Two Stocks On My Watch List For June 2014

lookingThe elusive broader stock market pullback. It’s coming any day now, right? Well, I’ve been hearing such a forecast for more than a year now.

Now, I can’t predict the future. As such, I don’t know if the stock market is going to come crashing down tomorrow, the next day, or ever. However, it doesn’t really matter anyhow. I’ve always proclaimed myself a long-term investor. I’m investing with the next 20-30 years in mind, not the next 3-6 months. It always troubles me when people are worried about what’s going to happen to the stock market in the short term if they’re truly investing for the long haul.

As long as I can find attractively valued individual stocks based on all known information I have access to and I have free capital, I’m going to buy stocks. Raining outside? I’m buying stocks. I’m not feeling well today? I’m still buying stocks. Some crazy warlord halfway across the world drawing new borders? Yep, buying. You get the gist.

So on that note, I’m looking at two companies in particular for my next stock purchase in June. After not buying any stocks at all in May, I found myself not adding to my portfolio for only the second time in over four years. So I’m excited to get back on the horse in June and add some equity in a high-quality company or two.

I believe shares in the following two companies are currently fairly valued, and I’m interested in purchasing stock in at least one of these companies in June, assuming the valuation stays similar and the capital is present.

Baxter International Inc. (BAX)

Baxter International Inc. is a global, diversified healthcare company that develops, manufactures, and markets products that save and sustain the lives of people with life-threatening conditions like: hemophilia, immune disorders, infectious diseases, kidney disease, trauma, and other chronic conditions. The company operates in two segments: Medical Products and BioScience. 

I’m happy to own equity in this great healthcare company. Growth over the last 10 years has been robust. Earnings per share is up from $0.62 in 2004 to $3.66 in 2013. This is a compound annual growth rate of 21.81% over the past decade, however growth over the last few years has slowed. Revenue has grown, but not as fast. Up from $9.509 billion to $15.259 billion over the same time frame, this is a CAGR of 5.4%. S&P Capital IQ predicts CAGR in EPS at 7% over the next three years, which is strong.

Shareholders stand to do very well over the next 12-24 months as the company plans to spin off its BioScience division into an independent, publicly traded company in 2015. Much like what we saw with Abbott Laboratories (ABT) when they announced a similar move, and then completed it in January 2013, shares in BAX stand to run much higher from here. And while I’m not in this for the capital gains, I am interested in buying shares before they become more pricey.

Dividend growth has been solid, with a seven consecutive years of dividend growth and a five-year dividend growth rate of 16.4%. A payout ratio of 56.5% means there’s plenty of room for further dividend growth, and I think future dividend raises should be sizable since earnings are suppressed due to special items – management is guiding for EPS in the $5.05 to $5.25 range for 2014, which is helped by the Gambro acquisition. The current yield is 2.80%, which is rather attractive in this market.

Shares in Baxter might appear a bit pricey here, with a current P/E ratio of 20.21, however if EPS is being guided correctly, the P/E ratio will either compress significantly over the coming year or the price in shares will rise sharply. Furthermore, continued anticipation of the spin-off should serve as a catalyst for the share price from here.

I valued shares using a Dividend Discount Model, with a 10% discount rate and a 7% long-term growth rate. This gives me a fair value on shares of $74.19, which is in line with where BAX is priced at right now. While this leaves no apparent margin of safety, I think shares still represent a solid buy with all the exciting moves the company is making. Furthermore, I’m always interested in increasing my exposure to the healthcare sector, as I believe an aging domestic population and rising middle classes in developing markets bode well for companies like Baxter.

Southside Bancshares, Inc. (SBSI)

Southside Bancshares, Inc. is a financial institution based out of Tyler, Texas. They currently operate 50 community-banking facilities in Texas, with approximately $3.4 billion in assets.

This small bank is a business I initially invested in back in April 2012. And I’ve been a happy shareholder ever since. With a healthy yield, special dividends every December, and annual stock dividends, this bank exemplifies shareholder returns. However, with that said keep in mind this is a very small bank – the market cap is just over $507 million. So keep in mind there are special risks present here.

