Recent Buy- Potash Corp (POT) and Black Diamond Group (BDI) +$875 of annual dividends 9


Back in the game.

It had been almost 3 months since I purchased stocks in last August. That was probably the longest time that I had been holding off of buying stocks since I started this blog. However that finally came to an end in November. Yay! I deserve some cookies here. I could not really resist bargains going on everywhere which made me pull the triggers again. On November 20, 2015, I purchased the following stocks.

 

Potash Corporation of Saskatchewan (POT)

POT logo

Beautiful slogan

 

Potash Corporation of Saskatchewan Inc. (PCS), incorporated on May 15, 2002, is a fertilizer company. The Company operates in three business segments: potash, nitrogen and phosphate. The Company owns and operates five potash operations in Saskatchewan and one in New Brunswick. Its nitrogen operations involve the production of nitrogen fertilizers and nitrogen feed and industrial products, including ammonia, urea, nitrogen solutions, ammonium nitrate and nitric acid. It has nitrogen facilities in Georgia, Louisiana, Ohio and Trinidad. The Company’s phosphate operations include the manufacture and sale of solid and liquid phosphate fertilizers, phosphate feed and industrial acid, which is used in food products and industrial processes. It has phosphate mines and mineral processing plant complexes in Florida and North Carolina. The Company also has four phosphate feed plants in the United States and produce phosphoric acid at its Geismar, Louisiana facility. The Company’s potash operations include the mining and processing of potash, which is used as fertilizer. In 2014, the Company’s potash production from all its operations consisted of 8.73 million tons of potash (KCl or finished product) with an average grade of 61.0% K2O, representing 47% of North American production (Reuters).

Potash Globe and Mail

That monster potash mining equipment. (source:Globe and Mail)

POT

7 years low now and it may become 8-9 years low soon

 

Potash had been in our watch list for a really long time (probably more than 1 year) and luckily the stock has dropped by 23% of its value over last 3 months and 35% over last one year period. What a great deal. I liked the company a year ago when it was being traded at $35-$36 then I like it even more when it is now being traded around $27.

Historical potash price

Potash price isn’t doing great however considering growing population, it will eventually head up.

 

Its fundamental is very strong and has been a cash cow for a long period of time. 2014 year was really great. It had cash from Operating activities of $2.6 billion and used only $1.1 billion for capital expenditure. Paid $1.1 billion as dividend and repurchased $1 billion worth of its own stocks. Even 2015 so far isn’t too bad considering the downturn of the industry as it generated solid 1.7 billion cash from operation which was spent toward paying out dividends and capital expenditures.

CF POT

Great fundamentals (Source: Google)

 

Dividend yield is at whooping 7.5% and it has increased its dividend for last 4 years. Its PE is around at 11 and has healthy debt to asset ratio at less than 25%. I know that Potash price isn’t doing great at this time and it is estimated to be worse for a while but I am buying this stock for a long term. I strongly believe the stock has been oversold. I don’t know whether Potash price will ever turnaround but regardless, this fundamentally strong company.

Recent insider activities aren’t too bad as directors purchased some stocks at this level.

POT Insider

 

Its 12 month price target is between $US21-41 (currently around $US20)

PT

(Source: Thompson Reuter)

 

and analysts rating shows 1 strong buy, 1 buy, 7 hold and 1 reduce.

POT R

(Source: Thompson Reuter)

 

I purchased 110 shares at $27 and another 75 shares at $26.78. Total $4,978. I got commission rebate of $30 from the teller after crying on the phone for 30 seconds (i.e. Annualized return of $31,536,000 🙂 Crying really helps!). The purchase will add $433 to my annual dividend.

