My Watch List For July

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 Corporation (XOM)

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.

Photo Credit: ntwowe/FreeDigitalPhotos.net

Comments

    • says

      Tactics,

      Glad to see another fan of BNS out there. I think it’s one of the better international banks. Conservatively run and being based in a market with a oligopoly doesn’t hurt!

      Happy shopping.

      Best wishes!

  1. says

    Nice list here DM. Maybe fed chairmeb Ben bernanke could stand in front of a microphone tomorrow and open his mouth to push these stock prices down and give us some better deals =)

    • says

      I dunno, after the poor economic numbers we got this week it’s more likely Mr. Bernanke will postpone any tapering that may have been planned. That would likely boost the markets. Ya just never know though.

    • says

      Investing Early,

      I try not to really worry about what the Fed is going to do or not do. I know it can be difficult, because a lot of financial news is shoved in our face. But I really ignore it all and focus in on businesses and the health of their operations. If operations are strong and I feel confident about their future I then look to what I feel is a fair price to pay. If the company is being sold at that level or below than I’m happy. I guess I’m easily pleased. :)

      But I do hope that we get some better deals. The recent pullback wasn’t much and it didn’t last very long.

      Best regards.

  2. Anonymous says

    I’ve been looking at PM – it’s way down! I only started doing some Dividend investing at the beginning of May and unfortunately initiated some positions at the high end…so I’m not sure if I should add more at this time – it’s very tempting since it’s quite a bit cheaper than what I had bought at. I can’t decide if I should try to diversify by getting other stocks like KMI or even MO or if I should get more of PM? What do you think?

    • says

      Anonymous,

      Great idea with PM. It would be at the top of my watch list if it wasn’t already my largest position. I first bought in the mid-$50′s and kept buying all the way up until the $80′s and I now have 100 shares. Based on the size of my portfolio I feel comfortable with that, but no more. My portfolio would likely have to increase in size by 50% or more before I’d be looking at adding any more PM. I think it’s a fantastic company, but I believe in diversification strongly. Going forward, I would feel comfortable if no one company made up more than 5% of my portfolio.

      Good luck!

      Take care.

    • Anonymous says

      Mantra,

      I agree 100% about wanting to diversify to avoid potential catastrphic events, but there should also be some consideration of whether you’re diversifying in a lower value company for diversifications sake.

      For example, if KO was fairly valued at $42, and a good deal at $38, but was priced at $25 all else being equal. If you trust your analysis of KO and it’s ability to make it into your portfolio in the first place, would it not be logical then to buy KO even if it was 10% of your portfolio? If it’s good enough for 5% of your portfolio why not 15-20%.

      It’s an exaggerated example, but worthy of discussion I think and I would love to hear your thoughts on forgoing a better deal in the name of diversification.

      Thanks,
      SA

      That being said

    • says

      SA,

      Great question there. I hope I can give you a coherent answer.

      Surely if a blue-chip company is undervalued by 30-40% I’m inclined to buy even if it’s already 10% of my portfolio. I would argue it’s rare to find a blue-chip company (like KO, or any other) to be that cheap but I’m interested in value and quality more than diversifying for diversification sake.

      However, it should also be noted that a black swan/catastrophic event is unlikely in a company like KO. PM is much more exposed to potential unfavorable regulation, so I’m even more motivated to diversify away from it. Same with the oil supermajors. The odds of a black swan event are much higher, hence the consistently low valuations and need to diversify between them.

      “If it’s good enough for 5% of your portfolio why not 15-20%.”

      Income diversification. That’s why. Even if I’m extremely confident in a company’s future and operations I cannot predict the future. I would never want a company to represent 20% of my portfolio, and hence my income. Once I’m financially independent and living off my dividend income I want to be diversified between 40-50 different companies so that no one company has an overwhelming impact on my income. If 20% of my portfolio is in one company and they cut the dividend I’m hurting in a bad way. If a company I have 2.5% of my portfolio invested in cuts the dividend I can easily make that up with the dividend raises from the other 39-49 companies, and if my margin of safety is there a 2.5% cut won’t really make a big difference to my quality of life anyway.

      I hope that helps. I plan on writing an article about this soon.

      Best regards!

    • Anonymous says

      SA & DM,

      I think most individual investors overestimate what they know about companies. I used to do strategic planning for a federal agency. My experience is that it takes approximately 10 years of working within an industry to really understand that industry. As individual investors we only know the published financial data and what is said about the companies/industries in the news.