Lately, Mr. Market hasn’t been enamored with SBSI, and it’s down some 15.76% over the last month. However, shares are down just 1.46% YTD. This performance as of late is apparently due to an announced merger between SBSI and OmniAmerican Bancorp, Inc. (OABC)  expected to close in the fourth quarter of 2014. I’m not familiar with OmniAmerican Bancorp, and to be honest even full-time analysts find difficulty in analyzing banks, but I’m trusting management to make the right call here. For reference, OmniAmerican Bancorp is a small bank based out of Forth Worth, Texas. They operate 14 full-service branches in the Dallas/Forth Worth Metroplex, with over $1 billion in assets. The announced merger will create the ninth-largest bank by deposits headquartered in Texas. At first look, the merger makes sense to me as it creates greater local scale for SBSI, although a cursory look at OABC shows us less attractive metrics when compared against SBSI, with much lower return on equity and return on assets.

Net income and EPS are both roughly flat over the last five years, but SBSI did a much better job at managing itself through the financial crisis than the big banks across the U.S. that came close to extinction and had to cut dividend payouts. SBSI boasts a 19-year streak of raising dividends, with a 10-year dividend growth rate of 14.2%. And a payout ratio of just 39.6% should allow continued dividend growth for the foreseeable future, although the merged bank will invariably change forecasts. The entry yield on shares right now is 3.27%, which is particularly attractive when compared to most U.S. banks.

Shares are trading hands for a P/E ratio of 12.09, which is in line with what most small and big banks alike trade at right now. However, I went ahead and valued shares independently using a Dividend Discount Model, with a 10% discount rate and a 6% long-term growth rate. It’s possible they could grow faster than that, but I wanted to use a lower rate due to the flattish earnings over the last five years, and the most recent dividend raise of just 5%. However, this model totally ignores the annual special dividend in December and the stock dividends. The DDM gives me a fair value on shares of $22.26, which is below where shares are priced at right now. Again, I think shares are probably pretty close to fairly valued based on the possibility of greater growth, special dividends, and stock dividends. Of course, there is also the uncertainty regarding the potential of the bank moving forward after the merger completes later this year.

All in all, I view both of the companies above as fairly valued with healthy yields, solid growth prospects moving forward, strong shareholder return policies, and low overall risk. Furthermore, my personal portfolio has room for both companies as my exposure to both is relatively small. It’s quite possible that BAX will perform better over the next 12-24 months based on the spin-off, but I feel both are solid opportunities for the next 10-20 years based on all known current knowledge. I’ll likely be investing in at least one of the above companies in the coming weeks, dependent on capital and assuming the prices don’t spike tremendously in the interim.

Full Disclosure: Long BAX and SBSI.

How about you? Think either company is an attractive opportunity here? 

Thanks for reading.

Photo Credit: bplanet/FreeDigitalPhotos.net

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76 Comments

  1. Thanks for the inspiring article, Jason. BAX is indeed a great play. Fairly prices, low risk and future opportunities. I’m looking into that one myself. I’m also checking out GPC. Did you ever consider GPC?

    Happy to hear you has a safe and cost efficient trip up north 🙂
    Jos

  2. Really like Bax. healthcare industry will only grow as the world population increase and people are living longer. Baxter is a nifty fifty stock without a big name. They have great dividend growth in the last 25 years and they are increasing the rate year after year. Good pick ups!

  3. Hi Jason,

    Firstly, thank you. I’ve been following this blog since early march and it inspired me to make my first investment on payday last month (and I did the same on payday this month!). You’ve also completely reversed my intentions about getting a hefty mortgage and put me on the road to FI, perhaps by 40 (i’m 27).

    One thing i’ve wanted to ask you though, is how you would approach a lump sum? Regular investing has such a neatness to it in downturns etc, it seems that a lump sum would carry certain psychological “baggage” if you weren’t getting the best bang for your buck, or if the market took the correction everyone is murmuring about.

    T

  4. hello what do you think of Kellogs and Kraft Foods which both have P/E 13 !

  5. Everything is so bloody expensive right now. I’m just going to add some more to my PM… And I’ll probably encounter the same problem you had which is an over-allocation to Tobacco.

  6. Hi Jason,

    You’re right. Predicting the market is something no one should try to do. It’s funny… I recently heard a humorist asking people during a fake IQ test he was doing what were the two best tools of a meteorologist to predict weather?

