Recent buys – Suncor and BP

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If you have been following the stock markets, you know the markets have taken a beating over the few weeks. Due to the dip, the value of our dividend portfolio has taken a HUGE hit. I’m not too worried though. We are not going to use our portfolio today, tomorrow, or in the next few years. We’re still in the building stage of our early retirement journey. Part of my plan of achieving financial independence is through purchasing of dividend stocks. I love the idea of owning part of the company and having my money working hard for me while I’m busy dealing with my everyday life. The recent dip in the stock markets has provided an excellent opportunity to purchase additional solid dividend paying stocks. It’s like building a house, you want to buy the materials when they’re on sale, not when the materials are over-priced. The same analogy can be applied to dividend stocks.

 

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One of the reasons for the drop in stock markets is the oil price as you can see from the chart above. All oil related stocks like Chevron, BP, Suncor, and Royal Dutch Shell have been dropping in price. Most of these stocks and are around the 52 weeks low. This was very different when I purchased Suncor about 2 months ago.

Seeing that the oil companies are around the 52 week low. I made 2 purchases recently.

First using US dollar dividend received in the RRSP account, I purchased 9 shares of BP PLC to add to our existing position.

BP is an integrated oil and gas company. The company operates in two business segments – exploration and production, and refining and marketing. Due to the Gulf of Mexico oil spill, BP stopped its dividend payment in late 20010 for 2 quarters but started paying dividend again in 2011. The dividend payments have been increasing year over year since 2011. Currently BP has a forward looking P/E ratio of 5.2, a 5.67% dividend yield, and a PEG ratio of 1.08. With numbers like these it’s hard not to get excited about owning BP. This purchase is relatively small in terms of dollar amount and BP continues to make up a very small amount of our dividend portfolio. This is my way of limiting risk on higher yielding stocks.

Continue the oil company purchasing theme, I also purchased 60 shares of Suncor Energy to add to our existing position.

Suncor is one of the biggest oil companies in Canada. The company explores, acquires, develops, produces, and markets crude oil in Canada and internationally. In addition, Suncor also transports and refines crude oil. There’s very little not to like about Suncor and the recent drop in price has given me more reasons to pull the trigger. This purchase allowed me to average down our cost basis.

These two purchases have added $88.08 into our annual dividend income.

I’m hoping that the stock markets will stay around the current levels for a few more weeks so I can continue purchasing solid dividend paying stocks at a bargain!

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19 Comments

  • Reply
    My Dividend Pipeline
    October 16, 2014 at 5:48 pm

    Tawcan,

    I like your focus on energy. I too am planning on adding more shares in this sector while it is low. Unfortunately these types of companies can bounce in many different directions with little warning and a lot speed so you have to move pretty fast. BP at over 5.5% is fantastic! Good job.

    MDP

  • Reply
    Asset-Grinder
    October 16, 2014 at 6:21 pm

    Really like the buy. Been thinkin of adding some energy as well. Also look into CPG. High dividend and should rebound as well!

    • Reply
      Tawcan
      October 16, 2014 at 9:53 pm

      Hi Asset-Grinder,

      Thanks. I’d be careful with CPG. The payout ratio is over 100% and there hasn’t been any dividend growth over the last few years. The PE ratio is also over the roof too.

  • Reply
    Dividend Mantra
    October 16, 2014 at 9:23 pm

    Tawcan,

    I’ve definitely noticed the drop in big energy plays. Though, if you look at the % drop in Brent, the drops are warranted. The real question is whether or not Brent stays this low. If it does, then the drop in profitability across the sector warrants a P/E ratio compression. However, if it’s a temporary drop then it’s a huge opportunity. Either way, I continue to scan this sector even though energy is about 15% of my portfolio.

    BP is particularly cheap right now. Nice pickup there.

    I’ve never really looked into Suncor, but maybe I should. I was always concerned about the higher cost of procuring the oil from the sands, and the fact that the heavy oil is worth less on the market. So that seems like an unfavorable spread compared to more traditional oil drillers. But that might be offset by assets with longer lives. I know SU has a pretty favorable dividend growth record, so they’re doing something right. And the diversification into a different integrated oil company might be nice.

