What Are You Buying?

I’ve always been pretty open with my investment moves, for better or worse. I always let you know what I’ve recently purchased, usually within just a few days of buying. Doing so is part of my overall mission with Dividend Mantra, and that is to provide a live journal on the road to early financial independence.

I’ve telegraphed a few of my purchases before, usually listing what’s on my short list of stocks to buy before I purchase. I’m going to do that again today. I’m likely going to deploy some fresh capital later this week, as I will receive my monthly commission check from my employer this Thursday. I’ve put a few stocks on my watch list this month and I’ve narrowed down my options to just a few.

The DOW took a small dive yesterday, and was down as much as 300 points in early trading before rebounding significantly for a 100-point loss. I was actually hoping the markets would have stayed down significantly, as I prefer a drop before I make a purchase. Nothing like buying my favorite equities on sale!

I’m listing the equities I have my eye on for a couple different reasons. First, I like to show my readers everything I’m doing. Second, I’d like to know what you are interested in? Perhaps there is a great buy out there I haven’t noticed. As I usually make just one purchase per month, I like to make sure I’m doing the right thing.

Here’s my short watch list:

AFLAC Incorporated (AFL)

Aflac has been hammered lately. Over the last month, this stock has dropped 18.7%! Is Aflac really worth almost 20% less than it was just one month ago? Has the fundamentals of the business changed that much, that fast? I don’t think so, which is why this equity has caught my eye. I’m a fan of the insurance business, as I’ve written about several times. It’s trading for a P/E ratio of 8.9. The company carries no debt, earnings and revenue growth have both been strong. Dividend growth is very strong, with a payout ratio of just 31%. It has an entry yield of 3.54%, which is historically high for this company. It does face some headwinds, as most companies in the current economy do, and some of the investments in European sovereign debt give me pause…but I think the price is almost too good to pass up. According to Morningstar, it’s trading for a forward P/E ratio of just 5. Yes, 5.

Intel Corporation (INTC)

Intel is one of the largest tech companies in the world, and THE largest chipmaker on the planet. I’m generally not a huge fan of tech companies, but Intel has caught my eye a number of times, and I do have a position with this company. I purchased a lot of shares at a price over what it’s currently trading for, so this is an opportunity for me to average down on this position. Intel has, disappointingly, not transitioned to the mobile market, but that leaves a lot of room for growth. In the meantime it’s a solid value play as the dominant producer of chips for the PC market. It has a rock-solid entry yield of 4.3%, and it’s trading at a P/E ratio of 8.95. That’s a fairly low valuation for a company that is as dominant in its industry as Intel. Another huge company with no debt. That’s a positive in the economic climate we’re in where debt is 4-letter word literally and figuratively.

AT&T Inc. (T)

I’ve gone back and forth on AT&T. There is a little uncertainty around this company right now with lawsuits currently swirling around regarding the proposed acquisition of T-Mobile. You get what you see with it. It’s a dominant player in the telecom space and owns 100% of its mobile operations, which is something that can’t be said for Verizon (VZ). It’s trading for a P/E ratio of 8.42 and has a high entry yield of 6.18%. My concerns with investing in AT&T are the lack of growth catalysts. The mobile market here in the U.S. is pretty saturated, and the landline market is declining. I generally like telecoms abroad like Telefonica (TEF) and Vodafone (VOD) that have better potential for growth. Speaking of which, Vodafone wouldn’t make a bad investment! Is it too late to switch this pick? I’m just kidding! 🙂

PepsiCo, Inc. (PEP)

What can I say about this company that hasn’t already been said? A dominant snack food company that has a rock-solid beverage brand as well. It may not be trading at the low valuations some of the other picks are, but it’s a solid defensive move in this uncertain market. I’m confident that this Pepsi will continue to provide shareholders solid returns for many years into the future. It’s trading at a P/E ratio of 15.9 with an entry yield of 3.3%. I’ve purchased PEP in a couple different lots, and I believe my cost basis is somewhere around $64. It’s trading slightly below my cost basis, which would give me an opportunity to buy at a cheaper price relative to my own determined value. I really love this company long-term.

