My nonPension account had a lot of cash from multiple sources sitting around: Remnants from the CAT sale in April and the CSX sale in late 2016, lose change from when the portfolio was set up, from when JCI had a merger and spin-off last year, and the sale of the spin-off company NGVT last week, so it was time to buy a new security: Penske Automotive Group Inc. (PAG).
PAG has typically had a low P/E ratio over the last few decades, and its P/E is currently under its long-term average. When you consider the expected rising future earnings, the investment appears to be a good candidate for price appreciation over time.
In addition to the relative low valuation at this time, PAG has a history over the past few years of increasing the dividend by a penny every quarter, resulting in a 4 cent increase per year. The current dividend growth rate is about 15% per year. Coupled with a current yield of over 2.5%, it could be a great addition to the nonPension portfolio.
Are there risks associated with this investment (as with all investments)? Yes. One thing that concerns me is that there was a dividend cut during the last recession. Will that happen again during the next recession? That remains to be seen. Let's discuss that when the time comes.
The purchase of 11 shares of PAG will result in a $1.10 average monthly income for my nonPension Portfolio, which takes the average monthly total over $70 for the first time. $70 down. $490 to go. Before you know it, I will be at $560!
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