Recent Purchase: W. W. Grainger (NYSE: GWW)

Purchases

On Friday, July 17th I dove into the NYSE for the very first time by initiating a position in W. W. Grainger (NYSE: GWW). I purchased 5 shares at the price of $233.00 USD, with a trading cost of $6.95 USD from CIBC Investor’s Edge…

CAD drops to lowest level since 2004

Considering I am a Canadian Investor, this ended up costing a total of $1, 539.36 CAD, with shares averaging roughly $306.48 CAD. With the CAD dropping to lowest levels since 2004, I am losing confidence in our currency under the conservative government, and with a recession looming here, I’d like to purchase some assets in our neighbor country, the USA. The Fed will only be increasing rates when things have stabilized and are growing in the US, and to me that shows that things will be good and that corporations which are not highly indebted are in a good position to continue growing.

About W. W. Grainger

A company overview of W. W. Grainger by CIBC Investor’s Edge reads as such:

“W.W. Grainger, Inc. is a distributor of maintenance, repair and operating (MRO) supplies and other related products and services. The Company offers its products and services to businesses and institutions in the United States and Canada, with presence also in Europe, Asia and Latin America. It operates in two segments: the United States and Canada. The United States business offers a selection of maintenance, repair and operating supplies and other related products and services. Acklands – Grainger is a distributor of industrial and safety supplies that distributes tools, fasteners, safety supplies, instruments, welding and shop equipment, among others. Other businesses include Zoro, the single channel online business in the United States, and operations in Europe, Asia and Latin America. The Company provides customers with a range of options for finding and purchasing products, utilizing sales representatives, contact centers, direct marketing materials, catalogs and e-commerce.”

Valuation

At the time of this writing (July 21), GWW trades at $235.10 USD. The 52-week range lies between a low of $221.67 and a high of $261.57. The company is nearer it’s 52-week low.

GWW has a trailing P/E of 20.5, which is roughly a 5% discount to it’s 5-yr average P/E of 21.6, and a 20% discount to the relative P/E of the S&P 500 of 25.8. Thomson Reuters has a 12-month mean price target of $255.00 per share, which would result in a share price increase of 8.5%. Thomson Reuters also has an analyst recommendation of HOLD on the stock, broken down into: 4 Strong Buys, 3 Buys, 11 Holds and 2 Reduce.

Dividend

With my purchase of GWW, I’ve bought another company with a relatively low dividend yield, but some really good yield growth. At the moment, the majority of my stocks are high-yield with slower growth or decent growth, but I’ve wanted to mix it up a bit. GWW could even be considered somewhat of a growth stock, considering it has an annualized return of 15.05% over the past 10 years. According to longrundata, GWW has a 5-year yield growth of 18.56% and a 10-year yield growth of 18.18%. Imagine getting an 18% raise every year for the past 10 years at your corporate job. This is what GWW does with its dividend payments.

GWW currently yields 2.08%, however it’s 5-year yield average is a measly 1.48%! Talk about getting more for less! They also boast a beautifully minuscule payout ratio of 37.73%, meaning they have a ton of space to increase the dividend, even at it’s current growth rate.

Yield-on-Cost

Given GWW’s current yield of 2.08% and it’s 10-year yield growth of 18.18%, the 10 Year YOC for GWW is 11.05%! This means that by investing today at GWW’s 2.08% yield, on your 10th year of holding shares you’ll be receiving 11.05% of your initial investment in dividends. And it just goes up and up from there. This is what dividend growth investing is all about.

 

Dividend Beginner

A 22 year old Canadian dividend growth investor striving for early financial independence; building as many passive income streams as early as possible.
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  • Great purchase, DB. GWW is one of the companies that doesnt get as much love in teh DGI community as it should. It has a great track record and the business is run very well.

    Congrats on adding this to your portfolio and on your first US stock. Keep up the great work.

    Best wishes
    R2R

    • Thanks R2R,

      I agree, and whenever I do see it on any div. growth blogs it’s usually them saying the exact same thing. Hopefully I’ll find some fellow shareholders in the community. It is indeed an incredibly well-run company and is a definitive long-term hold.

  • Great addition to your portfolio. With all the things that is going on right now in the market, probably US stock would be the best choice right now. Most of the companies traded on Canadian market are resources and I try to stay away from resources for the past year. I’ve been focusing on roaylty streams and real estate. Good luck!

    • GK,

      You’re 100% right in my opinion. I’ve been completely burned on all the resource-related companies I’ve bought.. In fact they’re responsible for nearly all of my capital decline in my portfolio by a lot. I’m already overweight in real estate, but am looking forward to the diversification of the US market, just sucks that it’s at such a steep price relative to the CAD.

  • Great buy here! GWW is one of our top low dividend yield companies. Great Aristocrat to add to your portfolio. You’ll love this investment 20-30 years down the road.

    Keep up the great work!

    Bert

  • Finally another dividend growth blogger that can appreciate GWW. I have held this stock for about 8 years and was always curious to know what it hasn’t been more popular among the blogging community. Needless to say that it is one of my top performers in my portfolio and the dividend raises continue as it has for multiple decades. I plan to keep this name for many more years and add to it accordingly. Thanks for sharing.

  • I think I commented before and you had said you were avoiding the US due to our poor, slowly falling apart currency but that’s the issue I have with trying to avoid that by buying Canadian companies.. there isn’t that much in comparison and being diversified is difficult. But, I’ve bought too much US and need to start watching the currency better and buying Canadian when I can. So ones like Telus, CNR, etc are on my radar until our dollar starts to finally fight its way back.

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My publishings on dividendbeginner.com references an opinion and is for information or entertainment purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice. I am not responsible for any decisions you make concerning finances, taxes, or investments. You must perform your own research and always take caution when extending capital.