Friday, October 11, 2013

What are you buying?

The government continues to remain deadlocked and it looks like that is going to continue up until the debt ceiling issue comes next week.  Eventually they will work all of this mess out, but in the meantime the markets have been none too pleased.  I'd expect volatility to increase leading up to any kind of resolution and that means it's the perfect time to build a watchlist and get some target entry prices.  Overall the markets haven't given too many opportunities, but with the current self-imposed debacle prices on some high quality companies are coming down to much better valuations with the chance for some fire sale prices if the government continues on its current ways.  In the long run, this is just noise.

Here's some of the companies that I'm looking at adding shares to.

Coca-Cola (KO) is a dividend champion with 51 years of dividend increases.  The current yield is 3.02% with a TTM P/E ratio of 19.7.  Coca-Cola's 5 year average P/E ratio is 17.6 and 5 year average dividend yield is 2.90%.  KO's 5 year dividend growth rate is 8.4%.

PepsiCo (PEP) is a dividend champion with 41 consecutive years of dividend increases.  Shares offer a current yield of 2.86% with a TTM P/E ratio of 18.6.  PepsiCo's 5 year average P/E ratio is 16.8 and 5 year average dividend yield is 3.00%.  PEP's 5 year dividend growth rate is 9.3%.

ExxonMobil (XOM) is a dividend champion with 31 consecutive years of dividend increases.  Shares are currently offering a 2.96% yield with a TTM P/E ratio of 10.4.  Exxon's 5 year average P/E ratio is 11.1 with a 5 year average dividend yield of 2.30%.  XOM's 5 year dividend growth rate is 9.7%.

Chevron (CVX) is a dividend champion with 26 consecutive years of dividend increases.  Shares are currently offering a 3.44% yeild with a TTM P/E ratio of 9.4.  Chevron's 5 year average P/E ratio is 9.3 with a 5 year average dividend yield of 3.20%.  CVX's 5 year dividend growth rate is 9.2%.

Wal-mart (WMT) is a dividend champion with 39 consecutive years of dividend increases.  Shares are offering a 2.58% current yield with a TTM P/E ratio of 14.2.  Wal-mart's 5 year average P/E ratio is 14.5 with a 5 year average dividend yield of 2.10%.  WMT's 5 year dividend growth rate is 13.5%.

Procter & Gamble (PG) is a dividend champion with 57 consecutive years of dividend increases.  Shares are currently offering a 3.13% yield with a 19.8 TTM P/E ratio.  Procter & Gamble's 5 year average P/E ratio is 17.3 with a 5 year average dividend yield of 2.90%.  PG's 5 year dividend growth rate is 10.2%.

Target (TGT) is a dividend champion with 46 consecutive years of dividend increases.  Shares are currently offering a 2.74% yield with a 15.0 TTM P/E ratio.  Target's 5 year average P/E ratio is 13.6 with a 5 year average dividend yield of 1.80%.  TGT's 5 year dividend growth rate is 20.5%.

Obviously there's a common theme between all of these selections and that's high quality with lengthy histories of paying out ever higher dividends to their owners.  In uncertain times you want to own businesses that have virtually no chance of failing.  Barring another global catastrophe I don't expect these companies to fall, and they certainly won't be the first ones to go.

The one I'm most interested in from a diversification standpoint is PepsiCo.  I'd love to own the other half of the soda duopoly and Pepsi would also offer some much needed diversification into the food/snack industry.  However I believe that all of these companies represent good value at current prices.

Moving up the risk curve I also like Visa, International Business Machines and Cisco.  These three companies offer the potential for much higher dividend growth, although with the exception of Cisco, the starting yield is much lower.

I was originally not going to be able to make any purchases until around the 18th of this month once I could get some funds transferred over.  However, I've gone ahead and started transferring some funds now from my savings to my brokerage account to allow me to capitalize on any opportunities that might present themselves.  I'll be re-stocking my savings account with my next paycheck.

What companies are you buying or looking to buy with a bit more of a pullback?

*All yields based off the close of trading on Wednesday, October 9th.

12 comments:

  1. Great List. I am looking to buy JNJ since I don't have a position as well as TGT.

    I would like to buy more of CVX and XOM if there is a correction. Hopefully nothing happens until I can get more capital. :D

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    1. Also ACN after this Analysis http://www.dividendgrowthinvestor.com/2013/10/accenture-plc-acn-dividend-stock.html

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    2. FFDividend,

      I wouldn't mind adding to my new JNJ position but I'd prefer a much better price. I think there's better values in the market right now. Out of my list I'd say PEP and CVX are on the top. But of course the markets had a huge bump to heading into the weekend which erased some of the value. Hopefully next week will bring some more volatility.