    Nice to see you add to that dividend income total! 🙂

    Best regards.

    • Reply
      Tawcan
      October 16, 2014 at 9:57 pm

      Hi Dividend Mantra,

      I think oil price will go back up again. Maybe not the $100/barrel level but maybe around $90. I added Suncor so I can enrol in DRIP. Your concerns are warranted but oil sand companies like Suncor has been able to reduce their production cost over the years to improve profitability. It’s all about diversifying the sector into different type of energy related stocks – producer, distributor, whole sales, etc.

      Cheers.

  • Reply
    weenie
    October 17, 2014 at 2:11 am

    Great to see an example of an investor taking advantage of the falling prices in the market – great opportunity!

    • Reply
      Tawcan
      October 18, 2014 at 7:30 pm

      Hi Weenie,

      Thanks, trying to take advantage for sure. Hope you’re doing the same.

  • Reply
    Jeff
    October 17, 2014 at 5:55 am

    Very nice article! Suncor is something I hold in my portfolio too.

    Canadian Natural Resources (CNQ) was down big time as well. Unfortunately, both Suncor and CNQ are already recovering since yesterday before I could stock up on some. 🙁

    • Reply
      Tawcan
      October 18, 2014 at 7:30 pm

      Hopefully the market will continue to be volatile the next few months so we can pick up more shares.

  • Reply
    My Own Advisor
    October 17, 2014 at 9:43 am

    Nicely done.

    I hope prices stay low for SU, until Jan. 1st 🙂

    I would like to be able to DRIP SU synthetically at some point. It might take another couple of years until I get there though and I certainly don’t want to buy high…

    Mark

    • Reply
      Tawcan
      October 18, 2014 at 7:31 pm

      Hi Mark,

      I hope all the stocks stay low for a while. Would be nice to add some more to TFSA!

  • Reply
    Roadmap2Retire
    October 17, 2014 at 11:26 am

    Great time to pick up energy stocks. It looks like the oil prices have stabilized after the fall. I pulled the trigger a bit too early on my CVX purchase. If I wait a couple more days, I could have saved about $5-6 per share. Oh well…its hard to time the market..I still got a good price and YOC on the investment.

    Best wishes
    R2R

    • Reply
      Tawcan
      October 18, 2014 at 7:31 pm

      Hi R2R,

      I think you picked up CXV at the right time. You could always add more to average down your price. 🙂

  • Reply
    Dividend Diplomats
    October 17, 2014 at 7:28 pm

    Tawcan,

    Nice energy pick ups! if I didn’t already own two oil companies + a pipeline that in combination takes a huge chunk of my portfolio, I would be buying more as well here. Great adds and I know these are great stocks to have in your dividend portfolio – dividend growth + hopefully earnings can hold through the downtrend in oil = a solid portfolio for years and years. Have to love the black gold in oil!

    -Lanny

    • Reply
      Tawcan
      October 18, 2014 at 7:32 pm

      Hi Lanny,

      Thanks, I think the earning will hold through the downtrend in oil. If not the low earning probably will only a quarter or so, providing more opportunities to add more oil stocks.

  • Reply
    Daisy @ Prairie Eco Thrifter
    October 18, 2014 at 11:42 am

    I have some ETFs that have these companies in them, so while I don’t buy stocks individually, I do own these. I have been LOVING the dip in the market and have been taking advantage of it by investing more (buy low!)

    • Reply
      Tawcan
      October 18, 2014 at 7:35 pm

      Hi Daisy,

      Great to hear! Seems that we all have the same concept of buying more! 🙂

  • Reply
    Special Agent Dividend
    October 18, 2014 at 9:23 pm

    Love these buys! The energy sector has been hammered, which is wonderful for us dividend growth investors! I added to my positions in XOM and COP this week, as the prices seemed very attractive so I wanted to throw some additional capital on top of my regular monthly investments in the two. I’d like to add BP or CHX at some point.

    • Reply
      Tawcan
      October 20, 2014 at 3:42 pm

      Hi Special Agent Dividend,

      Adding XOM and COP are great buys. I’m hoping to add some XOM and COP later. Hopefully the price will stay low for a while.

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