      As outsiders, individual investors must diversify due to lack of knowledge. Diversity must be balanced against meeting a goal of growing dividend income and buying individual companies which are not overpriced. The later two points are why I prefer buying individual stocks to buying an index fund. I buy the cheapest stock relative to value that meets my criteria and that doesn’t exceed my maximum weighting. I set the maximum weighting based on my confidence in the stock. 1% is my weighting for a stock where I only have financial data, while 8% is my weighting for a blue chip stock with a lot of news coverage.

      Ken

    • says

      Anonymous,

      Great points there.

      Many of the companies I’m invested in have very complex operations. For instance, if you take me on a trip through Chevron’s business, all the way from headquarters to an oil rig and then out to refineries and pipelines I’d probably be able to understand a great deal of how it all works, but certainly not all of it. And that’s just one of 36 companies I’m invested in. I would agree with you that the knowledge is naturally limited. And that’s not even mentioning banks. They seem simple on paper, but the operations are quite complicated.

      I would also agree with you that the weighting for a company you’re extremely confident in could be larger than another company that you have less confidence in, but my spread is not as large as yours. I hope that one day my spreads are between 2-5% of the total portfolio and no more than that.

      Great comment. Thanks for stopping by!

      Take care.

  3. says

    I just added to NSC at 70.50 ( got an awesome price! ) and sold 2 november 40strike puts on KO for 2.10 each and they are already down to 1.75ish.

    not much else on my radar at the moment accept maybe BBL and CAT

    • says

      Took2Summit,

      Nice purchase with NSC. I really like that railroad. I’m hoping to expand my railroad holdings and eventually own a piece of CSX and UNP. One day. :)

      BBL is very cheap here. I don’t want too much exposure to it so I’m not buying, but if I were looking to initiate a position I’d be very comfortable here a little over $50.

      Best wishes!

  4. says

    Canadian banks have attractive valuations while REITs win for income. I guess it just depends on what your goal is.

    I am looking to increase my core positions that are under weight at this time. For me, that means CVX, XOM, and KO. I’ll start there.

    • says

      CI,

      Great thoughts there. You get the value with the banks and the income with the REITs. Although some of the banks are coming close to the yields on some REITs. The recent strong pullback of many major REITs has widened that spread (as it should be).

      Great names there. I don’t think you can go wrong with buying any of those! I have a healthy position in CVX, but if I didn’t I’d definitely be buying here. I’m still thinking about it because I think there’s some strong value in that company. XOM and RDS.B are definitely on my list for energy as well. I love that yield with RDS.B (it’s higher than a lot of REITs), but the large exposure to natural gas (and low margins) adds a little risk. The operational results over the last 5 years or so hasn’t been overly impressive, but they’re definitely not going anywhere with $400+ billion in revenue.

      Best regards!

  5. says

    I’m with you on O. Wish I had a limit order set earlier this week to add some shares to my Roth when it dipped below 40.

    What do you think about BCE? I’ve been watching it for several months. With rumors that VZ may be entering the Canadian market fear of competition has lowered the share price. I would love to hear what your Canadian readers think of BCE and its current share price.

    • says

      The Stoic,

      Thanks for stopping by!

      Yeah, below $40 is a great price. I hope we see that again very soon as I’d be highly interested in adding to my position at that level.

      I’ve looked at BCE. Looks very good. I wrote about BCE, RCI and TU not too long ago and concluded that TU was probably the best pick among them. Rogers had the best asset mix, but also has a lot debt. BCE was strong in the east, but wasn’t growing quite as quickly as TU. The Canadian telecoms operate in a very favorable regulatory market (as do the banks), but that favorable treatment could be ending as signaled by the potential entry into the market by Verizon.

      Also, it should be noted that when I was researching this there was a restriction on foreign investment on Canadian telecom and media companies. It was capped at 20%, I believe. I’m not sure if this restriction has been lifted, but it could be if Verizon is making inroads. I read a lot of cases where investors had their orders canceled because of this restriction. I haven’t looked into this in at least a few months, so things could have changed.

      All in all, I really like RCI but the debt load is very high. BCE offers a great starting yield but TU is growing faster. They all offer something a bit different.

      Best wishes!

    • Anonymous says

      BCE was up .32 today on CRTC approval of BCE purchase of Bell Allient. This was a favourable move since BCE did not have to sell off The Movie Network since these telcos are regulated so as not create a monopoly. BCE still has a yield of 5.77 and the dividend is solid as they have considerable ownership of TV & radio stations across Canada as well as strong cell phone, home phone & internet business.

