Saturday, September 17, 2016

Some ideas for my purchase next week

Next week will be a smaller buy. I'm targeting $1000 total spread around a few stocks. Below are some of my ideas for stocks that have corrected recently and are yielding high amounts.

There is definitely a sector shift going on right now away from Consumer Staples, Utilities, and REITs into less high dividend sectors like Industrials and Technology. Big dollar fund managers are most likely cashing out their profits in these sectors and sector rotating to more growth sectors. Dividends are also becoming less "sexy" as talks of interest rate hikes are floating around the press. That's perfect for me since many of my favorite companies on my watch list are in Consumer Staples, Utilities, and REITs. REITs are still expensive so I don't have any names yet, although definitely pulling back. I have identified some names in the Staples and Utilities space below.

One of my favorites. Altria (MO) provides a very high yield and a high growth as well. It has corrected around 9% and any dip in Altria to me is a time to add. Altria yields a high 3.9% and has been consistently increasing the dividend at a 8% clip. Altria sells tobacco, an addictive product that is recession resistant and has a loyal userbase. I don't condone smoking but as an investment I recommend Altria. Altria is one of the well known dividend aristocrats with a 47 year dividend raise history (keep in mind they have spun off a lot of companies over the last several years so some may not consider Altria a dividend aristocrat).

Kimberly-Clark is now yielding over 3%. KMB has dipped around 12%. It's in correction territory. They have 44 years of dividend hikes and are a consumer staple selling products like toilet paper. They are very recession resistant. KMB has a very long 44 year history of consecutive dividend increases, making it a dividend aristocrat. Dividend raises have been not so spectacular, in the 4-7% raise range. But that's fine for me since KMB is a steady as you go blue chip, not a high flying growth story.

McCormick sells spices and they are one of the most consistent in increasing earnings and dividends year over year. They are a consumer staples with a lower yield. They have corrected around 11% and is yielding 1.8% now. MKC is a dividend aristocrat with 30 years of straight dividend increases. The dividend hikes average around 10%.

I still remember when J M Smucker was yielding less than 2%. Now it's yielding 2.2%! It has corrected healthily by 12%. SJM sells jam and other food products. SJM has a not too shabby 19 year history of raising dividends. SJM has a higher dividend growth averaging around 9-10% y/y.

I always felt AT&T was a boring stock. It's the epitome of boring but it generates very consistent cash flow that covers a fat dividend. One cannot look at the share price only when considering an investment like AT&T. Their share price is rather flat. Since AT&T yields so high, you have to include dividend reinvestment in the total return. With AT&T you're guaranteed the dividend return which is around 5% year after year. AT&T can consistently increase dividends every year by around 2-3%. So in total I expect returns to total around 7-8% per year over a long period of time. When looking at AT&T, the investor should focus on their increasing share count and increasing income year after year (not so much the share price total). Right now they yield 4.8% which is very nice for today's environment. The shares have corrected a bit around 8%. AT&T is a dividend aristocrat with 32 years of consecutive dividend hikes.

General Mills sells packaged food products such as cereal. The share price has pulled back by around 10% and now yields 2.95%, almost crossing the 3% mark again. GIS is one of my most favorite consistent food stocks due to its very stable growing earnings and dividends. General Mills and its predecessor firm have paid dividends, uninterrupted and without reduction, for 117 years... Think about that for a second, how many recessions and world wars were there in 117 years? General Mills didn't care at all. Tune out the noise. Business as usual. They sometimes go through periods of no dividend increases (fine by me), so their dividend hike history only goes back for the last 13 years.

Aqua America has corrected by over 15% now. It's now finally approaching realistic levels. Before it was such a rocket ship. WTR has 25 years of dividend increases. It is a dividend aristocrat. They raise the dividend on average by 8% year after year. Now it yields 2.54%.

1 comment:

  1. Those are some interesting ideas that you have there. I am familiar with most of them and have even been considering some of them myself. I'm not familiar with the last one, Aqua America but I do intend to look into it some. Great article that you have put together here. Thanks for sharing.