Three Reasonably Priced Stocks For January 2014

Some investors may cite the S&P 500’s monstrous run in 2013 – up some 29.6% – as a reason to build up cash right now and stop deploying fresh capital in the stock market. The reasoning here is that because of the index’s best run since 1997 surely stocks have nowhere to go but down. Luckily, I base my investment decisions around the prices of individual stocks because as a dividend growth investor I’m investing in individual companies. And because of this I still continue to find reasonably priced stocks for long-term investments, even though I also remain cautious about overall valuations.

There’s a few key terms I used in the above paragraph. Notice I used the words “long-term” and “reasonable”.

I think about the long term. When I invest in companies I think of myself as a business partner – a part-owner in the company, because as a shareholder that’s exactly what I am. I don’t invest in the The Coca-Cola Company (KO) at $40, then wait for it to pop to $42 and sell. No, I invest in Coke because I think over the next 20, 30 or 40 years they’re going to sell ever more product to ever more people and likewise grow the top line and bottom line numbers exponentially, which will in turn mean the dividends (as a piece of the profits) they can pay me will increase in turn.

And when I say reasonable, I’m not saying any of the stocks I’m going to list below are “steals” or “cheap”. While I don’t use the broader market’s valuation as a determiner of whether or not I should invest money, it does behoove one to know whether the stock prices of the individual companies they’re looking to invest in are priced higher or lower than the historical norms. And painting with a rather broad brush here, I’m finding that many of the stocks in the dividend growth universe that naturally attract my attention are trading at the upper end of their historical valuations. So when I say I’m trying to find reasonable opportunities, I’m looking for stocks that are trading closer to historical norms in an otherwise expensive market.

With that all said, below are three long-term, reasonably priced opportunities I’m looking at right now:

Target Corporation (TGT)

Target is priced at a P/E ratio of 16.80 right now, which is higher than when I first wrote about Target back in November. Yet, the price has fallen from the mid-$66 area to the mid-$62s. How did the price fall and the P/E rise? Well, because Target reported a rough third quarter just days after my article came out, on EPS of just $0.54 per share – off considerably from the $0.96 they reported in Q3 2013. The company also trimmed its full-year guidance to an adjusted EPS of $4.59 to $4.69 – off from earlier forecasts of $4.70 to $4.90. Furthermore, they were stung by a massive breach of security as the company has reported that up to 70 million customers had their credit and debit card information stolen, in addition to their names, addresses and phone numbers.

Obviously, this is a huge problem. As a consumer who shopped at Target during the time period in question I’ve been watching my credit card statements very closely. However, I don’t think that over the time horizon of the next few decades will this be a problem for Target, nor will it result in a massive exodus in shoppers. Online shopping is dangerous as well, and credit card data theft is not new nor is it a Target-specific issue. From the data I’ve read, this appears to be a problem with the technology that we in the U.S. use to process credit card transactions, as well as the credit cards themselves.

In my opinion, with a yield of 2.75% this is a very reasonable price point at which to accumulate shares in Target. TGT has a significant record of dividend growth at 46 years and counting, with a 18.6% 10-year dividend growth rate. A manageable balance sheet, growth domestically through CityTarget and abroad through Canadian expansion, a solid dividend payout ratio at 43% (on lower earnings) and an upscale, exciting shopping atmosphere bodes well for long-term shareholders in this company. When earnings return to normal the share price should likewise increase, along with dividends. However, the ride in the meantime may be a bit bumpy.

TGT is up just a little over 4% over the last 52 weeks, which is obviously considerable underperformance against the S&P 500. Luckily, I don’t compare my results to this index and I don’t have to report to anyone. I have decades to ride out an investment, and I’m confident that Target will endure. Right now, S&P Capital IQ is predicting a 3-year EPS compound annual growth rate of 8%. Combine that with an entry yield near 3% and you’re looking at pretty satisfactory returns here.