    • says

      Share prices of the big 3 have been hammered, especially Telus and Rogers. Last week, their prices were down due to the rise of interest rates and this week they are down because Verizon’s possible entry into Canada. Current regulations limit Verizon to 10% of the market. Anyway, I bought shares in Telus and Rogers twice over the last 15 days as share prices are down over 20% in about a month.

    • says

      Anonymous,

      Great info there on BCE. I will admit that I don’t follow the Canadian telecoms as much as some of my other holdings and companies on my watch list. Telecoms are usually major holdings for dividend investors on both sides of the border, so it would make sense that BCE, TU and RCI are popular up there as T and VZ are fairly popular down here. Do you have a favorite Canadian telecom?

      Best regards.

    • says

      ADY,

      Great job picking up some telecoms there on sale! Nice move. TU is down 13.69% YTD (before factoring for dividends), so it’s nice to pick up a quality company that has underperformed that much. Rogers is also down quite a bit for the year, but mostly because of the drop in the last month. It seems BCE has held up better than the rest.

      Overall, I’m not a huge fan of telecoms. The yields are usually pretty solid, but that’s usually due to the low inherent growth. Also, the service can become a commodity as one can just switch from company to company. I do hold T and VOD in this space, and I’m a fan of the businesses, but I’m not overly enamored. I look at telecoms as utilities (because the services are ubiquitous and necessary) and they fill that allocation in my portfolio. It is nice to have some exposure to utilities/telecoms though due to the income boost they can provide a portfolio, of which you can use at your disposal to reinvest as you choose. That’s why I like them. Also, it depends a bit on your age. If I were significantly older, or closer to financial independence, utilities/telecoms would definitely hold more interest because at that point I’m looking for the bird in the hand a bit more than the two in the bush (I hope that makes sense).

      Take care!

  6. Anonymous says

    I just wanted to comment that the ads on this blog are a bit excessive now. I have a hard time filtering content from the ads. I’m not against making money from a blog, but the layout could use considerable tweaking.

    • says

      Anonymous,

      I’m sorry to hear of your thoughts on this. Looks like this sparked some commentary.

      While I respect your opinion, I hope you can respect that I spend a lot of time on this blog trying to document my journey and also doing my best to create quality content that is engaging, educational, entertaining and inspiring. The ads provide a relatively meager income that I use to make sense of the resources I allocate to this blog. I hope you understand where I’m coming from.

      Best wishes.

  7. says

    Jason! Great stuff.

    I’m so sorry I didn’t respond to your message on my site or Seeking Alpha. It’s something I’m terrible at. Either I am reading away from home and forget to reply later, or I intend to write something comprehensive later and never get around to it. I need to get a system going where I’m as good as you!

    Anyway, thank you for the kind things you said on my site and about GE on Seeking Alpha. That was incredibly kind of you, and I’m glad we’re on the same wavelength about GE Capital. We’re a small minority in the dividend investing sphere on that one!

    Regarding the ads, I used to read Steve Pavlina and he said, “If you are going to put up ads, then put up ads. Don’t half ass it.” I’m inclined to agree. The whole business model hinges much more on clicks than impressions, and you gotta do what you gotta do. You are doing us a tremendous service by essentially “writing for free” (or near free) for an extended period of time until your ship comes in and you get a sizable audience that is worth monetizing. Personally, I want to make damn sure you receive as much compensation as you can. We don’t pay anything for your excellent content, and you should be rewarded as much as you possibly can for your intellectual and entertainment generosity with us. A small inconvenience is a welcome price to pay in exchange for you to receive compensation that still does not come within hailing distance of what you deserve. I say, rock on, brother man.

    • says

      Tim,

      Always a pleasure to have you here. I appreciate you stopping by.

      No need for apologies. You obviously stay very busy with your blog, your articles on Seeking Alpha and your personal life. I couldn’t imagine trying to run Dividend Mantra while writing as many articles as you do for SA. It would be impossible for me. If we can continue reading your quality content, then I’m quite okay if you don’t respond to some comments. :)

      Thanks for the thoughts regarding the ads. I do spend a lot of time running this site, as you can obviously relate to and appreciate. I rationalize that time by converting some of it into an income via the ads.

      Thanks again for stopping by!

      Best regards.

  8. Anonymous says

    I bought some Nestle, RDSB and PM last week – all significantly down from their highs.

    Looking forward to dips in PG, JNJ, MCD and KO.

    Good luck with your watch list & ignore the noise!

