Three Stocks On My Watch List For August 2014

lookingOpportunities remain rather limited as the broader stock market still trades near all-time highs. Butย dividend growth investors who seek value, like myself, simply see this as a challenge to sharpen the proverbial pencil and shop for bargains.

I’m not saying I see any super cheap stocks out there right now, but I do see shares in some high-quality businesses trading at fair prices or near fair prices. And one can do much worse than invest in high-quality businesses at fair prices, especially ifย the investment time horizon is rather long-term in nature.

I initiated two new positions last month, and lo and behold, the market is doing me a favor by discounting shares in these businesses even more. I always look for an excellent opportunity to average down on shares I already own, so naturally I’m most interested in shares in these two businesses specifically. However, there’s also a third business I’m currently invested in and also looking to add to. I’ll discuss all three stocks below.

Deere & Company (DE)ย 

I initiated a small position with this farm equipment powerhouseย just last month at $88.22 per share. Sharesย ended last week at $86.17. If I liked it above $88, you can imagine I like it even more at near $86. Not a major pullback in priceย by any means, but I’ll take what I can get here.

As I referenced in the above article, I thought there was already a lot of value in shares with a P/E below 10. Even with a likely drop in earnings over the next two fiscal years or more, the long-term story looks great. You have to imagine there’s going to be more people alive on this planet two or three decades from now, and they’re going to be hungry. Deere provides the equipment necessary to grow the food to feed these people.

And growth has been fantastic. Revenue has compounded at a 7.34% rate annually over the last decade. Meanwhile, earnings per share has compounded at an annual rate 14.07% over the last 10 years.

But the real story is the dividend, and the growth of it. The yield is pretty solid right now at 2.79%, backed by a 11 consecutive years of dividend growth, and a 10-year dividend growth rate of 16.3%. Furthermore, the dividend is well-covered with a payout ratio of just 26.3%. So Deere can suffer a shock to earnings and continue paying the dividend just fine.

DE remains at the top of my watch list for a purchase this coming month.

Visa Inc. (V)

Another recent purchase for me, as I also initiated a position with this fast-growing payments processing business last month.ย Shares are trading at roughly the same price I paid, but I already thought that was a good price, or I wouldn’t have initiated a position in the first place. Although I plan for V to be a rather small position, I wouldn’t mind doubling my investment in this business here.

There’s just so much to like here, namely the growth in the business. Revenue hasย compounded annually at a rate of 14.26% over the last five years, while EPS has a CAGR of 25.09% over this same time period.ย These numbers are pretty eye-popping.

Now, I’m obviously typically a proud value investor, so V is a hard stock to fit in my portfolio. But the reason I like V is for the supercharged dividend income. Sure, the yield is a bit pitiful at just 0.74%. But the dividend has grown at an annual rate of 45.9% over the last five years. That’s some pretty good stuff. And I’m willing to bet that the dividend will continue to grow at a rate well into the double digits for the foreseeable future.

Visa is the type of investment that you have to have a lot of faith in, simply because there’s a lot less current income to keep an investor satisfied. You’reย not getting as much of your capital returned to you in the form of a large dividend, so you’re counting on the growth. But as long as I keep V a small portion of my portfolio I’m okay with that.

General Electric Company (GE)ย 

I last purchased shares in this massive conglomerate back in March of this year. Shares are basically flat since then, which affords me an opportunity to do a quick look at my previous analysis and buy up additional shares at the same price.

The last decadeย wasย pretty ugly for GE, both for the stock and the business. Growth has basically been non-existent, and the dividend was cut during the height of the financial crisis. However, we invest for where a company is going to go, not for where it’s been.

And I think GE has a pretty bright future. The company has massively changed over the last few years as management continues to focus more on core industrial operations and less on financial and media operations. They sold off the remaining 49% of NBCUniversal last year, and have already started the process of dramatically shrinking GE Capital. Meanwhile, the focus on the industrial side of the business continues to take shape, with the purchase of Alstom’s energy assetsย and strong operations in aviation. The company’s massive $200+ billion backlog is evidence of this.

The company trades at a moderate valuation of under 18 times TTM earnings, with a rather attractive entry yield of 3.41%. The payout ratio leaves room for further dividend growth, at 60.3%. And since the dividend cut in 2009, the company has been regularly and aggressively raising the dividend. I suspect that will continue.

Full Disclosure: Long DE, V, and GE.

What’s on your watch list for August? Think any of these stocks make sense here?ย 

Thanks for reading.

Photo Credit: bplanet/FreeDigitalPhotos.net

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113 Comments

  1. Not sure if you subscribe to F.A.S.T. Graphs but Deere looks real promising from that lens as well. I might join you on a Deere purchase as I have been a fan for decades and the price offers a great entry point with lots of dividend upside as well.

  2. Mantra,

    Nice list and great view point from an investors standpoint. I like the pullback you saw with Deere – if you bought it a few bucks higher, nothing changed with the company – so why not add a little more? I am in a similar boat with a certain “three” stocks as well that I own and am debating about adding a little more to my pile in them. All have had down years in 2014 so far, and it’s nice seeing a pullback. If the P/Es are there, fundamentals are still in tact and there are strong dividend increases – if you have the capital then – Why Not? Looking forward to the next move DM, talk soon, hope you had a great weekend, nice post!

    -Lanny

  3. Those are 3 good companies that will be around for decades to come…Your analysis and opinion on Deere is right on the money. In 10 years time, there will be more people on the planet and Deere will be a major supplier of the equipment to grow the food needed to feed them. Majority of people use credit cards, so Visa will be solid for years to company. Visa makes money every time someone swipes their card. For me, I use Visa every where I can, because of bank fees with my regular day to day banking.