Unilever Plc (UL) (ADR)

This is another company I mentioned I was interested in a few months ago, and the share price hasn’t really gone anywhere since then. I’m quite pleased with that!

This multinational consumer goods company is a dynamo. They own over 400 brands; I repeat 400. They’re the world’s largest ice cream manufacturer, with ice cream brands like Heartbrand, Klondike, Ben & Jerry’s and Breyers. In addition, they have a stable of brands in beverages, cleaning products and personal care products. Brands like Axe, Dove, Knorr, Lipton, Hellmans, Surf, Sunsilk, I Can’t Believe It’s Not Butter and Slim-Fast ensures the enduring economic moat and pricing power this company enjoys.

UL currently trades hands with a P/E ratio of 18, which is right about its 5-year average. I enjoy investing in global juggernauts like Unilever (they operate in over 100 countries) at prices that aren’t a premium to historical norms, and that’s what we have here with UL. The yield is very attractive at 3.51%, which is great considering there are no foreign dividend withholding taxes since we have a tax treaty with the U.K., and UL are the british shares in this anglo-dutch company. (It’s dual listed.)

This is one of those companies that you can sleep well at night knowing they’re out they’re selling products to billions of people every single day. S&P Capital IQ is forecasting a 7% EPS CAGR growth rate over the next 3 years, which is fairly solid. The payout ratio stands at 67%, which is a bit high but I’m hopeful growth continues to propel this consumer goods giant. The company remains committed to growing the dividend, and I think shareholders should do well over the long haul here. From 2003-2012, EPS has grown at a compounded annual rate of 7.53%, which is in line with what is being predicted for the company over the next 3 years. The balance sheet is solid, the yield is attractive, the valuation makes reasonable sense and the brand names are strong. Not much to dislike here, folks.

General Mills, Inc. (GIS)

General Mills is a company I’ve been watching for some time now and just have never been able to buy shares in for one reason or another. I was actually researching the company for a potential purchase last year right before the news came out that H.J. Heinz Company (HNZ) was being bought out by Berkshire Hathaway Inc. (BRK.B) and 3G Capital. After this news became public knowledge many food-related companies like GIS seen their stock rise substantially. And so I felt priced out after I seen shares rise 5% or so right in front of my eyes. Dismayed, I passed on buying. I wish instead I would have just sucked it up and bought shares anyhow because they’ve risen even more substantially since then.

GIS shares have a P/E ratio of 18.32. Not overly cheap, but reasonable here considering the market we’re in. The stock is bolstered by a yield just above the 3% mark. And like UL, this company walks the walk when it comes to brands. Cereal brands galore that dot your local grocery store owned by GIS include: Cheerios, Cinnamon Toast Crunch, Lucky Charms and Oatmeal Crisp among many others. In addition, this company can brag about owning brands like Pillsbury, Betty Crocker, Progresso, Bisquick, Green Giant, Hamburger Helper, Chex Mix and Fiber One. Try to go to a grocery store and not buy something manufactured by General Mills.

Operating in more than 100 countries, you have to like not only the brand and pricing power but the geographical reach and diversification here. The balance sheet is attractive with a debt/equity ratio of 1.0. The 10-year dividend growth rate stands at 9.9%, so with growth like that and a yield north of 3% shareholders stand to see pretty strong returns over the long haul. The payout ratio stands at 56%, so the dividend is well-covered. Furthermore, General Mills has been rewarding shareholders with 10 straight years of dividend growth. S&P Capital IQ predicts a 3-year EPS CAGR of 7% – similar to UL. Overall, it just doesn’t seem like you can really go wrong buying a high quality company like General Mills at a reasonable valuation like you see today. GIS was able to grow EPS by a CAGR of 8.14% from 2004-2013, so I think the predictions for future growth are probably fairly accurate. GIS has actually been a strong performer over the last year (unlike UL and TGT), but shares still remain reasonable here.

In conclusion, I like all three stocks. I’m long Target right now, but hope to add UL and GIS to the Freedom Fund very soon. There’s few things I like more in life than collecting dividends from high quality companies that sell brand name products to people all over the globe. That’s a win-win I can get behind!