    • says

      Anonymous,

      Great purchases there! PM is my largest position, followed closely by JNJ. I am very bullish on Philip Morris Int’l going forward. I can’t imagine a scenario where that cash machine of a company doesn’t do well over the next 10-20 years.

      Looking forward to dips in some high quality companies as well. I wouldn’t mind adding to my position in PG as it’s actually a bit small. Same goes for KO!

      Thanks for sharing!

      Take care.

  9. says

    O is probably the next new position that I’ll take if it remains at current levels until I can get a bit more cash transferred over. Other than that I’m trying to add to current positions. I was hoping for an extended slide in the markets but so far that’s not happening. CVX and XOM are compelling to me but I have a bit too much exposure to the energy sector. I still like WMT at current levels although the starting yield is a bit low for what I like to go after.

    • says

      Pursuit,

      I’m also hoping for an extended slide in the market. Things were just getting interesting and it has already recovered. Rather unfortunate. I tried to disperse my cash slowly throughout the month and was already low by the time we got that 3-4 day window. Sucks!

      Hopefully we see more opportunities in the next couple weeks. :)

      Best wishes.

  10. says

    All of these look interesting. I’m not just a dividend investor right now so I have a few non-difvidend stocks on my watch list as well. It seems like finding solid companies that have trailed the S&P 500 lately may be a good strategy because they are probably undervalued.

    • says

      Jake,

      Great stuff there. Nothing wrong with diversifying into non-dividend paying companies.

      I don’t necessarily just go for companies that have trailed the S&P 500 YTD, but certainly when I have a basket of high quality companies that have done so I get very, very interested! All three of these companies have been rather weak, especially lately. I do love a good sale! Especially when it involves quality merchandise.

      Take care!

  11. Anonymous says

    You’re an inspiration as always, DM. Just bought some TD Bank, thanks to your comments above.

    For your watch list, have you ever considered Fastenal (FAST), which seems very undervalued here?

    Like Tim, I feel you deserve to make money, a lot of money, from your blog, and I think the ads are just fine. I much prefer them to your putting up a pay wall, which many successful blogs eventually do.

    Many thanks for your blog which is not just financially useful but a unique document of our times, a diary of one man’s fight for freedom!

    • says

      Anonymous,

      Thanks for the kind words! I’m glad you have found some inspiration and value here on Dividend Mantra. That’s exactly why I do it.

      Great buy on TD. It’s high on my watch list. S&P Capital IQ actually gives it a 5-star Strong Buy rating (as of two days ago). Not that I put a lot of emphasis on analyst reports, but the validation is there. Both TD and BNS are great Canadian banks and they’re my favorites. RY would be third for me.

      Thanks for the support regarding the ads. I really don’t think they’re that intrusive or obnoxious. I have been around many personal finance blogs during the past few years and there are many, many sites out there that are obscene with contextual ads, affiliate marketing, products being sold on pop-ups, etc. I actually take great care to make sure mine are rather tasteful and blend in. I’m surprised to see the negative feedback.

      I appreciate you stopping by and offering up your support. I’m grateful for it! :)

      Good luck out there and please keep in touch!

      Best regards.

  12. says

    There are so many great dividend growth stocks it’s hard to narrow down a list sometimes. I find myself falling in love with a few companies at a time for one reason or another and then a month or two later I find I’m really digging some different companies!

    I think your July watchlist looks pretty good. Personally I’ve been looking at PM lately as the yield is almost at 4% currently (which I believe is good for PM). I’ve also been looking at KO and WMT while they have been down a bit lately. I think those two companies are solid long term holds that I like to add to my core portfolio on decent dips and own forever!

    • says

      Dan Mac,

      Definitely hard to narrow down the list of quality companies to just a few. The watch list is always evolving, almost organic in nature. No doubt this is influenced by the fact that the prices on securities are always changing day after day. By the time I get capital next week RDS.B could pop up 10% and I’d be no longer interested. This is just a glance into my thoughts as they stand today, which may change tomorrow depending on what mood Mr. Market is in regarding the above equities.

      I’m with you on PM. I think it’s attractively priced here and is due for a dividend raise later this year. I’m even tempted to add to it because I do think the market is discounting the shares. But at the same time it’s already too large of a position for my comfort level, so I’m trying to contain myself. :)

      I wouldn’t mind buying KO if it stays below $40. I think $40 is fair value, so $39 or so would be a fair price for an excellent company.

      Take care!