That’s my list. All four stocks are currently listed as 4-star valuations on Morningstar. This list is in order of what I’m most likely to buy on top.

What I’m most interested in is what’s on your list? The market has been very interesting lately, and it has provided plenty of opportunity. I love few things better than a wonderful opportunity!

Full disclosure: I’m long INTC, PEP, TEF.

So…what are you buying?

Thanks for reading.

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38 Comments

  1. I’m looking into AFL, AEO and INTC.

    Aflac, in my opinion, is a no brainer. Trading at historical lows with a solid dividend and low payout ratio, it’s ripe for the picking. In fact, I have been picking it up in small chunks over the past five weeks.

    American Eagle Outfitters was my most recent purchase. Trading near its five year low with a dividend yield of over 4%, no debt and over $500 million in cash, I don’t see why this stock isn’t trading in the $15-$20 range.

    Intel, well, it’s also an obvious winner. Great history of dividend increases, large moat, great dividend, sound product and solid performer. Can’t go wrong with this puppy.

    Just my $0.02.

    Pey

  2. I’d like to increase my position in Nextera Energy (NEE), but I already took some money from my emergency fund over the last weeks, so I think I’ll wait a little while. There were so many great opportunities to buy in the last time.

    I also agree that Intel is great buy right now. It has become one of my larger positions.

    Greets.

  3. When I’m conflicted, I buy both! I have both VOD and T.

    VZ is too expensive for my taste, but it is a good company.

    I have both PEP and KO! Same problem as above!

  4. Still waiting on CLMT to dip some more.

    If I had to buy a telecom, it would be VOD. I was actually considering that for my roth.

  5. Good picks Mantra 🙂 Pepsico (PEP) is a long-term winner as is Coca-Cola(KO). Intel as you know from my recent DSO post is quite an interesting play..

    I think you and I might be able to take advantage of a short-term dip on McDonalds (MCD) in the near future, I would love to top it up if it goes lower. Lot’s of Canadian stocks to watch as well.

    Cheers!

  6. Pey,

    Thanks for reconfirming my suspicions about AFL and INTC. I see AFL had quite the pop today..up almost 6%. I receive capital tomorrow…so we’ll wait and see what the market gives me. I’d like to see AFL back below $35 before I pull the trigger, and INTC below $20. I see PEP had a nice pullback today.

    I haven’t looked at American Eagle before. I’ll have to take a peek!

    Take care! 🙂

  7. Dividends Warrior,

    Good luck with the REIT’s and telecoms. I don’t have any exposure to REIT’s, but do have one telecom currently in my portfolio (TEF). I’m looking at T and VOD for future telecom purchases, as my article states. VOD will pay out a special dividend relating to a payout from its Verizon Wireless venture early next year. That sure would be nice to get!

  8. Westphalian,

    You are in the same position as me. I also pulled some capital out of my emergency fund to make a purchase. I have to rebuild that, so I’m strictly good for only one purchase this month..so I do want to make it count.

    You also agree INTC is a strong buy. It seems that everyone is on the same page with that one!

  9. Ken Faulkenberry,

    Thanks for stopping by.

    So you’re a fan of T and INTC at these levels? I agree. The market had a bit of a pop today…I hope it settles back down over the next couple days or into next week. We’ll see.

    I think INTC is a wonderful buy under $20. T has a great yield at its current price. It’s nice to get a reliable 6%+ yield.

    I love your other picks as well. ABT is a large holding for me, and I purchased some additional CVX lately. I do like LMT (as well as RTN) at these levels as well. Strong earnings and dividends, but you have to wonder about future earnings with spending cuts. Only time will tell.

    Thanks for your opinions!

  10. MoneyCone,

    I agree with you! Buy both.

    I am also long PEP and KO. Both great companies.

    I would also probably do the same on VOD and T and own both. I think they offer different opportunities. The nice thing with VOD is you get both international exposure and the domestic business as well through their VZ holdings.

  11. Ninja,

    So many equities, so little money!!!