    The correct answers were : a window, a coin to flip… 😉

    I guess the same could apply to someone trying to predict the stock market… A chart… And a coin! You still have a chance out of two to be right!

    Someone might be right ten times in a row while flipping a coin but over the long term, if we sum up his winners and loosers, chances are that he will be right one time out of two…

    But, I’ve studied technical analysis quite a bit and found some interesting stuff in that discipline. Stan Weinstein’s method of investing with the long term trend using screeners, mma and volume is something that helps with cyclical stocks (not the kind of stocks most dividend investors seek I guess) and there are also some cycles and calendar effects thats keeps repeating year after year and almost every year, like the presidential cycle, the monday effect, the Christmas rush, the january effect…

    One of those is the may effect called “sell in may and go away”.

    While I wouldn’t sell any of my stocks, I’d like to buy more on a dip. It is statistically proven that the market is slower and more volatile during summer. If you look at past charts, you’ll see the market dipping usually near the end of june or at the begining of july. The market is usually pretty volatile until november and then the christmas rush begins!

    It might not happen this year… but I can wait another 30 days to see if it does. I still bought some shares of Tim Hortons recently on a small 5% drop. I payed a premium for them and I’m still happy with my buy because I think it’s a great company that has a lot of potential for expansion but it’s better to buy with a high initial yield… Isn’t it?

    Still.. You’re a more seasonned dividend growth investor than me and your method has served you well. So.. Why change? Cost-averaging throughout all market conditions is a good strategy for a long term investor.

    Thanks

  7. I’ll have to look into SBSI more. I’ve seen a few other bloggers talking about them as well. I really like BAX and wish I had purchased more when it was cheaper, of course I say that about most of the companies I own. I’m hoping to make a new purchase over the next week or two as well because while I know we’ll get a pullback in the future, I don’t know when or if we’ll add another 20% while waiting.

  8. The inevitable pullback. While we all know it is coming at some point, I am not too worried about it. Of course no one likes to see his portfolio drop 30%-40% in value, but the fact that it will happen at some point doesn’t hold me from searching for attractive companies to invest in each month. And even when it happens, I hope that I will remain cool enough to not cry about the losses, but cheer about the fact that I can increase my share in great companies at a lower price!

    With regards to BAX and SBSI, I haven’t taken the time yet too fully dive into them yet. But I will make sure that I put them on my consideration list for next month!

    Thanks!

    DW

  9. My bank play is NYCB, and I have had a small position in JNJ for quite a few years. BAX looks interesting, I’ll check it out. Thanks!

  10. Thanks for the great advice Jason !

    Just added equal amount to my exisiting positions after checking them.

    Hope everything is right in Michigan

    You will always astonish me for the sound approach you have for finding good divid growth stocks. For your frugality too (ouah !!! only around 100 bucks for your move across country ! I would have made the journey at least in two days )

    Good things may happen to you.

    Bye !

  11. DM – I always love to hear your insight. Thanks for sharing. I also have BAX on my watch list and hope to get in before the potential spin off as well. Just wish Mr. Market would provide a little more attractive entry point. 🙂

  12. Jos,

    GPC is a very fine company. That’s another great business I’d love to own a piece of at some point here. I haven’t taken a look at them in some time now, but the last I looked I didn’t really see much I disliked.

    Thanks for the support. It was definitely a cheap trip. 🙂

    Cheers.

  13. Asset Grinder,

    I’m with you. I’m definitely interested in more exposure to healthcare. I can’t see how this industry doesn’t just continue to grow, grow, grow.

    And although BAX only has seven years of consecutive annual raises, they had a nice streak before that. Unfortunately, it looks like they had a rough go of it from around 2000-2004 or so. But they’ve had a nice run over the last decade, and Gambro looks to be already making waves.

    Best regards!

  14. T,

    Hey, that’s fantastic! Glad to hear you found some inspiration here to make your first investment! Believe me, it’ll be the first of many. Dividends are addictive, my friend. 🙂

    And I do hope you’re able to get to FI by 40. That’s what I’m aiming for as well, and I think it’s a good age. It’s old enough to know what you want out of life while being young enough to still go out and do it/enjoy it.