Although I chose to highlight only a few stocks here, some other reasonably priced stocks that I’m also considering here are The Coca-Cola Company (KO), Realty Income Corp (O), HCP, Inc. (HCP) and Philip Morris International Inc. (PM). The REITs are a bit less attractive after the pop this past Friday, but they’re still very reasonably priced for the long haul. O is currently trading below my cost basis, so I’m anxious to pick up more shares here. I think Philip Morris in particular offers a unique opportunity of both yield and growth, and shares are sitting at their 52-week low. However, it’s already one of my largest positions so I’m hesitant to add more. But if I didn’t have such a large weighting to that company right now I’d be very interested in buying shares hand over fist.

Full Disclosure: Long TGT, KO, O, PM

How about you? Finding any reasonably priced stocks in the market right now? 

Thanks for reading.

Photo Credit: Stuart Miles/FreeDigitalPhotos.net

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71 Comments

  1. DM, I just bought 50 shares of T when last week it fell by 1.9%. I was wanting to add SO but due to limited capital ended up buying T. I read your goals and wish good luck on it. I am also thinking of opening a lending club account.
    Dividend Mom

  2. Right on Jason. I added to General Mills and Coke on the recent pullbacks. It’s tough to find value, but we could certainly do worse that those. On a personal note, my wife and I just got back from the beach. Isn’t this weather AMAZING. Snowbirds have the right idea. Have a great week my friend. Thank you so much for your help over the past week.
    -Bryan

  3. Hey Jason,

    Thanks for your article. I’m long PM, GIS, and thinking about UL. Also sold a put on KO.

    Do you have any thoughts on Kraft (KRFT)? I looked at this for a bit. Great brand strength and nice 4% dividend yield. However, there’s only 9 months of data since it was spun off, a levered balance sheet, and free cash flow that up to this point has not been enough to support the dividend.

    Any thoughts would be greatly appreciated.

    I read your site everyday.

    Thanks

    Dave

  4. DM,

    I added to my shares of HCP and initiated a position in TGT last month. I need more diversification, but it seems like the big bargains are in reits, tobacco, telecom, and some utilities, and TGT looks cheap because of the security problems. That’s the problem I am having right now. Do I add to sectors I am heavy in or buy different sectors for the sake of increased diversification. I am leaning towards buying some more TGT because I think a year from these problems will be a distant memory. I seem to remember BP trading in the 20’s in 2010 after the oil spill. Sometimes there are great opportunities during these crises.

  5. Dear Mantra,

    Have a look at the classic beverage company Pernod Ricard SA home of the Absolut Vodka, Chivas Regal, Malibu, Kahlua, Jameson and many more well established brands. A company with global reach throught through an extensive retail and wholesale distributtion network. The company has a decent track record in terms om dividends (2,1%) and div growth (6% 5-yr average). Currently trading at 52-weeks low due to the questioning of emerging market growth pace.

    great company at a great price

  6. “UL currently trades hands with a P/E ratio of 18, which is right about its 5-year average.”

    This is the kind of stat I’m always interested in seeing more of, where were you looking to determine UL’s historic P/Es?

  7. I am looking at exactly the same 3 companies plus McDonald’s. I own stock in every company mentioned except BRK.B with UL and HCP being new additions this month. I agree with you, but yes I am biased.

    Might snag a little UL or TGT tomorrow, hopefully it will be a down day for those stocks!

  8. I’ll be hitting TGT hard in the weeks to come. UL looks interesting as well, that sort of yield is far better than the typical US company yield. GIS has normally been too expensive for my tastes, but maybe it’s something to consider.

    Thanks for making these suggestions!

  9. Dividend Mom,

    Nice grab on T after the sale. If T gets back up to 6% or so yield I’d be inclined to add a little more.