Recent

 

 

 

Black Diamond Group (BDI)

BDI logo

Black Diamond Group Limited is a provider of remote workforce accommodations, modular space solutions and oilfield products and services in Canada, the United States and Australia. The Company provides its products and services to a range of industries, including oil, natural gas, mining, power, construction, engineering, military, Government and education. It operates in four segments: Black Diamond Structures, Black Diamond Logistics, Black Diamond Energy Services and Black Diamond International. Black Diamond Structures rents and sells remote workforce housing and modular workspace solutions and provides associated services. Black Diamond Logistics provides lodging services, remote facility management and supply chain solutions and Black Diamond Energy Services rents and sells a complement of oilfield equipment and services. Black Diamond International rents and sells remote workforce housing and modular workspace solutions and provides associated services outside of North America (Reuters)

bdi

See how low it got during the year?

 

Another beaten down oil and gas related stock that I wanted to buy for a while. As you know by now, I am a managed risk taker. I love buying oil & gas related stocks considering its downturn but I don’t buy every oil&gas stocks available out in the market. I only buy oil & gas stocks (with exceptions of some speculative stocks) of which fundamentals are supported. As you can see from my portfolio, I recently purchased Oil and gas related stocks with strong balance sheets and great fundamentals.

All of the stocks will be volatile next little while but eventually when supply and demand balances out (which will), all of them will reward me handsomely and then I will restructure my portfolio.

 

Black Diamond Group is a very interesting company. Without further ado, watch the video to understand what they do.

Its fundamental is strong and its cash flow has been great. 2014, it generated about $50 millions of free cash flow which was used to buy back its stocks and paying out dividends. For the first 9 months of 2015 wasn’t too bad considering the downturn of the oil&gas industry as it still generated $50 million of free cash flow which was used in paying out dividends and retiring debt.

BDI CF

It is challenged but still generating positive cash flow (source: google)

 

It had recently cut its dividend from $0.08 per share to $0.05 per share (it pays monthly dividend) which I believe a prudent move considering the challenges they are facing. Because of the announcement, the stock had dropped by 20% over the month which gave me the signal to jump in and snap the bargain as the investors are definitely panicked and sold at dirt cheap. Dividend yield is still at whooping 8.5%. Its PE is at around 23 and has healthy debt to asset ratio at less than 25%.

Its 12 month price target is between $7-14 (currently around $7)

TP

Source: Thompson Reuters

 

and analysts rating shows 1 strong buy, 8 buy, 3 hold and 1 reduce.

Roc

Source: Thompson Reuters

 

The price to sale ratio is at 0.9 as opposed to 5 year average of 3.0 which is about 70% discount on the stock (Can you believe that?)

Price 2 S

Source: Thompson Reuters

Price tS

Source: Thompson Reuters

 

Insiders, especially CEO, have been buying back its own stocks like madmen which is another good signal that I will take. Who knows about the company better than its CEO and directors?

Untitled

 

I purchased 737 shares at $6.85 totaling $5,058. The purchase will add $442 to my annual dividend income.

Recent

 

Both purchases will add approximately $875 to my annual dividend income. That’s at least $73 passive monthly income that will be given to me year after year. Highly likely $73 will get bigger as time goes by. What a life! We will keep buying when opportunities are out there in the market. I see many opportunities lately due to the crash of the oil price which is just perfect for me. As you may know, it did not take too long to build this portfolio. When I started this blog (a year ago), our net worth was around 80K (excluding my car) and that only provided us less than $2,000 of annualized dividend income. However, now it provides predictable $7,500 of annualized dividend income per year and that number will always go up. Amazing huh?

As I mentioned several times, building your dividend portfolio isn’t very difficult. See the following links for excellent ways to save money and invest.

Check out my portfolio page to see what stocks I own and the following article for more investment tips-How to Simply Invest and Get Richer for Dummies in 8 Easy Steps.