    As far as your lump sum question goes, all the reading I’ve done on the subject suggests that you’re better off investing it all in one shot. However, in reality if I were to be given $100,000 or something crazy tomorrow I’d probably invest it in chunks here and there as I do now. I’d probably just increase the size of those chunks. So instead of investing, say, $1,500 or so per month, I’d double or triple it. Again, this goes against conventional wisdom, but I’d feel better about picking my opportunities as I go. And if the market crashes and opportunity really opens up then I’d be even more aggressive with the outflow of capital.

    Hope that helps!

    Best regards.

  15. Christian,

    I like KRFT more than K out of the two. I expect somewhere around 5% annual dividend growth from KRFT, which when combined with the yield of ~3.5% you’re looking at total returns in the 8.5% range, assuming a static P/E ratio. KRFT has some solid brands, but keep in mind they operate solely in a challenging, mature, and competitive U.S. market. It’s not a bad play, but I think the lower P/E ratio is probably deserved. However, I’d rather invest in KRFT around 4% which would at least provide you with some pretty strong current income, and that level was available not that long ago.

    I hope that helps!

    Take care.

  16. youngdiv,

    Can’t disagree with you there. Not many deals out there, and at this point I’m just looking at what’s fairly priced.

    And PM is still one of the better deals out there, but I’ve written about it and recommended it ad nauseam. And I really can’t invest in it anymore at all here as I’m fully allocated. But it’s still a smokin’ deal – pun intended. 🙂

    Cheers.

  17. Allan,

    Yeah, I’ve never really understood technical charts and all that nonsense. I mean, I get the point of them and the reasoning behind it. However, I believe you’re looking at a lot of human psychology at play here, even with the robots and everything else. And you simply cannot quantify emotion with a chart or a formula. If you could, you’d be rich. And you wouldn’t be sharing it.

    Buying and holding isn’t the ultimate model in efficiency because you’re naturally going to buy at peaks and hold through troughs as part of the nature of the beast, but one could do much, much worse. I look at it from a holistic perspective. I’ll take my chances! 🙂

    Best wishes.

  18. Pay Off My Rentals,

    Indeed. The hard part is picking those “sometimes”. And many were picking it a year ago, and you can see what happened there. In the end, it’s less about focusing on absolute stock prices and more about focusing on the compounding income.

    Take care.

  19. JC,

    Yeah, not sure what we’ll get here. I certainly hope stocks are a little cheaper here soon because I now have less capital than ever to invest with! I always say so many stocks, so little capital. But now I really mean it. 🙂

    Cheers.

  20. DW,

    Yeah, I hope you take a look at the two and see what you think. I think both are pretty close to fairly valued here, and one could do worse than that in today’s market. I think BAX especially could go on a run like what we saw with ABT/ABBV.

    Cheers!

  21. Dave,

    Interesting pick there in NYCB!

    JNJ is actually one of my largest holdings, and it typically oscillates with PM for the #1 spot for me. However, there’s room for more than one great company in healthcare for my portfolio. I really like BAX. MDT and BDX are a couple of other companies I like in this space as well.

    Take care.

  22. Aspenhawk,

    Hey, glad you enjoyed my post here and put some capital to work! Means the world to me that you believe in what I’m talking about here. I certainly put my money where my mouth is, as you well know. 🙂

    And I believe good things may happen to you too!

    Best wishes.

  23. AFFJ,

    I hear you on prices. I got in on BAX near the $67 level or so, which I thought was a great price for the business. And then soon after that the stock shot up on the news of the spin-off. But I think it’s still attractively priced here. The forward P/E ratio is below 15 based on guidance, and the dividend growth should be strong for the foreseeable future. It’ll be interesting to see how the dividend gets split between the two businesses and whether that results in an immediate raise.

    Best regards.

  24. Small world. I live in Tyler, Texas. Southside Bank is a local bank that is growing like crazy opening branch offices all over town and opening small “banks” in the local grocery stores. The shale oil plays in Texas is helping our local economy and boosting bank deposits. SBSI was right under my nose and I didn’t think to research it as a possible investment.

