Aug 06 2016

My Latest Buys: DHT, EDF

Time for another monthly stock buy report. For my first stock buy in July, I didn’t go for an ETF (my usual modus operandi) and instead bought shares of a single company: DHT Holdings Inc (NYSE:DHT). I bought 120 shares at $4.936 per share. With a quarterly divided of 25 cents per share, it has an annual dividend yield of 20.26% (!!). DHT is a holding company, which through its subsidiaries, owns and operates a fleet of 20 crude oil tankers. I’m sure my green friends won’t approve of this stock buy.

Why did I buy into DHT? Well, let’s look at my pros and cons list…

Bargain. With a stock price very close to its 52-week low and a low P/E ratio of 4.88, DHT seemed like a bargain. The risk, of course, is the stock may fall further. It’s a fact of investing that you’re never going to get in at the bottom and you’re never going to get out at the top, so I will just have to accept the very real possiblity that DHT’s stock price may fall a bit further before it and the general oil market recovers.
Yield. Yeah, I know that an annual yield of 20% is insanely high. But after the recent dividend cuts that impacted my dividend income, I need to take a risk in order to make up for lost cashflow.
Institutional Investment. With 82% of DHT stocks owned by institutional investors, there seems to be strong confidence in DHT’s performance.

Age. Founded in 2005, DHT is a fairly young company and has only weathered one serious recession. The experience of management in handling a difficult economic climate seems limited, but I could be wrong given that DHT operates in an environment that is unstable and unpredictable.
Yield. Yeah, I know I counted Yield as a positive. However, I do have my reservations about the sustainability of the stock’s 25-cent quarterly dividend. With a high dividend yield of 20%, there’s a good chance a dividend cut may occur in the near future.
Sector. The tanker market is cyclical, seasonal, and volatile so some rough rides are to be expected. That could be regarded as a positive, because management needs to stay on top of things and cannot afford to be complacent when the tanker business is stable and doing well.

My second stock buy for July is 65 additional shares of EDF at $14.809 per share. If you want to read about my pros and cons about EDF, see my January My Latest Buys: EDF, CODI posting.

These two stock buys will help raise my projected average monthly dividend income by $27.70. Another step closer to my 2016 projected monthly average dividend income goal of $750.00.

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