On April 7th, I added 57 shares of Inter Pipeline Ltd (TSE: IPL) to The Dividend Beginner’s portfolio. I purchased the shares at $26.10, with a trading cost of $6.95 for a total cost basis of $1,494.65.
This is my second time purchasing shares in Inter Pipeline, and I’m happy to do so. I originally purchased 43 shares in February for $23.20 per share, and the stock price has continued to rise steadily since. I originally invested a total of $1,004.55 into IPL stock as I was playing very conservatively and soon realized it deserved a bit more of my attention, so I upped my share count to a nice round 100. The monthly dividend income is a great boost to incoming dividends to help cover monthly expenses as the numbers are starting to mean something after a year.
Average Cost Basis Increased
Unfortunately, as this is my second time purchasing IPL shares, and at 12.50% increase to my original purchase, my per share cost basis has increased a decent bit. I hear a lot of other dividend investors preaching to only buy more shares once the stock price drops below your cost basis, but I think that it’s just as good to catch prices as they are rising as well and would like to incorporate some of that into my stock purchasing decisions. So to figure out my new average cost basis on my IPL investment…
(43 shares * $23.20) + (57 shares * $26.10) = $2,485.30 / 100 shares = $24.85 per share
Yield on Cost Decreased
Another unfortunate result of purchasing more stock at an increased price with the same dividend means that my yield on cost for my IPL shares will drop. This is not much of a concern of mine since my increased concentration in IPL still increases my overall annual dividend income a decent bit, and the IPL yield is very high relative to other investments so I still believe I come out on top in the end. My new yield on cost for IPL is…
$1.56 dividend / $24.85 share = 6.28% dividend
My yield on cost has dropped to 6.28% from a previous 6.72%. My most recent purchase at $26.10 resulted in a dividend yield of 5.98%, which is still an incredibly high yield. I really can’t complain from having my yield drop 44 basis points.
Annual Dividend Increased
Despite both my per share cost basis rising and my yield on cost decreasing, one great benefit to my increased concentration in IPL is the result of an increased total annual dividend coming in from this mid-cap pipeline company. My new annual dividend is…
100 shares * $1.56 dividend = $156.00 annual dividend a.k.a $13.00 monthly dividend
My previous annual dividend from IPL was set at (43 shares * $1.56 dividend) $67.08, so this marks an increase of 132.56%.
My new 57 shares of IPL add $88.92 to my annual dividend income, or $7.41 per month. IPL has increased their dividends consecutively for 13 years. In fact, IPL meets all of the Dividend Beginner stock picking criteria. My stake in IPL has increased my 12-month forward annual dividend income from $1,524.20 to $1,613.12, an increase of 5.83%. My monthly average dividend income now stands at $134.43.
|Annual Dividend Income||$1,524.20||$88.92||$1613.12|
|Monthly Dividend Income||$127.02||$7.41||$134.43|