  13. gibor says

    DM, nice list. I also would prefer CVX over XOM, and in your place maybe would add to CVX in order to drip dividends. Also, I find COP pretty attractive.
    I like Canadian banks,all “big 6″, all of them have resonable P/E, payout and yield. Also every bank has a little different exposure (for example BNS – latin America, TD northeast US – remember how called Boston Bruins arena ?!).

    The Stoic , BCE is a core holding of every Canadian dividend investor, just look at the yield. I personally was buying both BCE and RCI on the dips. imho market is overreacting on possible VZ “intervention” to Canada. Also I don’t think VZ quality/cost will be much better than Canadian’s telcos.

    • says

      gibor… Thanks for taking the time to reply. I’ve been watching BCE and I really like it at these levels. The market makes a habit of overreacting to these types of events, but it is these times it makes the most sense to invest. Take care and thanks again.

      The Stoic

    • says

      gibor,

      I can’t argue with you on CVX. By most metrics it’s just a tad cheaper than XOM and offers a higher starting yield. Although it does have some issues right now in Ecuador. I’m only interested in XOM over CVX because I believe in diversifying between the oil supermajors because of potential black swan events (spills, government take overs, explosions, etc.). Diversification is my attempt at reducing risk between the energy holdings.

      I’m with you on the Canadian banks. Although I’m particularly fond of BNS and TD, one could make a case for all six. I think RY is also particularly strong.

      Thanks for stopping by and offering up those thoughts, and also for responding on the question regarding BCE!

      Best wishes.

    • gibor says

      DM, thanks for commenting! Always appreciate your opinion!

      The Stoic, .. I know many dividend investors online or personally and practically all of them long Canadian banks , telcos or both.
      Some points why I’m bullish on Canadian telecoms (just my personal opinion). Withpit looking on fundamentals, just from common sense:
      1. Canada excepts every year 250,000 independant immigrants, plus sponsorship , business immigrants and refuges it will be about 320-350K. And this is more than 1% of all canada population. If those immigrants can avoid buying something like iPad, they will definitely connect to the Internet and wireless. And most likely they will select brand names like Bell (who doesn’t know this guy).
      2.Many Canadians generally doesn’t like US and won’t swith to US company.
      3. Does is worth to VZ enter very competitive Canadian market with population less than in Cali and huge territory? As an example, I pay now about $45 for high speed internet, with no limit and 28Mbps. Rogers now offers for the same price and 200GB limit , 35 Mbps. What price should VZ give me that I’ll switch to them?!
      4. It’s not a secret that a lot of Cnadians download not so legal stuff from the Web and everyone knows that US companies more strict to copyright issues. Would you take a chance for couple of bux?!

    • Anonymous says

      As a Canadian I strongly disagree with point #2. Many of us cross border shop to the US, watch American TV & movies, own property in the US and think of Americans as our brothers, not just our neighbours.

    • gibor says

      Anonymous, and many opposite :) I immigrated to Canada in 1999 and was thinking like you wrote and I was extremely surprised that so many Canadians, with whom I was talking, don’t like US too much.
      Just couple of quotes from Canadian forum:
      “I think not many Canadians will want to be part of that American invasion”
      “I also believe most Canadians will not want to be part of this US invasion. “
      “Now Telus had its bid for Wind blocked by the government, only to have Wind
      now entertain offers from a foreign company”

    • Anonymous says

      I wouldn’t put too much credence in a couple quotes from misguided losers. I own property in the States, am there all the time & have always been treated wonderfully. I’m sure there are Canadians that don’t like Canada, as well as Americans who don’t like their country, so it is really no big deal that someone worry about an American invasion buying our companies but neglects to talk about TD buying Banknorth or Manulife buying Hancock. Its a big world out there.

    • gibor says

      Anonymous, don’t understand me wrong. I’m pretty tollerant to US and travelled in 10-12 states so far, even though I wouldn’t like to live there (we had offer couple of years ago to rellocate to CA or OR) and I wouldn’t like VZ buying Canadian companies.
      P.S. I didn’t like when one of the last big Canadian hightech companies ATI was bought by AMD and when our company was bought by US bank and sold after couple of years to Indians

  14. Anonymous says

    I love the watch list and the Recent buy columns. I feel like there are some strong conversations in the comment section. Very educational!! What do you think about CAT. I know it will be a tough 2013 for them but long term I don’t see it getting beat up too much. Thoughts?
    -Jersey Jerry

    • says

      Jersey Jerry,

      Glad you enjoy the watch list and Recent Buy posts. They are definitely some of my favorites as well (along with the dividend income reports).