    Another “local” company that you might not heard of is Delek Logistic Partners (DKL), which is the MLP formed by Delek US Holdings (I can look out my office window and see their refinery!).

    Thanks for the heads up on SBSI. They are now on my watchlist.

  25. luckydog17,

    Indeed! Texas is growing like wildfire with the energy boom going on there, and SBSI has certainly caught some wind in its sails as a result. Net income and EPS is roughly flat lately, but they did a lot better than many bigger banks through the crisis and after. I have nothing but good things to say about my investment with SBSI, and the special dividends every December are most appreciated. 🙂

    I’ll have to take a look at DKL. I don’t invest in limited partner units via MLPs, but instead invest in GPs only. But I’ll take a look at the setup. Thanks for the suggestion!

    Best regards.

  26. The BAX spin off sounds interesting on top of them already being a solid dividend stock. Healthcare is only going to grow so I would put my money in BAX.

  27. RichUncle EL,

    Yeah, healthcare is pretty much a lock for continued growth from here. I can’t see how one could go wrong buying a high-quality healthcare business at a fair price.

    Thanks for stopping by!

    Cheers.

  28. Hi DM!

    I like both of these plays too. I recently added to my SBSI position and would definantly like to add more possibly over the next few months. I haven’t considered adding more to my BAX position, but I would like to increase my exposure to healthcare for the reasons you mentioned.

    I think either would be a good purchase now!

    Take care!

  29. DM,

    If I happen to find time over the next few nights to research SBSI – I will let you know about the acquiree target Omni as well. I analyze banks everyday – I am an external auditor, auditing community banks, ranging from as small as $100M banks to around $3B, and can see trends with community banks fairly well, to which I’ll say – financial institutions are definitely out of the murky water, with difficult to support allowance for loan losses and also difficult to survive with larger institutions setting such high premiums to purchase them, as most banks are having difficulties in growing organically at the moment (loan growth, that is). Most banks now are using their cash to either purchase vanilla short term bonds, in case interest rates rise or hoarding it for an acquisition target. Makes me pumped that you’re looking at community banks, as I wish I could have invested into a few in my area. I’ll send an update if I dive into their recent 10Qs & 10Ks.

    -Lanny

  30. Hi DM! Do you have your REIT (DLR, O, OHI, ACRP,) stocks in a Roth IRA for tax purposes? Thank you! 🙂

  31. ILG,

    Thanks for stopping by.

    Yeah, I think both are decent buys right now, especially in light of where the broader market is at. I can’t see one being unhappy with either stock 10 years from now.

    And nice job topping up on the SBSI recently! 🙂

    Cheers.

  32. Lanny,

    That’s great. Since you do this for a living, I’d love to get your opinion on SBSI! I think it’s a fine bank, and I’m very happy thus far.

    If you get a chance to check it out let me know what you think. If you don’t get a chance then no big deal. 🙂

    Best wishes!

  33. I agree the market is due for a correction but I don’t try to time the market either as that rarely ends well What I do instead is consider writing covered calls at a strike price slightly above the current market price. If the correction does come or the stock trades sideways you keep the option premium. If the stock trades up you are forced to sell the stock below the market price, but you keep the premium and you still are selling the stock at a price higher then when you wrote the option. I have had good results with this strategy in times when the PE ratio is trading above a normal range.

  34. Kelsey,

    Sounds like a fair strategy there. I don’t use options for a multitude of reasons, but I say rock on if they’re working for you! 🙂

    Hopefully, we get some cheaper stocks either way here pretty soon. I wish we got coupons in the mail for stocks much like the way we get coupons for food from our local grocery store. Wouldn’t that be nice?!

    Cheers.

  35. I just stumbled on to your site, have you done any posts before about your feelings on options?

  36. I’m also getting frustrated with the high valuations going on now. If they don’t come down next month, I’m just going to have to send my cash flow into JNJ, PG, UL, PEP, etc at 20x earnings. If I can’t get value, I can at least get quality.