      Thanks for stopping by!

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  2. Great list. I pulled the trigger on Baxter earlier this week for a @65, also currently moving cash over to max out my Roth and take advantage of additional dips (I think we are due for a bigger correction, mutually exclusive from the debt ceiling cr*p). I'm looking to add to my positions in KO and PG. I personally think DPS is a better play than PEP right now, but can't go wrong with either.

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    1. BidAsk,

      I like PEP more than DPS because of the snack food business. I have very little exposure to the food/snack industry so PEP would make a great addition. Hopefully we can get another 5-10% pullback due to the governments' incompetence. Next week will be pretty telling, although the end to this week has been pretty disappointing for me. Here's to next week.

      Thanks for stopping by!

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  3. Pursuing Financial FreedomOctober 11, 2013 at 3:21 PM

    I recently bought XOM @ $84.85, DPS @$43.50, TEVA @ $37.50, CVS @$57.80, QCOR @ $56.23. I totally missed the boat on BAX, but may set a limit order for $65.25, to see if I can get that 3% yield. I would love to add to CVX and start long term positions in JNJ, AWK,WFC if they get to better prices. I like your ideas on CSCO and V for dividend growth. I have decent allocations in both and wouldn't mind another dip. I think DPS is an unsung hero. They seem set on great dividend growth and are buying back/retiring shares at an awesome rate! Definitely a slow and steady, with a possibility of takeover. Plus the 3.5% yield I receive to wait is nice. I still don't know if I should root for a deal to be reached this weekend or not. Luckily, I have planned well and have dry powder to deploy if we get a good dip. Good luck next week!

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    1. PFF,

      I'm jealous of all those purchases and they should all turn out nicely for you. I didn't have any free capital this past week so I was left waiting. And of course my capital didn't make it to my brokerage account until Thursday right when the markets wanted to go gangbusters. There's still another week until the deadline and I assume like most of their dealings so far, it's going up to the last minute. PEP is my favorite out of the stocks I listed because of the diversification standpoint for my portfolio. If we get a big drop next week I have a feeling I'll be blowing through my capital pretty quickly. I really like V and CSCO but going into some uncertain times I'm not sure if they're the best companies to try and pick up. But the DG potential is a lot better for the 2 of them as far as percentage increases but their histories are fairly short. I've started trying to add some lower yielding/higher DG companies to the mix by picking up IBM and V and would like to add more to both positions but I think I need some more stable growers for now. We'll see how the weekend and next week goes, but I'm hoping for a breakdown in negotiations over the weekend.

      Thanks for stopping by!

      Delete
  4. Pursuit,

    Nice looking list. I like the retailers here. I recently bought XOM and BAX, so that's where my capital has been going. I also wouldn't mind adding more to either.

    KO is one I've been thinking of. It seems that when it's trading near that elusive 3% yield mark that's a good time to buy. Plus, it's a smaller position than I'd like it to be. It's due for a buy.

    I actually would love to start adding to more consumer stocks and eventually add CL, NSRGY, CLX, GIS, UL and the like to the mix. Those would round my portfolio out nicely. However, they're all just a tad expensive for me. On the other hand a few of them are always expensive (notably CL).

    Best wishes!

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    1. DM,

      I like both XOM and CVX here but O&G makes up such a large amount of my portfolio that I'm hesitant to add to that sector. But XOM at a 3.00% yield and CVX nearing 3.50% sure is tempting. I need to build up my core holdings more and get some consumer staples companies. I'll be fine with a good portion of the portfolio offering 3%+ current yield with 5% min annual DG due to inflation/pricing and 1-2% share buybacks.

      Thanks for stopping by!

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    2. Also, if ADP somehow gets cheap through the government mess being sorted out I'll be scooping up some shares. I feel that's a long shot though, unless the government does what they do best, show their incompetence.

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  5. I've also been looking at KO, PG, and XOM. "Moving up the risk curve" (as you put it), I'm also looking at GLW.

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    1. SB,

      GLW has always intrigued me as a potential holding but I've never purchased any. I really need to build up my core holdings so that's the plan if we get some continued selloffs next week leading to the deadline.

      Thanks for stopping by!

      Delete