      As far as CAT, I’m mixed. I think it’s definitely cheap here as it is priced at the bottom of its cycle. The entry yield is attractive, bolstered by the fact that management just raised the dividend by 15%. That gives me some hope that the future looks bright. However, the debt is a tad high and FCF has been weak lately due to consistently increasing CAPEX. I’m also not quite sure what kind of economic moat the company has. They face heavy competition from Asian rivals in Komatsu and Sany. Also, they had a recent acquisition go south for them. Just some things to think about. It’s a very capital intensive business.

      Best wishes!

    • Anonymous says

      GREAT points DM. That is exactly why this blog is great and educational. Keep up the good work. Thought of those statements, but sometimes competition makes you better. Every time I drive to Ohio to see the in laws or SC or FL it’s all CAT fixing the roads. I know that’s just domestic but they are also starting to get in the natural gas game which I’m a big fan of with WPRT. (I’m in love with WPRT but it’s not a dividend stock. My only non dividend stock I own)
      -Jersey Jerry

  15. Scott says

    DM-
    I am a long time reader and have commented a few times. It is obvious that you put a significant amount of time into research, and creating original content. If you want to watch a TV program then the commercials go along with it. Your blog is no different. You are not running a charitable organization. The ads don’t bother me and you deserve what ever income they provide you.
    Scott

    • says

      Scott,

      Thanks so much for the kind words and support. I do greatly appreciate it.

      I spend a lot of time on this site trying to create something really unique and share it with the world. I’m saddened by the fact that some people can’t appreciate the fact that my time is worth some kind of remuneration. Believe me, blogging is not a “get-rich-quick” scheme. :)

      Thanks again!

      Best regards.

  16. says

    I really like O and would be a buyer at these levels if I wasn’t already overweight in O. I like CVX though, it pays in September and it’s going to be a tough choice when I have to decide what to buy for that month. It’s gonna be between CVX, MCD and LMT I think. I may just wait on CVX though since they have a full year before they do another dividend raise (they just raised it). I definitely wish they were all cheaper though.

    • says

      Captain,

      I’m with you. I recently initiated my position for a price over what shares are being sold for, so I’m definitely interested.

      Great ideas there. I don’t think you can go wrong with any of them.

      Happy hunting! :)

      Best wishes.

  17. SkyInvestor says

    Hey DM,

    Nice post as always, per your suggestion I have recently finished up Josh Peter’s Ultimate Dividend Playbook and have now moved on to his monthly morningstar newsletters. That being said, as I read his book I definitely related it back to your blog and can tell where you learned a number of the dividend investing ideas from.

    I made what looks like a solid purchase this AM of RCI after the large beat down it took from the announcement that Verizon “may” enter the Canadian telecom market. Does RCI make any of your watch lists? It seems to be decently attractive right now considering even if Verizon did enter the market, it would take time and money to pull away subscribers that are most likely in the middle of multi-year contracts.

    In other news I had a few things I wanted to run by you for some insight. These are listed below:

    - Scottrade’s new flexible dividend reinvestment plan – not sure if they are your brokerage choice, but would be interested to get your thoughts on this plan.

    -Roth IRA – do you ever plan to utilize a Roth IRA to allocate some of your capital? I could see this not benefiting you at your anticipated retirement age, but one cant help but see the benefits later on of letting your investments grow tax free.

    • says

      SkyInvestor,

      Thanks for stopping by!

      Glad you enjoyed Josh’s book. I found a lot of value in it. I don’t subscribe to his newsletter, but I can imagine there’s a lot of value there. I’d like to think he and I are quite similar in our views and philosophies.

      I actually did take a look at RCI (as well as TU and BCE) not too long ago. I also took a look at the Canadian banks at that time, and initiated investments in TD and BNS not long after I wrote the article:

      http://www.dividendmantra.com/2013/02/three-canadian-stocks-on-my-watchlist.html

      I concluded that RCI had some fantastic assets, but is unfortunately weighed down by its debt load. BCE offered a fantastic entry yield, but the growth prospects are somewhat limited as it dominates the east. TU seemed to have the best prospects going forward and offered a solid entry yield backed by pretty attractive growth. I think all three have their merits and I actually really liked what I could see on RCI. I may have to take a look at these companies since they have been punished so much recently. This is exactly why I write these articles. I learn so much. :)

      As far as Scottrade’s new FRIP feature, I plan to mention that very soon. I think it’s a fantastic tool.