  37. DM,
    Thank you for all your info on this blog. I have been intrigued with dividend stock investments and just began my investing in November. SBSI and BAX seem to be two strong potential buys for the long term. Thanks for the review. What caught my eye in this discusion was the post by Dave and his NYCB play. I have a large holding in NYCB long before I began my dividend investing. My original purchase was Richmond County Bank and NYCB bought them back in 2001 and consolidated all assets into NYCB. Although NYCB has a high yeild, they have not raised their dividend. I am new to dividend investing and I am still learning but all I have read this is a stock that no dividend investor would add to their portfolio. It has been flat for 10+ years with no growth in the dividend. I am still deciding if i should sell all of my position but I would stand to lose dividend income. What is your take on NYCB?

  38. Nice write up! And good luck adjusting to the new surroundings! Thanks for all the articles! Work keeps me busy, but I squeeze in some time to read your blog when I can.

    The SBSI shout out made me smile.
    I bought some SBSI last week, some CBRL around the beginning of the month (before the run up), and some CMS this week as I am trying to add a bit of utilities to my portfolio.
    Also fripping in WEC and BP.
    I’m long BAX at $66, bought in around September 2013. When you see the amount of products Baxter sells to hospitals, it’s ridiculous. If you’ve ever had an IV, it might have been from them.

    I’m currently waiting for some of the energy stocks like CVX or XOM to drop lower so I can accumulate those. Apart from those, PG seems sort of around fair value.
    I totally agree with the buying attitude. I could see myself buying and following slightly too many companies though. I think when I’m hitting 50-60 stocks I will slow down and reevaluate what is attractive in my portfolio at that time and add to those stocks. The argument is that eventually it’s like building your own etf,… I don’t really have a problem with that as long as I make sure my position sizing is big enough to reduce the impact from commissions.

    TGT seems worth revisiting, I already bought more on the way down once, might do it again if it gets to the low $50’s.

    In terms of entering a stock, if I like a company after checking out the fundamentals, my favorite entry tools are: the historic yield, the payout ratio and finally the bollinger bands over a 2 year time frame. Other things I like looking at for ideas is the ccc spreadsheet (and the holdings in your current portfolio).

  39. Hey DM,

    Just wanted to say thank you for the good work and the strong motivation and willingness to change.

    Just wanted your thoughts on the 2 canadian banks you own which have been on a tear the last year. I know TD and Bank of Nova Scotia are doing some very exciting things and are well diversified. There earnings keep growing at great levels and the dividend is raising steadily.

    If you could please share your thoughts and views about them and at these record high levels that would be great.

    Thanks,

    Mike

  40. Nice purchases there DM. I’m particularly intrigued by SBSI. I really need to increase my exposure to financials outside of MA & V.

    I’d also like to add that there are still some areas of value out there. In addition to the previously mentioned TGT I’m taking a closer look at other retailers like ROST, TJX, COH, and BKE. I already own ROST and it’s been wonderful stock for me over the years.

  41. I like BAX, should probably add to my holdings. I also hold BDX, JNJ, and PFE. I don’t own stock in any banks (but do have MA and V). I had shares in Huntington Bank (HBAN) a while back. I see that they are buying more BoA branches here in MI, but the dividend history is spotty. I see CMS mentioned by AlphaTarget. I’ve been considering adding to electric utilities since I only hold Southern (SO). I love this blog! Thanks Jason, and welcome home.

  42. Thanks for the suggestions. I owned SBSI several years ago but I sold it because I wasn’t happy with their dividend payout irregularities (it didn’t have clockwork regularity of, say, WFC). BAX looks like a very interesting idea, which I will keep in mind if we ever need to put capital to good use. The last significant healthcare purchase that I made was AMGN. I’m hoping it will turbo charge our portfolio’s dividend growth rate.

    I’m happy to see that you are still finding good value in this market. I wholeheartedly agree with your philosophy of buying shares through rain or sun shine!

  43. Kelsey,

    I’ve never written an article on options, but I’ve been open about them in discussions before. I don’t use options for many reasons, most of which is because I don’t like to cap my upside. I’m here to make money off of compounding dividend income, not trading in and out all of the time.

    But there’s many ways to skin a cat, and I say go with whatever works for you.

    Cheers!

  44. Justin,

    I’m with you, and that’s essentially my attitude right now. If I can’t get cheap stocks, I’m definitely going to get high-quality stocks. That was the mantra behind my recent purchase in CLX, and many others over the past 6 months or so.

    Best wishes.

