Wednesday, February 22, 2017

Watchlist for March

Well, most of the companies I own that I was looking to add have rallied higher. In fact, a lot of them are quite excessively valued for my taste at this moment. This makes it very hard to add. Names that I wanted to add to include MO, PM, HD, PEP, CL, PG, MKC, and V.

You can take a look at what stocks I hold and their 12 month chart on this page: http://www.youngdividend.com/p/portfolio-chart.html 

I have been accumulating a lot of cash that is sitting in a savings account. I have decided to taper off the rate at which I accumulate that cash and start to invest some more in dividend paying stocks. I am slowing down the rate at which I am looking to purchase a house due to the uncertainty of my employment situation.

In the end, even if the market is rising I will continue to add to positions. This is my principle of dollar cast averaging. Since I cannot count on myself to outsmart the market and time exactly at the right time, I just purchase stocks periodically month after month after month. Over time I average out times when I buy at the highest of highs and when the market is at its gloomiest lows. By being persistent I guarantee that my income every month can increase.

For next month I am eyeing the following stocks:


General Mills: Consumer staples making  packaged goods like cereal. Yields 3.17%. Slower growth, Very defensive and stable.

Home Depot: Large home improvement store. Yields now 2.45% after the massive 29% dividend hike. Is a very strong grower with good comps and decent yield. Company is more cyclical during recessions. Despite being brick & mortar, it is likely very difficult to Amazon a lot of the types of services and items they sell.

Mastercard: A company supporting cashless transactions. It has a sub 1% yield but this company grows very quickly. Company is relatively defensive in nature. Recent dividend increase was around 16%.

3M: Diversified industrial conglomerate. More cyclical but likely one of the least cyclical industrials out there due to its diversity and strong balance sheet. The company has steady growth and yields a moderate 2.53%. The latest dividend hike was a modest 5.9%.

NextEra Energy is a fast growing diversified utility. It yields 3.06% after its recent large 13% dividend hike. NEE is very defensive and does well in all periods.

PepsiCo: Diversified drink and snack business. It yields 2.75% now and I am waiting for the dividend hike in June timeframe. I think I will get a 7 to 8% hike in the dividend. The company has very nice comps compared to Coca Cola. Pepsi is a stable slower growing blue chip company. They provide a safe dividend and is a dividend aristocrat known for increasing steadily year after year.

Procter & Gamble: Diversified personal care products company. People use their products everyday. This business is very defensive. They are undergoing restructuring and change. I think eventually it will work out. The business yields 2.93% now which is lower than it was in the past. Activist investor Nelson Peltz has taken an active stake in PG and I have always liked how investments turn out with Peltz's involvement. I expect PG to raise its dividend in May at a rate of 3%. PG is a slow growing blue chip company, and pays you to hold it over the years with its large dividend and steady dividend increases.

Philip Morris: An international tobacco company. I think their new iQOS concept will be a huge hit and will provide a diversified revenue stream for PM and reduce the decrease in tobacco comsumption. With iQOS, smokers can smoke without worrying as much about the harmful effects of smoking (at least that's the plan..) PM yields 4% and I expect the recent headwinds to decrease. I am looking for a dividend increase in 5% range this year around October. PM in the past with MO has growth incredibly well, severely outpacing the S&P500. Their dividend increases together were around 8% year after year.

Visa: Like Mastercard, Visa is a global giant in cashless transaction processing. They are a defensive business and grows very rapidly. It is a low sub 1% yielding company. The growth will more than make up for the low dividend.

Air Products & Chemicals: APD is a chemicals company for industries. The company is cyclical in nature but is a dividend aristocrat and has shown that it can survive recessions. APD yields 2.71% after their recent announcement of a 10.47% dividend hike.

9 comments:

  1. Solid list of companies YD. I really want to build up my position in V and start a position in MA. Since I'm only in my early 30's I've got a long time to reap the rewards both of those companies have to offer. MA is a better value right now than V, but I like V a bit better. I'm looking at HD's foil in LOW. They have a stronger DG history and they're offering a decent value right now although it would be much better in the low $70's. This market run sure is taking companies out of my buy zones which is frustrating. Some day we'll actually see a decent downtick in the markets to unlock some value.

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  2. I been slowly chipping away at V and MA. HD and NEE are both on my list also. Just waiting for "fresh capital"

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  3. Young Div -

    Nice post and didn't realize the big shake up GIS has had over the last 6 months, very compelling there... love their products as well.

    -Lanny

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  4. Hello YoungD!

    Solid choices - agree that the prices have gone up too quickly of late. FYI, Pepsi already announced the new increased June dividend in their most recent results.

    Cheers,
    MG

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  5. Hey Y/D
    Another question for you. I had some "O" stock, then I sold it (I know, stupid move). I'm totally regretting doing that. Anyhow I'm going to buy more. My only concern is the P/E is so high. Would it be a bad idea to buy it now at such a high P/E? Or wait for it to go down? I worry if I wait, it might take too long, and that's wasted time not earning some monthly dividends. I think it was Warren Buffet who said, "it's not timing the markets, it's time in the markets." What are your thoughts?
    As always, I appreciate you insight.
    Thanks
    Shane

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  6. Using Price to Earnings (P/E) for RETIs is not a good way to evaluate them. REITs use depreciation to lower the value of their assets over time. This means every year REIT companies write off certain parts. It's not actually costing the company anything but this makes it appear that the company is earning less. I recommend using Price / Funds from Operations instead of P/E.

    I don't really like the REIT space now because of rising interest rate environment. However O is best of breed and I think if you really want to add some and dollar cost your way in, O is the one to add. It is on the expensive side compared to its historical average.

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  7. Like your list! LOW, JNJ, V, CL, GPC, MMM, CCOM, CSCO, INTC, PM, all on my current watch list. Hoping for a correction so I can pick up some of them.

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