    I haven’t yet looked into opening a P2P account. I had heard that there’s a lot of competition out there between lenders now, as those services have become more and more popular. However, you would expect that to even out over time as more borrowers come on board.

    Best regards.

  10. DGI,

    I agree. I find both TGT and WMT solid buys in today’s market. However, I’m leaning toward TGT only because earnings have been lowered temporarily on expansion/hacking issues and I also have a larger weighting to WMT already. I’m inclined to even the positions out in those retailers.

    And I also agree with you on PM. I’ve thought about temporarily increasing my position beyond my comfort zone, but it’s already there as it is. Over the long term I’d really like no one position to be any more than 3% or 4% of the portfolio, and PM is right now about 6%.

    Happy shopping. 🙂

    Best wishes!

  11. Bryan,

    Nice buys there with two solid companies. Even in a weak economy people are still gonna drink beverages and eat food. You have to love that kind of certainty. 🙂

    And wow, the weather has indeed been amazing. Especially today. Right now, I have all the windows in the apartment open and the breeze is awesome. I miss my family in Michigan more and more as time goes by, but it’s days like this I really enjoy living down here in Florida.

    Hope you enjoyed your weekend!

    Cheers.

  12. Dave,

    Glad you enjoyed the post. And I appreciate your readership!

    I’ve looked at KRFT before. I’m not sold on it yet. They operate solely in a mature U.S. market, so I’m not sure why I’d be compelled to purchase it over, say, GIS which sells similar products but has the whole world in front of it. Obviously the yield is a bit higher, but it’s not high enough for me to look past the lack of international diversification. Maybe at 5% or higher I might be interested. And, yes, the balance sheet isn’t particularly attractive either. I don’t think they’ll have a hard time covering the dividend here, and we’ll likely see small raises going forward (in the 5% range or so), but I just see better opportunities elsewhere for future growth. I like the product lineup, so it’ll simply remain on my radar until the yield rises high enough to give me more interest.

    I hope this helps!

    Take care.

  13. Dividend Pipeline,

    Nice purchases there! I missed my chance on HCP recently. I was looking at it heavily last week and I was interested in buying on Friday, but then it popped quite a bit. I’ll continue to watch it.

    And you’re right about the problems with TGT and the security breach being rather transitory. T.J. Maxx had that big breach a few years ago, and now nobody even talks about it.

    I agree with you on the sectors holding value. These things are cyclical. I’d continue adding where value exists – REITs, tobacco, retailers, etc. – and then add to other areas later when value inevitably returns.

    Best wishes!

  14. BJ,

    Nice job there adding to TGT at these levels. I think earnings will eventually rise back to their normal levels and the market will assign shares a higher price accordingly. And it is surprising that the shares didn’t take a bigger hit from the data breach. Shares did fall a bit on Friday after the news came out that the theft was larger than initially reported, but other than that we haven’t really seen blood in the streets or anything.

    UL is a powerhouse. Deoderant, soaps, ice cream, beverages, food, cleaning supplies, etc. Brands all over the place. That’s the kind of business I can get behind!

    Best regards.

  15. Swedish Wealth Club,

    I’ll have to take a look at that company. To be honest, I never have before. They may not show up on a traditional dividend growth list if the dividend hasn’t gone up in our currency regularly, but I’ll have to do some digging. 🙂

    Thanks for stopping by!

    Cheers.

  16. CI,

    Glad to see we’re on the same page! You and I love investing in high quality companies, and I think that’s a great trait to have in common! 🙂

    UL looks good here. I’m also interested in purchasing it. We’ll have to see how much capital I have, however. I had to get a root canal last week, and the crown goes on next week. So I’m about $1,200 shorter than normal…and this is after the big cash outlay on the car.

    Best wishes!

  17. Monty,

    Sounds like you have a very productive week ahead of you! 🙂

    Yeah, it seems like there’s still some decent value in many European stocks because the markets over there have not been nearly as hot as the U.S. market has been over the last year or so. That may portend a flip-flop in the near future, but I’ll just continue to pick up opportunities wherever they come from.

