I’ve got another December buy to report. This time it’s a brand new stock for my Portfolio.
This is a stock I’ve been eyeballing for months. The stock had dipped to its current level before, but I didn’t act.
This time I did. I wanted to initiate some sort of position just in case the stock moved higher. Should the stock continue to drop though, I’ll look to add on.
This stock is not a high-yielder, but it does offer a nice dividend growth history, and that’s always something I’m looking to add to my Portfolio.
Let’s get to it… here are the details of my latest buy.
Accenture (ACN)
ACN is a large-cap IT services company from the Information Technology sector. The company provides strategy, consulting, outsourcing and operation services to help its clients implement rapid, technology-driven business transformations that improve the client’s efficiency and productivity.
The company operates globally. ACN has over 9,000 clients in more than 120 countries. North America is the company’s largest region and it accounts for 46% of ACN’s total revenue – Europe isn’t far behind at 34% of revenue. ACN was founded in 1951 and is headquartered in Dublin, Ireland.
ACN has impressive metrics, most trending in the right direction. However, Return on Equity and Return on Invested Capital had drifted lower (from stellar levels) over the past decade before stabilizing in the past 3 years. Both RoE and RoIC metrics are still north of 30%, which is terrific for any company.
I was attracted to ACN by its double-digit earnings and dividend growth. Its dividend yield is about 1 percentage point below my Portfolio yield, but I don’t mind that given the company’s growth.
I’d say ACN is still a bit overvalued even at the price I’m paying, but with a dividend yield above its 5-year average and a forward P/E ratio that is lower than normal, I’m willing to dip my toes in the water.
On 12/19/22, I initiated my ACN position by purchasing 10 shares at $259.00/sh, for a total of $2,590.00. The stock yielded 1.73% at my purchase price, or about 1% lower than my overall Portfolio yield.
The purchase added $44.80 to my annual forward dividend income. My first dividend payment will come in February.
As you probably know, I’ve been looking to increase my Portfolio weighting in the Information Technology sector, and ACN certainly helps in that regard. ACN becomes my 10th Portfolio stock in that sector.
ACN starts as the 8th smallest position in my Portfolio, just behind VF Corp (VFC), but ahead of FedEx (FDX).
As I normally do with a new holding, let’s take a quick look at the dividend growth history dating back to 2000…
ACN started paying a regular dividend in 2005 and has basically raised the dividend each year since then.
You’ll notice a decline in the dividend payment in 2019, but this was more of a timing issue than a true reduction in the dividend. ACN switched from a bi-annual dividend to a quarterly dividend and it ended up being one bi-annual dividend and one quarterly dividend being paid that year.
Dividend growth is essentially in the low double-digits if you account for that payment anomaly in 2019. ACN’s most recent dividend raise was a 15.46% increase this past September.
Dividend safety for ACN is rated ‘Very Safe’ by Simply Safe Dividends (score of 92 out of 99). Part of this strong safety rating stems from ACN’s low earnings payout ratio of 38% and an even better free cash flow payout ratio of 30%.
The addition of ACN raised the number of my Portfolio holdings to 59.
Summary
Just a single transaction to report this time around. It was a buy, and a new Portfolio stock no less!
I initiated a position in Accenture (ACN). It’s an Information Technology stock, boosting my holdings in that sector.
I bought 10 shares. Due to ACN’s high share price, it ended up being a fairly significant investment of $2,590.
ACN yielded 1.73% at my purchase price. My annual forward dividend income rose by a decent $44.80.
Since ACN is a new Portfolio holding, the number of stocks in my Portfolio rose by one to 59.
I don’t see ACN in many dividend portfolios. Is it a stock you own? What would stop you from owning it? Its lower yield? Its high valuation? I look forward to your comments!
Hi ED,
This is a company I’ve owned since 2008 and you’re right that it is rarely discussed or owned in dividend portfolios. I hold a large position in ACN and it has been a terrific investment for me over the years. The company has a great business model and its services and solutions are necessary to stay on the cutting edge of today’s need for efficiency. Because I’ve owned ACN since 2008, my cost basis is $36 a share and yield on cost is upwards of 13%. When I first purchased ACN I recall that the dividend yield was only 1%, but I just saw a bright future and in this case it proved right. I trusted the dividend growth to do the heavy lifting over the years. This one is still a winner today. Nice addition for you.
Wow, Ralph.. since 2008… a nice addition, no doubt. You’ve benefited from some terrific dividend growth over that time as your YoC points out, not to mention some outstanding price appreciation. That’s the way to do it.
I’m sure you’ve got some other stocks in your portfolio that have similar results. Well done!
ACN is solid but rarely goes on sale. Similar to you I initiated a position in late 2020 knowing it was on the expensive side of things, but I felt at the time it was a reasonable level at which to start a position. I’d love to see this one keep drifting lower.
Me too, JC… I’d love to add below the $259 share price I started at. Based on the timeframe you mentioned for your initial purchase, it sounds like maybe you started between $215 and $260.