    I agree..a lot of strong picks out there at pretty decent prices. I know PEP isn’t the cheapest on the market, but you get a strong company with very little to gripe about. It had a nice little drop today which makes things interesting.

    I agree with you on INTC being a bit interesting. A strong value play, but in an ever-changing industry. I think it’s a great buy, but as long as it remains a smaller position in a diversified portfolio.

    You also have the entire Canadian market to look at!!

    So many equities…

    Take care!

  12. Aflac, in my opinion, is a no brainer – agreed.

    Intel, I don’t know. Maybe b/c I’m not into technology. Just too speculative.

    PEP (and KO), a given. Awesome history of dividends and dividend increases.

    What do you think of BIP? I really want to buy this one.

  13. MOA,

    I’ve never really looked at BIP before. I know that Dividend Monk analyzed this company not too long ago and believes it’s attractively priced.

    I haven’t really looked into MLP’s yet, but once I have most of my positions locked in I’ll likely eventually move into REIT’s and MLP’s.

    BIP seems to have a pretty low price with a strong and rising dividend.

    Good luck to you!

  14. Kanwal,

    Great buys there. Gotta love those businesses…they certainly aren’t going anywhere.

    I’ve been mixed on AT&T. Strong yield, but I do wonder where the growth will come from. I certainly believe they will be able to pay that fat dividend for many more years however, so it is on my list. If I were to add to my telecoms, T and VOD are my two picks.

    Good job getting in during the drop. Buy on the dips!

  15. On August 31, the U.S. Department of Justice sued to stop the AT&T/T-Mobile merger. If the DOJ is successful in stopping the merger, AT&T will be forced to pay Deutsche Telekom (T-Mobile’s current owner) $3 billion as stipulated in the acquisition agreement. If this scenario plays out, this could negatively impact AT&T’s share price and stall out any future dividend growth for quite some time. I know you said you like TEF and VOD better and I completely agree. Anyone considering AT&T should proceed cautiously…

  16. Compliments on your site D. Mantra. I’ve been checking it out for some time and find it informative and inspirational. I actually think of a ton of ??? to ask u when I read it but for now I’ll focus on the task at hand.
    Like U, I’m trying to stretch my cash a bit to buy some stock during this down market. Picked up some PG at about $60 which helped me average down since I previously bought some at $64. A dividend stalwart at that price seemed like a bargain to me. Then I choose another one that’s risker (debt and European exposure) but has a higher yield (TEF @ about $20). Now I’m deciding on one more and am considering some of the same ones as U.
    PEP – Hard to go wrong w/ this but debt is a bit of a concern (interest coverage ratio is good though)
    INTC – Good yield, payout ratio and attractive valuation BUT I’m leary of tech as income stocks and the dividend growth is fueled too much by a previously low payout ratio instead of revenue/earnings.
    Instead of AFL, I’m considering SLF. A Canadian insurance compay, it has a good yield, reasonable payout ratio, good dividend history and is trading at a discount to its Graham number. I think it might be overlooked.
    T – I already have a fairly large position so I’m not adding but U said it well (fat divvy that it has cash to keep paying). Also has dividend growth albeit modest. I think you’re right that growth in telecomm needs to come from a TEF or VOD. Think about TU, a Canadian telecomm serving mostly western Canada (there’s limited wireless penetration there so more opportunity)?

  17. Anonymous,

    I don’t follow the Dogs strategy implicitly, but I do invest in a few stocks listed in it. As my conservative nature dictates, I largely invest in large-cap dividend growth stocks…which what makes up a large part of the Dogs strategy.

    Congrats on your success. I don’t have any investments with T or KFT, but MCD has been extremely strong for me as well!

  18. Pirate,

    I didn’t know that T would still have to pay $3 billion if the DOJ is successful in stopping the merger. Wow! That is definitely something to keep an eye on. I’m not a huge fan of T, but I do think the dividend is stable and the slow growth is icing on the cake. Definitely something to watch.

    Thanks for the info!