    Take care!

  18. Hello DM-

    It is great to see a post about stock picking again. Have you ever looked at and considered purchasing any stocks in the insurance industry?

    I noticed you have Vodafone in your portfolio. The cash dividend from the VZ sale should be a nice lift for you in March. I have 100 shares of VOD and I know I am looking forward to March’s dividend month.

    Matt in GA

  19. Katz,

    Nice job on owning a nice little chunk of TGT. I predict a bumpy ride in the short term, perhaps, but think we’ll do well over the long haul.

    Hope all is well on your side of the world. 🙂

    Best regards.

  20. Anonymous,

    I used to own HGIC. I did very well with that company, but it was bought out by Nationwide.

    I currently own AFL, and it’s one of my larger positions. Other insurers do interest me from time to time, and I’ve specifically looked at HCC and TRV. I actually have an article half-written on insurers, and the article is going to discuss AFL, HCC and TRV.

    VOD is interesting. I’m still not real sure what to think about the sale of VZW to VZ. They sold the crown jewel there. The cash and VZ shares will be nice, I suppose, but I didn’t really want to own a piece of VZ. Especially now after that massive bond issue. I’ve considered selling my VOD shares before the new shares are issued and the cash and VZ shares are sent out to shareholders, but I just can’t find a real compelling reason to do that. So I guess I’m just sitting tight right now.

    Cheers!

  21. WC,

    I actually have never been real keen on utilities in general. Especially with the valuations that some of them are commanding right now.

    A couple of issues I have with utilities – specifically electric utilities – are:

    1 – The growth rates. I’m a young investor, and so I like to know my investments are going to grow over time, typically 7-10% annually. Utilities are heavily regulated, and as such are capped to the upside. They’re geographically capped as well, but obviously command a monopoly over their local area. I guess if I were to place bets on which would be worth more after 20 years – Philip Morris International or Duke, I’d pick the former. It just has way more potential. And every potential investment competes against every other investment in the universe, right?

    2 – The movement to solar power. You have a groundswell of people moving to solar, which limits the revenue major electric utilities can earn, which further harms their ability to reinvest in the grid and spread out the costs to all customers.

    Add in the stretched balance sheets that many electric utilities operate with and I just don’t find many compelling. That’s not to say they can’t be great investments, because certainly there is a measure of stability and predictability due to the fact people have to have electricity and revenue will increase as regulators allow, but I just wonder if there aren’t better investments in the dividend growth stock universe.

    Just my immediate thoughts off the top of my head.

    Best wishes.

  22. Jason couldn’t agree more with Target! This past week I added to our position and purchased more at $62.72. Almost doubled down on it but I want to see whats going to play out over the next few months with the price. The stock doesn’t seem to really be affected by the bad news lately since the main pull back came before the hacking news came out.

    Also interesting you mention Unilever since I have been looking into that one myself lately. I was simply looking at all the things we buy and keep in our house and Unilever seems to be everywhere around here!
    BJ

  23. D-S,

    I think we’re definitely on the same page regarding Target! I didn’t openly state it, but I listed these companies in order of my personal interest.

    I hope we both own a piece of all three companies here pretty soon. 🙂

    Take care!

  24. Great picks on stocks. I have been looking at UK companies to find values in this market (since they are a tad behind us in the recovery). I will be picking up UL, TGT, and NGG this week.

  25. I hope so. The PE for NGG is great at around 12ish compared to SO/DUK/AEP and some of the other utilities. Do you currently own it?

  26. Good stuff, all are also on my watch list. I actually bought SO mentioned in the first comment about a week ago and it looks like a good investment!

