Principal Financial Group – A few days ago I made my first stock buy of 2016. The market has been a mess since the start of the year. I’ve been itching to buy stock but every morning it seems that the market keeps dropping more and more. I finally decided to pull the trigger. I bought 60 shares of Principal Financial Group, (NYSE: PFG), at $39.59 per share, totaling $2,384.35. Immediately following this stock buy the market dropped almost 400 points. Had I waited 48-hours, I could have bought Principal Financial Group at its 52-week low of $37.03. Oh well, so much for timing the market.
Timing the market is impossible. It would have been nice to buy lower, but since I plan on holding this stock for many years, it really doesn’t matter. My purchase price is still well below Principal Financial Groups average stock price. I’ve had Principal Financial Group on my insurance watchlist alongside MET and AFL. I went back and forth over which stock to buy, Principal Financial Group or MET. I decided on Principal Financial Group because it’s new to my portfolio and I already own 50 shares of MET. This stock buy increases my annual dividend income by $91 dollars.
Principal Financial Group Overview
Principal Financial Group, Inc. is an investment management company. The Company offers businesses, individuals and institutional clients a range of financial products and services, including retirement, asset management and insurance through its financial services companies. Its segments include Retirement and Investor Services, Principal Global Investors, Principal International, and U.S. Insurance Solutions. Its Retirement and Investor Services segment provides retirement and related financial products and services primarily to businesses, their employees and other individuals. The Principal Global Investors segment provides asset management services.. The Principal International segment offers pension accumulation products and services, mutual funds, asset management, income annuities and life insurance accumulation products. The U.S. Insurance Solutions segment offers individual and group insurance solutions. Source: www.schwab.com.
Principal Financial Group Dividends
- Annual Dividend Yield of 4.01%
- Annual Dividend Rate (IAD) $1.52
- Payout Ratio (TTM) of 35.08%
- Dividend Coverage Ratio (TTM) of 285.07%
- 3 Year Dividend Growth Rate of 22.3%
- 5 Year Dividend Growth Rate of 20.7%
- 10 Year Dividend Growth Rate of 11%
The chart below shows the past eight years of Principal Financial Group annual dividend increases. The past five years Principal Financial Group has increased annual dividends at a rate of 20.7%.
The chart below covers annual dividend amounts for Principal Financial Group from 2002 – 2015. The company cut its dividend 50% in 2008, but since then Principal Financial Group has steadily increased its annual dividend payouts. In 2008, dividends cuts were common, so I’m not too concerned about the cut.
Principal Financial Group Valuation
- S&P Capital IQ ranks PFG as 4-stars, a buy with a fair value calculation of $57.50 and a 12-month target price of $56.
- Morningstar ranks PFG as 4-stars, a buy with a fair value of $56.
The F.A.S.T Graph below shows that Principal Financial Group is well below the orange and blue lines. For those of you unfamiliar with this tool, when the black line falls below the orange line this indicates a stock is trading below the market standard P/E Ratio of 15. If the black line falls below the blue line this indicates a stock is undervalued and is trading below its normal P/E Ratio. Based on the graph below PFG is undervalued.
The market is extremely volatile lately. Financials and Insurance are getting hit especially hard. The stock market is down, but it might not be a buyers market yet. I expect stocks will continue falling for most of Q1. Only time will tell if I made this purchase too early. I could have parked my money for a while, but I want to increase my annual dividend income. I chose to buy PFG stock now because I feel it is undervalued. Having said that the stock could fall further due to an overall market downturn. If this happens I will likely buy 40 more shares. Once I’ve accumulated 100 shares, I will use covered calls to make money and reduce my overall cost basis.
What do you think of my Principal Financial Group buy? Are you a PFG shareholder?
Full Disclosure: Long PFG
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