  45. hbkid,

    I’ve not looked at NYCB before, so my opinions are just based on a very quick look at the stock. What I see is a payout ratio near 100%, a valuation higher than many other banks, a very high yield, and a static dividend. Not a company for me, unfortunately.

    However, what doesn’t work for me may work for you or others. But as a dividend growth investor looking for sustainable dividend payments, a history of raising those payouts and a willingness to continue, attractive valuation, low debt, substantial economic advantages, etc., NYCB doesn’t fit my mold from a cursory look.

    Best of luck!

    Cheers.

  46. AlphaTarget,

    I’m with you on BAX. I bought in around the same price as that, and I’m very happy thus far. Even with the run, I think there’s still value here. Healthcare is only going to grow, and BAX should be able to ride that wave.

    TGT definitely seems worthy of an investment here. I’m already long and have a full allocation to the retailer, but if I didn’t I would definitely be putting some money there.

    I’ve never used Bollinger Bands because I don’t use any technical analysis in my strategy, but if it works then I say go for it. 🙂

    CBRL is one I definitely have to take a look at! It looks like it’s run up pretty strong over just the last couple weeks, but the valuation/yield seems to make sense here. Payout ratio is a tad high, however.

    Best wishes!

  47. Mike,

    Thanks for the support! Much appreciated. Life can be wonderful sometimes; always an adventure. Gotta be willing to roll with the punches. 🙂

    I love those two banks, and I also like RY here. I’m not interested at today’s levels, as both were available for significantly cheaper prices not very long ago. I like BNS around $60, but below that is even better.

    The worry over Canadian banks is the housing market up there. Canadians are carrying a lot of debt right now, and some are speculating the housing market up there is in a bubble. I don’t really get into macroeconomic arguments like that, but things seem a bit frothy there to me. As such, I wouldn’t go real heavy in Canadian banks right now. But a decent pullback in some of these names would definitely have me interested, however.

    Stay in touch!

    Best regards.

  48. wes mantooth,

    I’m with you all the way. I think retailers in general offer value here, and I’m a fan of TGT and WMT right now. I want to like ROST and TJX, but the yield just doesn’t offer me enough right now. I’ve looked at COH before and really thought about initiating a position, but in the end decided against it. I’m just not sure I want to get into the luxury clothing/accessory game where today’s fashion is tomorrow’s garbage. As an anecdote, people I know that used to like their products have switched over to Michael Kors. Again, just not my game.

    Best wishes!

  49. KeithX,

    Thanks so much! I love it here too. I really geek out on writing about this stuff, and staying in touch with you guys is a real treat for me!

    And great job holding MA and V. I consider my passing on V shares below $100 as one of my biggest mistakes so far in my young investment career. I hope to not repeat it too often. 🙂

    CMS would be a nice homegrown stock, right? It’s nice to profit from your own utility usage, as well as neighbors’.

    Take care.

  50. Spoonman,

    Hmm, their irregular payouts must have occurred before I owned them. Since I initiated a position, the regular dividends have been regular. However, the special dividend in December could be anything. But more money is never something I complain about. 🙂

    I’ll have to take a look at AMGN. The yield is a bit low, but the recent dividend growth has been stout. Let’s hope that continues.

    And I know you’re with me on buying stocks whether it’s sunny or raining outside. I’ve always got my umbrella handy!

    Cheers.

  51. I could not agree more DM. People are paying 300 k for tiny houses they need to redo doesn’t make much sense when they costed 40% less 3 years ago. Im happy to pile up and save next few years and wait to see what happens when interest rates go back to normal levels. Debt will become much more expensive and people with liquid assets will have a huge advantage, in the near future in my opinion. All my friends think I am crazy for selling my place and banking the profit and waiting to see what happens in the next few years.

    The banks seem rock solid but I do like them more at about 10-15% less as you stated.

    Thanks for the feedback,

  52. Mike,

    It’s kind of crazy what’s going on in Canada. You have to wonder how much higher houses can really go.

    At any rate, it makes me appreciate the small town I’m living in right now all the more: 1,200 sq. foot ranch houses built in the 70s go for around $60k here. Housing that cheap certainly brings the idea of FI much closer.

