Friday, April 7, 2017

The April Plan

My taxes are done, there will be a tax return I will get this month that I would like to use on stocks. Along with the cash I have been saving from my income, the amount I plan to spend will be in the 5 figures.

The problem now is that most of the stock market has run up a lot and everything is expensive. My goal is income accumulation and not necessarily buy and sell. So higher stock prices have to me a downside of acquiring less income per share than before, however since I do not have any desire to sell shares that I buy, a decrease in share price will not be a problem for me.

I have recently switched brokerages so I will be able to get several free trades per month due to the balance of my portfolio. Hence, this list is quite large.

Here are some names I am thinking of to add this month. I am trying to pick primarily higher yielding companies.


Altria (MO): This well run company paying copious dividends has pulled back nicely. I always buy on the dips on Altria. MO yields 3.4%

Philip Morris (PM): The highest yielding stock I'm considering from this list. Its yield is 3.7% and has strong growth prospects with IQOS and the international population usage of cigarettes has a much higher growth potential than the US. The company is also hampered by the strong dollar, and when that goes down PM's earnings will increase substantially.

Procter (PG): Still expensive but it's pulling back. I like PG at a 3% yield or above and that's where it sits now.

Kimberly (KMB): Also a bit expensive but it's rolling back down. I like this company at a 3% or above and it's sitting around 3% now.

Coca Cola (KO): The no growth loser. It yields around 3.5% now which is a nice yield in today's market. I will consider buying KO not for growth but as a "bond" that grows with inflation.

Clorox (CLX): Still at a high but pulling back a little bit. It yields 2.40% which is not very high but it's one of the few companies that can still grow organically.

General Mills (GIS): Downgrades and less than stellar earnings is causing this staple name to fall back even more. It now yields 3.3%

Hormel (HRL): Hormel is a small yielding company at 2%. The company shows impressive growth but I feel it is experiencing PE contraction right now (sits at around a P/E of 20 which is much lower than what it was in the past). The price has not moved since the beginning of 2016.

JM Smucker (SJM): Nice pull back on this consumer staple company that is very defensive. It's at 2.32% now and has strong growth as well. A bit expensive with a P/E of 22.

3M (MMM): I'm late to industrials but my weighting in industrials is too light. So I need a few high quality names to have small additional positions added to. 3M is the highest quality in my opinion and it yields now 2.5% which is not bad for the amount it has run up. 3M's recent dividend increase was only a modest 6% hike. My strategy for industrials (since I am buying at a high) is to buy a small position now and then buy more as the companies drop due to bad news or slow downs.

Illinois Tool Works (ITW): ITW is more cyclical than 3M but it is also a very well diversified industrial. It yields only 2% but increases its dividend at a high pace when the economy is good. It's recent increase from 0.55 to 0.65 was a 18% hike. Industrials pull back hard when the economy slows down. I don't want to overload on ITW right now but want to have a starter position. For example, add $3000 now, and when it drops 10% add another $3000. Since this position is long term, I have no plans to sell and buying at a lower price will just give me the benefit of getting more dividends per share.

Visa (V) / MasterCard (MA): Both of these are very high growth and offer non-existent dividends. However, these dividends grow quickly. V yields 0.74% and MA yields 0.78%. I'm expecting V and MA to grow their dividends by 15-20%. The future is cashless.

Becton (BDX): Very consistent grower health care equipment company yielding 1.6%. BDX is usually very conservative with increases, so I'm expecting a 10% hike.

Ross (ROST) / TJX Companies (TJX): These are more speculative since they are brick and mortar. However, their past performance has been impressive and I believe they offer a niche store style that customers will always flock to even during bad times (they are the discount store that sells brand name products). TJX recently hiked their dividend 20%. from 0.260 to 0.313. It has done this consistently in the past and I believe it will continue in the future. I expect similar growth with ROST.


  1. Young Div -

    I hear ya on the tough stock market, it's just hard. Have you looked at CVS? Feel free to take a look and let me know what you think...


    1. Not a big fan of CVS despite the good revenue and earnings growth history. Even though they have a healthcare plans business, I dont like very much their brick and mortar business. I have walked through their store several times and I always ask myself why would I ever buy anything at CVS if I can get it for 30% cheaper at Walmart or Amazon?

  2. There are a lot of great companies that your considering. I have my eye on a couple of them that are on your list but i dont have as much capital to put to work as you do. I look forward to reading about how you decide to deploy your capital. Thanks for sharing!

  3. All solid companies if at better valuations. I second Lanny's CVS pick. Regarding the B&M retail the thing about it is you run into a CVS if you need something right that second and it's more convenient to go there as opposed to WMT. To me the retail part is just kind of a "hey we have customers in here getting prescriptions why not throw in some other stuff in case they want to buy it." It's all about convenience shopping and isn't something that you really plan out. I'd love to see MO at yield closer to 4%, but I'll probably have to wait on that one. HRL is another one that I've seen has been making the rounds with a few bloggers making purchases and I need to look into their healthy/natural/organic brands that they've added to their mix to see how they stack up. All the best in April and maybe the markets will continue to pull back and unlock some better values.

  4. Hi, Young Dividend -- you're listing some great stocks for consideration, especially what you call foundation picks. Unfortunately, I think most of them are trading at a premium now. Last week I bought HRL and CVS -- HRL is trading at about fair value and CVS is discounted by about 20% to fair value, in my view.

    Thanks for the update and happy investing!

  5. Hello Young Dividend, I like how you sorted your options into foundation, industrial and high growth picks. For foundation stocks, I am currently interested in increasing my JNJ position but am on the fence due to the price. I have been slowly averaging into BDX and will continue over the course of this year. I have also been eyeing V but the price is making me hesitant. I still want to deploy some capital this month so I will see where it goes. Looking forward to reading about which stocks you pulled the trigger on.

    1. If your plan is to hold these stocks for decades then I don't think you will care if you bought JNJ at $124 or $118 or $110 in 30 years. In 30 years you will likely be more amazed and what the dividend growth will be. Perhaps JNJ will pay you more dividends every year than your original cost basis. I prefer to be time in the market instead of timing the market so I buy companies every month.

  6. Thanks for sharing! I'm not buying in the near term and am still paying off debt. Ugh! :)