Wednesday, February 17, 2016

Recent Buy - Reynolds American Inc. (RAI)

Hi Everyone,

Another purchase is in the books.  After my sell of O, I had a decent amount of funds.  RAI has pulled back just a tad off its 52 week high and the quarter looked really good.  Not to mention is that they just raised the dividend 17%!!!  That's what I'm talking about!

Ever since the merger with LO I have been looking to buy this stock.  Turns out a 22 forward PE is above average, but the synergies they should see from LO, the growth in brands, especially Newport and consistent business model is a reason for investment. 

This stock rarely pulls back and I was tired of watching it go up without me being in it.  I seemed to have traded one overvalued stock for another, but the growth in RAI I think will be much better than O at the current prices.  We shall see how things work out.  I lost just .5% in dividends as RAI is 3.5% yield and O was 4% when I sold it.  Currently I have a buy order in for OHI but the stock has taken off a bit the last couple of days.  If that purchase goes through, the combined dividends will be higher than what I was making for just O alone, and I cover 8 out of 12 months in the year.  There is just 4 others that I would not receive a dividend like I did with O.

I'm looking for O to pull back to $55.00 before repurchasing.  I will be saving cash over the next month to make sure I have some capital ready for that purchase.  I love O, just not the price!

With that being said:

I purchased 42 shares of Reynolds (RAI) at $48.04.  This purchase adds $70.56 of annual dividends to our account at the now current .42 quarterly dividend.

Tobacco has now become a pillar of my portfolio.  With roughly $10,500 invested between PM and RAI, I think I am done with tobacco for a while unless they pull back.  The REIT space in general still interests me.  If I can't get OHI, then perhaps something else...   What do you guys suggest???

So there you have it, the next building block on the path to the American Dividend Dream!  What do you think, good purchase, bad purchase?  What are you looking to buy next?



  1. RAI and PM are solid stocks with great dividends, I don;t own RAI, but I have PM and MO. OHI is another stock I own and recommend. To answer your question, I also like Starwood, STWD and Digital Realty Trust, DLR.

    1. I've heard good things about STWD and I already own DLR. I'm a bit pissed I missed OHI at $27. The money did not settle in my account quick enough! Just hoping it dips below $30 again so I can pick some up!

      Thanks for stopping by

  2. Hello,

    I checked RAI. Look at dividend yields - historically company was paying around 5% yield in 2013/2014, it's about all time highs... don't you worry that share will go down and valuation will be still demanding?

    1. I understand your concern, however, RAI was one of the cheapest tobacco companies at the time and they are still seeing synergies/growth from their acquisition of LO. Visa was not a cheap stock when I first bought it and it has doubled from that first purchase. Sometimes you have to pay up for quality and RAI has been one of the best quality stocks for some time now. I am just hoping that continues. Tobacco is recession proof and with oil/gas prices so low right now, consumers are seeing extra money in their pocket. They use that money to buy vices... tobacco/alcohol/etc. As long as oil prices stay low, i see RAI benefiting from that. It could be years before the valuation is good but at that point, perhaps the stock has already run another $50. Just wish I would have only bought Visa back in the day...