    I do not know what to think about TESCO (tsco.l). 28 consecutive years of dividend increases but in 2013 the increase was put “on hold”. It’s like GE after losing it’s dividend aristocrat status – a good time to initiate a position or a signal to stay away? WWJD? (What would Jason do? 🙂

    Regards,
    Yet another dividend growth investor

  27. All three companies make you want to make a purchase!

    In my watchlist, they have the following positions (1 = strong buy / 150 = no buy)
    (Calculation about the dividend growing)

    Target = place 28
    General Mills = place 77
    Unilever PLC = place 90

    Therefore I would decide me for target, if I have to buy an stock now.

    regards
    D-S

  28. Jason,

    What do you think about China Mobile ( CHL )? P/E of around 10, with a dividend yield of around 4%. I picked some shares at 49.60 last week.

    Jaspinder

  29. Hey Jason,

    Thanks for your thoughts on TGT. I ran a fair price using DDM via Gordan Growth model of $90ish. Does that seem high to you…maybe I made a math error?

    Chris

  30. Not yet, unfortunately my list is longer than my free cash at this time, and I just maxed my Roth IRA for this year so will need to be patient. I can foresee if things go well with income I can initiate and/or fill up 6 positions in the next 2 months.

  31. I hold DUK, YORW and some of the other utilities. I am a firm believer that each sector should be represented in my portfolio. I do, however, understand that Cigarettes, Coca Cola and Cheeseburgers are going to outsell utilities…because they are addictive!

  32. I live in Minnesota (home of Target and General Mills). You may want to take up reading the business section of the Star Tribune! Two articles of note:

    “General Mills Slips with the Packaged Food Market”:
    http://www.startribune.com/business/236366311.html

    “Minneapolis Residents Sue General Mills Over Pollutant in Soil:
    http://www.startribune.com/lifestyle/health/234663311.html

    I personally believe that people are also generally buying more private label brands (Target, Costco, and Aldi) over name brands–with maybe the exception of Cheerios!

  33. Hi Jason

    Nice post as usual, interesting that I am looking at Unilever as well, already have a small position, but price has dropped a small amount since, so may look to add to existing.

    I also noted your comment on VOD in the stream, and I am in the same position as you, not sure if selling out of VZW was the right thing to do, but also can’t see a reason to sell right now.

    Also similar to yourself, although prices are probably high right now, I don’t think its a particular reason to not buy (I don’t think that prices are likely to fall by enough to offset dividend payments in the next 12 months, unless something radical happens to either an individual company or to the whole economy). I don’t think it’s worthwhile to hold out for possible minor price fall and forego income of 4-5%.
    Best Wishes

    FI UK

  34. Good article 🙂 At the end of it you mentioned a few other companies, and I am definitely on board with O. I’ve looked at it myself, and am anxious to pull the trigger in my Roth. Just need to finish my Roth contributions then I’ll be ready to pull the trigger. Let’s hope the price doesn’t shoot up in the mean time!

  35. Jaspinder,

    Well, when you’re buying equity in a foreign company you always have to consider geopolitical risk. And I think that risk is somewhat high with any Chinese stocks. There were a large number of Chinese companies caught up in accounting fraud a while back, and while I’m not saying that’s a risk with CHL it is something to be aware of. While I love the idea of having access to the Chinese consumer, I think I’d prefer to be conservative about it and invest in company not based in China that still does significant business there.

    Best wishes!

  36. Chris,

    I ran a DDM on TGT with a 10% discount rate and 8% growth rate (below its historical norm) and got a fair value in that range. Now bringing the growth rate down to 7% reduces the fair value significantly – down to a little over $60. I think the truth likely lies somewhere between. 🙂

    Best regards.

  37. Anonymous,

    To be honest, I’ve never followed Tesco. However, as a broad strategy you have to be careful with buying companies that dividend increases on hold. I recently encountered such a situation myself with Intel. While its dividend growth record is still intact because it paid out more in 2013 than it did in 2012, anytime you see a company not raise the dividend on schedule it should give you pause.

    So I sold more than half of my INTC position, and kept the other 100 shares to see what they’ll do. If the dividend isn’t raised in early 2014, or they still fail to make fairly significant inroads into mobile I’ll likely cut the rest of the position loose.