      I don’t utilize a ROTH. I’ve discussed my reasoning before, but it is basically because, as you mention, it would have somewhat limited use for me due to my unique situation and early target retirement date. However, I recommend a ROTH for everyone else who has the spare $5,500 to invest in one beyond the 401(k), IRA and anything else they may have.

      Thanks for stopping by!

      Best wishes.

    • Anonymous says

      DM,
      Had a question specific to canadian stocks. Say we buy TD or BNS, and get quarterly dividends, are those taxes differently here in the US ? OR will it be treated like normal dividend income. Not being clear about this has led to me sitting on the sidelines :)

    • SkyInvestor says

      DM,

      I use the library access to morningstar similar to how you do, if you navigate to the newsletters tab on the toolbar you can access Josh’s newsletters for the trailing 12 months.

      Thanks for the reply!

    • gibor says

      Anonymous, you won’t be paying any dividend witholding taxes on Canadain stocks if you hold them in retirement account (I beleive it’s 401k in US). This is why Canadians bying US stocks into RRSP/LIRA accounts.

    • gibor says

      SkyInvestor, from my own experience if you don’t even have a contrac with Rogers, it’s extremely difficult to switch from them…. we called them about 10 times to switch out… rep trying to convince you to stay, than they transfer you to customer retention who giving you various better offers, bundles, discounts etc. also you have to notify them month of so upfront, drive to their store to return all equipment or you will be charged and so on. It so many hussle that not many gonna do it for a little bit cheaper price. My wife told that she won’t call Rogers for cancelation as she cannot stand pressure to stay with RCI.
      btw, I finally disconnected from Rogers 2 months ago and now with new provider I have worse speed and service and Rogers send me new offer even better than I have with current provider. So, maybe I’ll switch back to RCI. :)

    • says

      If your contract is over and you have no penalty you never have to talk to Rogers. Just make your deal with your new provider and they port over your old phone number. Quick and easy no uncomfortable phone call with Rogers.

    • gibor says

      Not true! If you contract is over , Rogers will give you regular price (that usually higher than contract) and before your contract expire you have to give 1 month notice…. Actually when I already had my contract with Teksavvy, Teksavvy called me and told that Rogers is not aware that I cancelled their servise., good think (after many issues with Canadian companies) I write down date/time , iteration number and name when I was talking to Rogers. btw, on the day/hour when I was supposed to be disconnected from Rogers, they disconnected cable TV , but left Internet and wanted to bill me for it.
      Another nasty thing they did…. I notified them 1 months up front, but they (by mistake ?!) disconnected me 2 weeks after, when I called them , it took them 3 days to reconnect me back and they wanted to count 1 month from this reconnection day!
      Whatever you say, I state that it is very difficult to disconnect from Rogers

    • says

      Anonymous,

      The response above was correct, from what I understand. There is no dividend tax withholding from Canada if your shares in Canadian companies are held in an IRA or 401(k). However, in a taxable account you’ll pay 15% to the Canadian government. Keep in mind, however, that you can reclaim most or all of the foreign taxes withheld from the U.S. government at tax time as a dollar-for-dollar credit.

      Here’s a discussion on this from the IRS:

      http://www.irs.gov/taxtopics/tc856.html

      As always, one should also consult a tax professional. :)

      Best wishes!

    • says

      SkyInvestor,

      Thanks so much for the info there. I’ve heard of that. I actually tried that at the library when I was there a couple weekends ago, but the computers were all tied up. I read a little on Buffett instead.

      Best regards!

    • says

      Just a quick note on the above. In 2009 Canada introduced a Tax Free Savings Account (“TFSA”), which allows investors to invest up to $5,000/yr (recently increased to $5,500). As the name implies, gains are not subject to taxes. However, unlike Registered accounts (such as RRSP’s, RRIF’s and LIRA’s) dividends received on US stocks are subject to a dividend withholding tax, because the Tax Treaty between US and Canada only encompasses Registered accounts.

  18. Spoonman says

    Good list, DM.

    In addition to XOM, I’ve got my eye on CVX, KO, KMP, and maybe T. It’s amazing how quickly the market seems to be recovering after learning that the QE-cocaine would go away (new pundits have assured trader junkies that all will be well in the near term).

    I started salivating when UHT and NNN were dipping down quickly, but now they seem to be rebounding again. Ah well, I’m just glad we have some buying opportunities available.

    • says

      Spoonman,

      Great list there. I think CVX is a great play on Big Oil right now. Solid value. I also really like the GP of KMP – KMI, but KMP is also fantastic. T is great for current income, although I do wonder if it’s just a tad expensive? I think maybe $32 or so would get me interested in adding, even knowing the future growth is a bit limited as I discussed above regarding telecoms. They are good for current income which one can use to redeploy strategically and selectively.

