As I’ve talked about many times before, I believe in the power of persistence. And one way I try to exemplify that is by purchasing shares in high quality businesses month in and month out, year after year. I’ve been doing this since early 2010, and the strategy is going three years strong now. I ignore the noise from most financial pundits screaming about the latest macroeconomic concerns and instead focus on the businesses I already own a piece of, and those businesses that I’d like to.
As such, another month means more fresh capital from my day job (service advisor at a car dealership) and another round of adding to my Freedom Fund! This means adding to my dividend income, which brings me one step closer to my ultimate goal: financial independence. I get giddy just writing about it!
I’d like to take a moment to share my watch list for July with everyone out there, as I feel we all learn from each other. I try to share my best ideas with you readers as much as I can, and often I gain a fresh perspective on some quality companies that weren’t previously on my radar. So, without further ado:
Exxon Mobil has been on my radar lately, and I’ve been writing of my interest often. And for good reason. This is the largest publicly traded company in the world, and it’s been making money since Rockefeller. Who doesn’t love that? The entire energy sector right now is interesting from a value perspective, and I continue to drill for great ideas (pun intended). XOM has a 10-year dividend growth rate of 9%, backed by 31 years of dividend growth. I find shares in this high quality supermajor attractive at under $90 and with annual revenue coming close to $500 billion, I don’t see Exxon Mobil’s dominance coming to an end anytime soon. Shares currently offer a yield of 2.81%. I’m also interested in Chevron Corporation (CVX) and one could make an argument that it’s the better buy. I currently have no allocation to XOM, while CVX makes up about 4% of my portfolio so there is some motivation for diversification at play here. I’m also interested in Royal Dutch Shell plc (RDS.B) due to the higher yield and exposure to natural gas, but the low margins give me pause.
The Bank of Nova Scotia (BNS)
BNS is a high quality bank that I’m already a proud part-owner of. I’ve discussed before that I love the strong operations in Canada, but also the diversification of business segments and exposure to other markets throughout the world. This international bank has fallen almost 7% in the last month and I think it’s currently attractively valued. Shares currently offer a 4.3% yield, which is obviously attractive in this low interest rate environment (we’re still in one, despite the jump in rates). Although this bank didn’t raise dividends during the Great Recession, it didn’t cut them like many big U.S. banks did. BNS has been paying a dividend since 1833. Let that sink in for a second. That’s before the American Civil War! Shares in this company are trading below my cost basis, so I’m interested in averaging down if the market continues to discount the bank’s business. For similar reasons, I’m also interested in adding to my position with Toronto-Dominion Bank (TD).
Realty Income Corp. (O)
I recently initiated a position with this high quality equity REIT after some strong pullback in the shares. O is down over 23% since late May’s high of $55.48 per shares. You can currently buy a piece of this business for just under $42 per share. If you believe in the future of tenants like Fed-Ex, Walgreen’s, CVS and Family Dollar, then owning a piece of this business makes sense. One of my goals this year was to diversify my wealth, principally through ownership in real estate and I accomplished that goal by owning a piece of this business, which furthermore owns 3,525 properties throughout 49 states. O offers a yield right now of 5.16%, and that’s income that is well covered and growing (backed by 19 years of dividend growth).
These are a couple of my best value ideas. All three companies have trailed the S&P 500 YTD by a large margin, and I believe all are attractively valued at today’s prices. They offer strong current income, backed by long histories of growing their respective dividends. I’ll be receiving some fresh capital during the first week of July, so we’ll see what kind of mood Mr. Market is in at that time. Hopefully he’s extremely depressed!
How about you? What’s on your watch list?
Full Disclosure: Long CVX, BNS, TD, O
Thanks for reading.
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