    I guess what I’m saying is a dividend freeze is a red flag. And this should give you, as an investor, pause. You’ll want to be even more vigilant than usual in looking at the fundamentals and figure out why it is that management isn’t raising the dividend per usual. What was management saying in the conference call? Any investor presentations bring up the subject? What’s the FCF situation? Major investments or acquisitions on the horizon?

    A freeze isn’t nearly as bad as a cut, but as a dividend growth investor I’m always looking to increase my income over and above the rate of inflation. If a company cannot meet these objectives then there are hundreds of other companies that can.

    I hope this helps!

    Best wishes.

  38. Anonymous,

    Well, I have to be honest and say I’m not really all that concerned with the second article. Companies that are a major manufacturer of just about anything will eventually cause some type of environmental footprint.

    However, I wasn’t able to load the first article. I’m guessing it has something to do with a sales issue. But I’m not really seeing it in the numbers that General Mills has been posting. That’s not to say that issues cannot arise in the future, but I think it’s fair to say that the odds are good that General Mills should do well with their product breadth and geographical diversification.

    Cheers!

  39. FI UK,

    I’m guessing over on your side of the pond Unilever must be a very popular holding?

    It’s tough to say what’s going to happen to the broader market from here. Certainly it hasn’t been particularly strong out of the gate for 2014, but in the end as an investor who purchases equity in individual companies the valuation of those individual companies is all that really matters to me. The stock market could be cut in half, but if every company I’m interested in investing in stayed at elevated valuations that wouldn’t help me very much.

    Best of luck finding solid deals out there!

    Take care.

  40. MG_Cookie,

    I’m not sure about PF. I’ve never followed it, but it has a fairly high P/E ratio and the dividend growth record is still pretty new. Certainly one to watch, however, due to the brand quality.

    Cheers.

  41. Dividend Cave,

    Yeah, I like O here. It’s not a steal either, but I think the price is very reasonable right now. Especially for a long-term investor ready to hold for decades. I don’t think you can go wrong with owning a high quality company like that with real estate all over the country that is so shareholder friendly.

    Best wishes.

  42. I agree with all three of these. I am at a full weight on TGT but am still adding some at these prices. I bought GIS immediately after selling HNZ after the buyout news and have been hoping for a pullback to buy more. I really want UL in my portfolio at some point. It is starting to look attractive. What do you think about CVX here? I plan to add a little tomorrow.

  43. Brent,

    Yeah, I remember you already had a fairly sizable position in TGT. I’m sure this pullback is giving you a nice little opportunity to average down. I know I’m enjoying it. 🙂

    I like CVX quite a bit here. It’s already one of my largest energy holdings, so I’m still just watching it right now. I’d actually like to increase my XOM and RDS.B holdings in this space, but both are solidly above what I paid.

    Best wishes!

  44. I own very small positions in UL and GIS already and continue to add. I like them both here. TGT I do not have but will probably add a little later this month. I do like WMT better.

    I also like MSFT and BUD here a lot, especially MSFT. The P/E ratios are very low on both of these companies. My horizon is very long and I do not see either of these companies going anywhere anytime soon. INTC is another nice one but you already own that.

    I’m also a big fan of the smaller regional banks here, TMP is one that comes to mind. Low P/E, low payout ratio, big dividend, and a great dividend track record.

  45. I suppose the decision to put dividend on hold was mainly because of the huge pressure from the Germans (again!). Lidl and Aldi are doing a massive invasion in the UK which means price wars, consumers in sluggish economy looking for cheaper groceries etc. This probably leads into near zero EPS & DPS increases so TSCO is not probably a good choice for me. Then again the current yield is over 4,5% so if the share drops enough…hmm…then maybe. (TSCO is the second-largest retailer in the world right after WMT)

    Thank you for a comprehensive reply!

    Regards,
    Yet another dividend growth investor

  46. DM,
    You always provide top quality content! Are there any lower priced stocks (say $15 or less) on your watch list?
    I am on board with the dividend growth investing, but with a family and lots of student debt, I can only put a little amount away a month. I just don’t like paying $7 a month to initiate or add to a position at 1 or 2 shares at a time.

