40	$1,350.15
COP	ConocoPhillips Co	8.63	4.49		61.06	20	$52.80	$1,176.40
GIS	General Mills In	15.48	3.09		42.13	30	$38.85	$1,263.90
							$963.04	$26,326.65
							Average Yield	3.66%
							Yield On Cost	3.82%