If you are also a dividend investor like me, then you should check out the following page to see how other dividend investors are doing. You won’t regret a moment of reading their valuable and inspirational articles. The Financial Bloggers Dividend Income List. Oh right, you may want to check out the following section to see what other investing bloggers are up to as well. Blogroll

 

Hope my recent buy updates inspire anyone who is dreaming of becoming financially independent. I am not there yet but I am happy to share where I am and where I will be headed along the journey to be a millionaire thus financially more independent.  Don’t dream on winning lottery or a jackpot from your local casino. That’s not going to happen to you. Dream on something that is so real that you can catch it after executing easy passive income strategies. It is not going to take very long to see the results and I am sure you can do it as well. All you need is a strong commitment for your future. Start your first step right now and come along for the million-dollar journey. Hang in there because your loved ones got your back (and me  )strength 

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9 thoughts on “Recent Buy- Potash Corp (POT) and Black Diamond Group (BDI) +$875 of annual dividends

  • Dividend Diplomats

    How great does it feel to be back in the game after such a long period of inactivity. Potash is a stock that has appeared on my screener for a long time, but I have always focused elsewhere for a variety of reasons. I like your analysis of the company and the pricing m,ultiples definitely indicate that the stock is trading at a discount compared to the market. The one item I didn’t see in your analysis was a discussion about the payout ratio. I just quickly looked it up on finviz.com and it showed the payout was around 83%. With the high yield and the performance, does the payout ratio’s creep towards 100% concern you? Obviously the company is still able to cover its dividend, which is a good thing.

    Regardless, great job getting back in the action and adding one heck of an amount of dividend income to your portfolio. Congrats and keep up the great work!

    Bert

    • monsterid
      Be Smart Rich Post author

      It feel pretty darn good to be back for sure 🙂

      In terms of dividend payout ratio, you are right, it is at around 75-83% for Potash however, the formula of dividend payout ratio does not directly related to how much cash it brings in as it is related to company’s GAAP earning. The formula is Dividend per share/ Earnings per share. The earning includes other non-cash related items such as depreciation, impairment etc… therefore I much prefer to use dividend funding ratio such as dividend amount / cash flow from operation activities (or you can use free cash in the denominator to be even more conservative). It is currently around at 52% for the nine month ended September 30 2015 so I felt the dividend would still be safe.

      Thanks for stopping by Bert!

      BSR

    • monsterid
      Be Smart Rich Post author

      Yup. I love beaten down stocks. I always think the beaten down stocks’ risks are already significantly reduced as not much room to go down further. Well it can become 0 but I would not invest in that risky stock. As long as fundamentals are strong, for me, beaten down stocks are no-brainer. Thanks for coming!

      BSR

  • DivHut

    First off, increasing your annual dividend income by close to $900 is insane in just two buys. But I guess it averages out since it has been a while since you made any buys. POT has been making the rounds among the DGI bloggers in recent weeks. Who can blame them with that really high current yield which looks to be quite safe despite low commodity prices. I’m not familiar at all with Black Diamond. Always nice to read/learn about a new dividend paying stock.

    • monsterid
      Be Smart Rich Post author

      Yup $900 is sweet isn’t it? 🙂 I can’t believe myself as I was able to holding off that long.

      I realized that lots of people are buying POT. What’s really not to like about this company? BDI is pretty awesome too so I hope other value investors start to take a look at them. Thanks for stopping by!

      BSR

  • InvestingGrasshopper

    As a fellow Canadian who is new to investing, hope this question doesnt sound too naive: how do you purchase US stocks when in Canada? With CAD being so weak, is it still a good idea to purchase US stocks? And the 3rd and final question: do you use “Norbert’s gambit” when converting to USD, or is there another way?

    • monsterid
      Be Smart Rich Post author

      Hi InvestingGrasshopper. There is no naive question when it comes to investing. No single person is an expert of anything even the professionals.

      1. In order to purchase US stocks, you should open US account in your investment accounts. You can open US accounts in TFSA, RRSP and Non-registered accounts. Ask your banks, they will know what to do. Make sure your yearly fee is waived when you open them.
      2. CAD is really weak and therefore I wouldn’t recommend it at this time. I can see there are a lot of good deals in US market that makes me want to add some more US stocks but I will wait until Canadian dollar strengthen a bit.
      3. Please see the following link. It explains Norbert Gambit in different ways http://besmartrich.com/2015/06/21/norberts-gambit-save-thousands-of-dollar-from-foreign-exchange-conversion-fees/

      Thanks for the questions!

      BSR