  47. I suggest using loyal3.com, which has about a dozen good dividend stocks, including the ones mentioned here Unilever and Target, that trade without fees and in small increments. I’ve used them a few months and have had no trouble. The dividends are returned to the account as cash, but they are easy to reinvest yourself.

  48. Dividend Guy,

    BUD is interesting. I haven’t taken a look in a while. I’ll have to revisit the name.

    TMP is a nice find. Lengthy dividend growth record, although the 10-year DGR leaves a little to be desired. I’m invested in a small bank as well (SBSI), though there is additional risk with these plays.

    Best of luck with the shopping list! 🙂

    Cheers.

  49. Welorf,

    First, keep in mind it’s not about the cost of a stock. It’s about the equity in a company. Buying 1 share for $100 and 10 shares for $10 is the same thing, assuming all other metrics are the same. For instance, if IBM initiates a 10-for-1 split and my 10 shares in IBM at ~$180 are split into 100 shares for ~$18 it didn’t change the amount of equity I have in the company.

    Second, for what you’re asking – how best to invest relatively small sums of money – I would recommend Computershare. It’s a transfer agent that works directly with many companies on behalf of shareholders to allow you to get shares for pennies on the dollar. Many companies have direct purchase plans (that Computershare offers) that charge $0 in fees. A list of the companies can be found here:

    http://www-us.computershare.com/investor/3x/plans/buyshares.asp?bhjs=1&fla=0&stype=nof

    Best of luck to you! 🙂

    Take care.

  50. Great read! Thanks for the updates. So far this year I’ve shoveled some $ at KMI in my Roth and TGT in my Wife’s Roth IRA. Other companies on my watch list are UL or NSRGY (Nestle). I really like NSRGY, but UL is currently a better value. DIS and KMB are also companies I’d like to own at some point. I’ll probably pass on KMB for now and go with a lower yielding growth company like DIS this year.
    I know it doesn’t matter in the long run, but I’d hate to pick up DIS and NSRGY at the same time because they both pay an annual dividend not quarterly. GIS is my biggest position so I’m full on that one.

  51. Jerry,

    Glad you enjoyed the post.

    Sounds like you’ve got a great shopping list there. I like all of the companies you mention. I’d love to eventually own a piece of Nestle, and will at some point. It’s just a matter of time. 🙂

    Disney is one I wish I would have invested in a while ago. It’s a money printing machine, and the purchase of Star Wars property was ingenious. I missed the boat on Disney.

    I hope we get some solid prices on these stocks over the coming months.

    Best wishes!

  52. I think Coke (KO) is getting into a good pricing zone. Now it is trading at 39 a share and its dividend yield is almost 3% and I am seriously thinking opening a new position in this stock. If it continues drifting I might buy.

    Also TGT I think it will survive the breach and continues going up in the future so this drop may be a good buy opportunity.

  53. Martin,

    If KO falls a bit more I would definitely be interested in adding to my position. I’d prefer KO to be more of a core position for me, and right now I have less invested in the company than I’d like. A 3% yield on KO shares would be very nice.

    I don’t plan on TGT being a particularly big position for me, but if it continues to fall to the mid-$50s or so I would be interested in adding more shares depending on capital availability.

    Cheers.

  54. Great post! I put an order in at $39 for UL on Jan 13th. It executed this morning, at 38.44/sh
    Here’s looking to a great year with Unilever!

  55. Anonymous,

    Nice purchase there! I think UL under $40 is a nice buy in today’s market. I’ll likely be joining you as a Unilever shareholder within the next few months, as capital allows.

    Best wishes.

  56. Dave,

    Unilever’s dividends are determined in Euros and then converted to dollars for the ADR shares. So the exact amount will fluctuate due to prevailing currency exchange rates. That’s why you’re seeing the oscillation.

    Best regards!

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