  19. I would like to know what your criteria is for you to ” pull the trigger ” for a buy? Does the stock have to lose a certain % to flash a buy? or do you sometime go by a gut feeling? I think you will get plenty of buying at lower prices later, build up cash & wait till the end of oct, key support levels for the DOW 10’809 & S&P 500 1,119 if the support levels are broken, then much damage will be done. My advice is build up your cash & wait for the carnage.

  20. Anonymous,

    Thanks for the compliments. I’m really glad that you find the site inspiring. I put a lot of work into it, so when someone gets inspiration out of it that makes me happy!

    I agree with you on the picks. I think PG is a great buy at $60.

    I agree on INTC. Tech also scares me. The payout ratio has been rising with the extreme growth in the dividend, but the EPS and revenue have also grown nicely over the last few years.

    You got a much better price on TEF than I did. I made my first purchase at $25 and then averaged down twice after that. I would definitely buy at current prices, but am already heavy on it…so I’ll hold and collect the fat dividend.

    So you have a large position in T? Would you buy at current prices if you had no position in T?

    Thanks for stopping by!

  21. Anonymous,

    I have bought equities every single month since I started investing in early ’10. I try to buy the most attractively priced stock on my watch list, which includes my portfolio and about 35 other stocks. I watch about 50 stocks in general.

    When you have that small of a basket you get a feel for when things are a good buy and tend to develop price points naturally. These price points change, as the market is fluid and almost organic in the way things change so fast in our economy. It’s a moving target.

    My idea of an attractive price is formed by my own feelings, as well as reviews from Morningstar, S&P and fellow bloggers. I don’t necessarily wait for a certain percentage drop. I feel that it doesn’t really matter 30 years from now if I bought PEP at $64 or $62. We’ll see. I don’t trade. Every position I buy, I plan to own forever.

    I didn’t buy today as I had planned. I got too busy at work to actually make a move. We’ll see if that works out to my favor or not.

    I don’t necessarily believe more carnage is necessary. I was buying in ’10 when the DOW was breaking below 10,000 and I was buying earlier this year when it was above 12,000. I’ll be buying regularly whether the DOW is at 8,000 or 12,000. I’d obviously prefer the market much lower when I can get it…but I don’t believe in my ability to predict the future. I do, however, try to keep 5% or so in cash as dry powder for precipitous drops in the markets. That cash was recently tapped for the energy buys in CVX and COP.

    Thanks for stopping by!

  22. Looking to increase my position on HGIC. Inspecting HCBK to see if it’s a value pick or a value trap. Wanting to put more capital into NVS. Interested in initiating positions in WMT, MSFT, and INTC. Still finding BIP and ETE to be good partnership picks.

    My interest is piqued on AFL.

  23. Monk,

    I have never looked at HCBK. I know they had a dividend cut, but a lot of investors sounded relieved to reduce pressure on earnings and it still maintained a high yield due to the subsequent price drop in the stock. Interesting play. I’ve looked at banks, and published an article on The Div-Net about banks..mainly about WFC and USB, currently the only two banks I’ve looked at and would consider. HCBK has had some trouble, no? Again, I haven’t looked. I’m a little leery on the entire financial sector, outside insurance.

    WMT is a solid play, you already know that. INTC seems as solid as it gets in the tech space. I seen your write-up on BIP, if I were looking at MLP’s that would probably be a top pick.

    I look forward to a write-up on AFL, if you are so inclined. I’d love to see what you find out when you dig a little deeper. I think the headwinds from deregulation in Japan and the sovereign European debt on the books are more than offset by the price. I think it’s very attractively valued for a long-term holding.

    Thanks for letting me pick your brain! 🙂

  24. You’re welcome as the compliments are deserved.

    I’d consider buying T if I already did NOT have a position. I think it serves a important role in current yield and current income w/ modest income growth. Plus, the price is trading at a discount to it’s Graham number. The TMobile deal is a bit of a concern but I think T has the size and depth to emerge fine long term. In fact it might serve short term to drive the price to make more attractive. BUT as u pointed out it has limited growth prospects so I only expect modest capital appreciation and divvy growth. Because of this I think it’s optimal to compliment it w/ a TEF or VOD.
    Telecomm’s about 17% of my portfolio (T plus TU and now TEF) so I’m done w/ it for awhile.
    Of course when considering buying T, u have to weight that against putting limited cash into the other good stock choices u mention. As u put it “So many equities, so little cash”.