    And 10-15% cheaper Canadian bank stocks sounds about right to me. I think both BNS and TD are just a tad pricey here. High-quality banks, though.

    Best wishes!

  53. COH makes me crazy. They’re losing market share, yes, but still raking in cash. I figured I would place a small contrarian bet since everybody was jumping onto KORS and their 30 p/e. COH has been around since the 1940’s, fashions have changed repeatedly since then, and they still exist.

    But after missing on earnings again, they decided to freeze the dividend. It’s like they’re trying to scare people away.

  54. Justin,

    Well, “been around since the 1940s” and being able to pay a rising dividend for the next 20 years are two totally different things. I have no doubt that Coach will still be around a decade or more from now, but will they be able to keep raising their dividend? I have my doubts. Thus, I’m not investing in the company.

    But I wish you luck if you decide to make it a contrarian investment. 🙂

    Cheers!

  55. Hi jason enjoying your blog, really a wonderfull work you did and still doing here! I also started my dgi adventure 8 months ago after playing with options and high pe stocks like fb for a while.. i lost alot of money on daytrading and i was always damn nervous.. finally i searched for a new strategie and since then i love investing and reading your blog and all about value masters like buffet munger and graham.. keep up what uare doing its wonderfull, and i hope your reach your goal soner than later. Hope whe can still bee in contact im 24y old suisse guy so you have fans al over the wordl jason 🙂 you are a inspiration! Cheers suisse dg investor

  56. Abou the topic, i really like both stocks, but sbsi seems a little to expensive for me, for bax i didnt pull the triger at 67$.. sometimes im waiting to long, also for a marcket corrections. I have bought some shares of coh, but i think i didnt realise how hard the competision is in the luxury retail apprel sector.. so this wont touch these category again. I love slow growers like energy or consumers banks pharma..any thought about mat or us bancorp? Or jpm? Not in ccc list but doing also a good joob..

  57. Pingback: Stock Analysis – SBSI & OABC | Dividend Diplomats
  58. DM,

    Phew – just pulled out a quick analysis at my page. Spent a bit of the morning going through some Qs and Ks. http://dividenddiplomats.wordpress.com/2014/06/01/stock-analysis-sbsi-oabc/

    I dove into asset quality and capital trends at both institutions. SBSI, it’s interesting – definitely has taken a large step back from Q1, has huge improvements in their loan portfolio and has been piling away capital (for acquisitions, regulatory purposes) – seems like a sound investment. Also – Texas has been a booming market as well. Should be interesting…

    -Lanny

  59. Pingback: Two Stocks On My Watch List For June 2014 – Dividend Mantra | Stocks Reporter
  60. suisse dg investor,

    Thanks for stopping by all the way from Switzerland! It’s really wonderful to have readers from Europe and other places throughout the world. 🙂

    And I’m glad you’re now on a path to sustainable investing via investing in high-quality companies that pay and raise dividends. I think you’ll find it much more robust and tangible than chasing after the big growth names. And it’s certainly less of a roller coaster ride. Your stomach will thank you!

    Hope you stay in touch. Best of luck with your investments.

    Best wishes!

  61. suisse dg investor,

    Of your stocks listed, I like US Bancorp the best. USB is a very solid bank, although I haven’t looked closely at them a while ago. When I was initially interested in investing in big U.S. banks it came down to USB and WFC for me. I ultimately chose WFC, but it could have gone either way for me. Both have done very well over the last few years, and I wouldn’t mind owning a piece of USB at some point in the future.

    Cheers!

  62. Lanny,

    Hey, just stopped by a bit ago and checked it out. Thanks so much for putting it together!!

    And you’re right: Texas is booming right now, and I think SBSI is riding that wave. I’m about 50/50 on BAX and SBSI right now. I’ll watch the two and see how much capital I have available in June. I’m just excited to get back on the horse and invest soon. 🙂

    Thanks again.

    Cheers!

  63. Jason,

    enjoy following your blog and started DGI around 2 years ago. You show me how important to buy when you have the cash even thou not the best price as stocks are no longer cheap as 2 years ago. Have you ever looked at AVY Avery Dennison Corp. I bought 23 shares 2 weeks ago at 47. Just wondering your take on AVY.

    Thanks

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