      I’ve noticed the REITs have rebounded. If O can drop back down to that $40 level I’d be highly interested in adding. Again, lower growth but great current income. Great assets.

      Best of luck out there! It’ll be fun seeing what July offers us. :)

      Take care.

  19. says

    I like Realty Income a lot. I hold 117 shares of this great stock and wish I had more cash to buy more of this recent drop.

    I also ignore the noise and I actually laugh when seeing media reasoning why something happened. The recent laugh I have about hysteria around gold. a few years ago they were chasing each other in who would make a higher gold price prediction and today the same idiots are competing in who makes the lowest price of gold prediction. I am just laughing.

    • says

      Martin,

      I’m with you on Realty Income. Great company, great tenants and great management. Very consistent results.

      I’m with you. The gold pundits are the worst. The funny thing with gold is that it has extremely limited utility and produces no cash flow, so it’s impossible to truly value it. Nobody really knows what it’s intrinsic value is, so everyone is at the mercy of the market. Really funny to see people try to get out in front of the market and predict a price movement when you have no basis for the claims. I’m laughing with you! :)

      Best wishes.

  20. Anonymous says

    Hey D. Mantra,

    I’ve always been and continue to be a fan of Canadian banks. For a long term investment in the financial sector, they are hard to beat. Solid, conservative and well regulated. They have a special place in my heart (I know don’t get emotional over investments, right?). But since I invested heavily in three of them (TD, RY and BNS) in 2009 shortly after the financial crisis, they gave me a large capital gain which I then took and invested in other dividend paying stocks. However, as they themselves were good divy payers, I keep some of the shares in two of them (TD and RY). It was a tough call to let BNS go but I wanted to diversify. I was fortunate enough to have a substantial amount of capital after the 08-09 crisis and these stocks are one of the places I deployed it.

    In any case, they’ve been mostly moving sideways recently and deploying some capital into them might be advisable. TD and RY are solid and it seems BNS is a good choice as well.

    As others have commented here, after the news of Verizon moving into the Canadian telecomm market, now might be an interesting time to initiate a position in one of the three (TU, BCE, RCI). As is often the case, I think the market overacted to the news but the ramifications of this development are yet to be realized. One thing to perhaps keep in mind w/ BCE and RCI is that they are NOT pure telecomm plays. In addition to wireless and wireline, they are also media and content companies as well. Something that isn’t the case w/ our telecoms down here in the States. I agree that TU is attractive but what persuaded me to consider RCI and BCE instead was their control of media content whereas TU was more of a pure telecomm play (like T or VZ here in the States). Because of concerns, however, w/ RCI’s debt I choose BCE. As you pointed out, however, each one has something a bit different to offer.

    Finally, thanks for your recent articles on REIT’s. Like you, this was an area I definitely wanted to invest into but was waiting. I looked at O, DLR, HCP and OHI. All seemed good and had something to offer but I decided on O. DLR really intrigued me but I already have telecomm (T, BCE, VOD) and tech (INTC, MSFT) and didn’t want to put anymore into stocks related to those sectors (as DLR leases datacenters and the like). Besides, O really does seem like the “bluest” blue chip of the REIT’s. If you’re only going to own one REIT that’s probably the best one to have.

    Anyhow, I decided that I’d start to get interested at about 42. Once I saw it go down to about 40-41 a week ago, I decided to pull the trigger and bought some at about 41. Very happy w/ my purchase. So again, thanks for the articles.

    Take care

    -Rock the Casbah

    • says

      Rock,

      Glad you enjoyed the recent articles regarding my purchases of O and DLR. I agree that O is probably the “bluest” blue-chip of all the REITs. The business model is very easy to understand, the tenants are high quality, the triple net structure bodes well for them long-term, and their operational history is excellent.

      Great info there on the Canadian telecom/media companies. I’m with you on how they all offer something a little different. I really like RCI’s asset mix, but the debt load is high. I see you also fear that. Nice move on BCE. Can’t argue with that one. Provides a ubiquitous service that most people pretty much require and the yield is very nice from an income perspective. I’ll have to take another look at BCE. While telecom companies typically don’t offer great growth prospects, they do give some great current income which can be used to reinvested selectively.

      Keep up the great work! Sounds like the investments have been working out very well for you. :)

      Best wishes!

Join The Discussion!