  25. I picked up some more Banco Santander (the ADRs trade under the unfortunate ticker STD on the NYSE), which I really think is undervalued. It’s a Spanish based bank, but the majority of its profit is derived from operations outside the Eurozone (Brazil is huge). They also have little exposure to the European debt crisis, but trade like they are in as bad a position as some of the more exposed banks. They also made the list of the top 10 most secure banks globally, so was happy to pick up more shares at what I consider to be a big discount.

    Also looking to pick up more Duke Energy (DUK) now that the Progress Energy merger looks far more likely.

  26. Anonymous,

    I understand what you’re saying on T. It does serve a purpose for current income as well as very conservative growth. It’s large yield provides capital to reinvest. I agree that it would be best complimented with a large, global telecom like TEF or VOD (or both as I plan). Great stuff! If telecoms are 17% of your portfolio, that’s some serious yield!

    I’m glad you picked up on that…”so many equities, so little cash”…

    Keep in touch. Best of luck with your portfolio!

  27. Neu Grufti,

    Nice picking up STD at a heavy discount. It wasn’t that long ago that it was trading at $12 a share. Now it’s below $8. It’s precipitous drop reminds me of TEF. Anything based in Spain has been punished harshly. This is a great time to initiate, or add to, positions from that area. You’re getting a pretty solid yield from STD. I haven’t looked at them, is that dividend pretty sustainable?

    Best of luck to you. If I wasn’t already heavy in it, I’d add to my TEF as I think it’s worth more than it’s trading for.

    Keep in touch!

  28. Mantra,

    I think the dividend on STD is pretty sustainable…while their income is getting hit on the Eurozone exposure primarily due to exchange, lots of debt issues, and the general malaise, their Brazilian and Latin American operations really are picking up the slack.

    Their continental European operations really slumped in the first half of 2011, down 21% and the UK operation down 4%. Given that those two portions of their business represent 51% of the profit, it seems bad, doesn’t it…except, that Sovereign operations were up 58%, Brazil was up 7%, and the rest of Latin America was up 16%. Add to the that the growing contribution of Poland’s BZ WBK, and I think it’s going to be a great time to get in, and that the dividend is sustainable, even though it’s currently at a 10.88% yield. I think, personally, this is a rare point where a person can buy into a major international operation as a value play. Santander was at almost $18 a share at the beginning of 2010 when they were in even worse shape with loan loss provisions than they are now. I think once people realize that they are not nearly as exposed to the European debt crisis as their head office location would indicate that it’ll see some good recovery.

  29. Neu Grufti,

    Thanks for the information on STD. It sounds like a pretty solid bank, especially considering the environment in which it operates. I’m a little leery on the finance sector in general and looked at WFC and USB a few times. The yield, for me, just doesn’t justify the risk. There are some smaller, regional U.S. banks that have very generous yields nearing the yield offered on STD. But, you have risk of failure with small banks. STD offers you the yield of a smaller player, but with the risk level and market cap of a multinational bank. Good stuff!

  30. I made a position in PEP earlier this summer and I think the stock offered some solid entry points to the investor over the past several weeks.

    I also purchased roughly 50 shares of WMT in my wife’s retirement savings plan at a yield of about 3% and I was happy about that.

    I don’t have any shares in INTC, but I like it! Thanks for sharing these details DM.

    Cheers,
    TWC

  31. TWC,

    PEP is solid at current levels. It’s trading at $59.99 a share now, and I consider anything below $64 a pretty decent value. These are great times for long-term investors.

    WMT is also solid, and another company I’m long on. Anything close to $50 offers tremendous long-term value.

    INTC is very interesting. I think it definitely faces headwinds, but if you look at ANY company long enough you’ll find something to dislike.

    Take care! Thanks for sharing.

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