  4. Awesome names. If I was still in the accumulation phase I would seriously consider GE, but honestly, I’m not sure when I’ll be able to “forgive” that company. But I think you are playing it right by catching it early while it is still relatively unloved.

    This is certainly a challenging environment to invest in, but these names look great.

  5. Well since I’ve bought some of all 3 recently you know where I stand on them. I’m looking to average down my cost basis in DE on further weakness in the share price. There’s not anything that I’ve found that’s super cheap but there’s still some high quality companies trading around fair value.

  6. I am looking to increase my GE position soon. It took me a while to get comfortable with adding more, but I am there at this point and just looking for a good entry point. Like you, I am much more likely to be adding to current positions than to be initiating new ones at this stage.

  7. SE,

    I don’t subscribe to F.A.S.T., but I hear great things about it!

    I think there’s a lot of upside for DE over the long haul, both in dividend growth and share appreciation. The future looks very bright!

    Thanks for stopping by. ๐Ÿ™‚

    Cheers.

  8. Lanny,

    Hey, good to see ya!

    If I like a stock at $X, then I surely must love it at less than $X. I always look forward to averaging down on a position, assuming I have capital available and the position size warrants addition. ๐Ÿ™‚

    Looking forward to seeing where your capital goes this coming month. Happy shopping!

    Best regards.

  9. IP,

    I think the future looks pretty strong for all three companies, albeit in different areas of the economy. And that’s why I like all three for different reasons.

    To our continued success! ๐Ÿ™‚

    Thanks for stopping by.

    Take care.

  10. Asset Grinder,

    Thanks for the perspective!

    I think what’s really cool about these three stocks is they all offer a different blend of value, growth, and yield. So there’s really something for everyone, plus the diversification is there as they all operate in different areas of the economy. So many stocks, so little capital.

    Best wishes!

  11. Spoonman,

    I hear you. It’s tough to forgive a business after they cut the dividend, especially the way GE did it with all that “The dividend is safe!” talk right before cutting it. I personally like Immelt, but he sure didn’t earn any friends with that move.

    And it’s definitely a challenging environment, which means you’re moving from the accumulation phase to the distribution phase just in time! ๐Ÿ™‚

    Thanks for stopping by.

    Best regards.

  12. AA,

    Hey, thanks for stopping by! Your consistency is really inspiring. You definitely live up to your name, my friend. ๐Ÿ™‚

    I’m with you on all of those names. The one I’m most disappointed with is MCD. I hope they get it together at some point. But I think all of those names are pretty compelling right now.

    Take care!

  13. Henry,

    Those are some interesting names. I know you’re big on ROST and TJX. I like the businesses, but I’m just already loaded up on retailers with WMT and TGT. I hope they all serve us well. ๐Ÿ™‚

    Thanks for the suggestions!

    Cheers.

  14. JC,

    I’m with you. I’d love to average down a bit on DE. That’s tops for me right now. But V and GE also make a lot of sense as well here.

    Let’s hope we get even cheaper prices in August! ๐Ÿ™‚

    Best wishes.

  15. S.B.,

    Yeah, with my portfolio now at 49 positions I’m going to be sparingly initiating new positions. There are still quite a few businesses that I’d like to invest in, like CL, ADP, BDX, NSRGY, and UL, but I don’t want to get carried away. I may have to prune a position here and there over time. We’ll see how it goes.

    But I agree that GE looks solid here. I’m quite pleased that it’s been weak lately. Meanwhile, I think they’re making the right moves. I’m glad to see the changes weren’t just lip service.

    Cheers!

  16. Happy to be a fellow shareholder with you in GE. I fully agree with your assessment of the company in that GE of today and the future will be radically different than GE of recent years past. Going back to its industrial roots will no doubt deliver growth and value for shareholders going forward. Sometimes being a conglomerate with such varying businesses as finance and media can be more than a little distracting and makes it easy to “lose your way.” Have to like the GE consideration.

  17. Great watchlist. GE and DE are on my watchlist as well.
    Besides these, MCD and WMT are also trading close to their 52w low figure.

    As I’m just starting the fundament of my DGI portfolio, I don’t like the extremely low yield for V.
    Perhaps in a later phase of building this dream, because their growth is fantastic.

    Keep up the good work!
    Best wishes. DfS

  18. Hi,

    Just add a stoploss or putoption on the stocks that are off higher prices and your good to go for dividend since your networth is still protected.

    Nice finds DM although I don’t believe in GE to be honoust since margins are too low.

    Kind regards,
    FGI

  19. Thank you sharing DM,

    I like two out of those three stocks โ€“ Visa and GE.

    DE – the valuation is great, but I am still learning their business model.

    Best Regards,

  20. All great stocks…best wishes with your investment. Looking forward to see which one you buy.
    I started a position in GE last month and might add more later in the year.

    R2R

  21. I would place my funds in GE as the growth potential is evident. THey actually manufacture products we use and I see great innovation going into the next few years.

  22. On the other hand, you know that GE leadership is willing to change in order to respond to a new environment (something the Big 3 automotive companies did not do… and we all know how that ended up).

    I think the hardest thing to do is remove the emotion from investing. Emotionally, investing with a company/person who burned you before may hurt, but even we as investors need to respond to new environments with reason over emotion. The important question is whether you interpret that decision as a smart one or a poor one for GE. Over the long-term, what’s good for GE (or any company we hold) is good for the shareholder.

  23. I like all 3 of those companies too, with my least favorite valuation wise being V, but still not a terrible entry. Just some ideas, take a look at TUP and CHD. I think they are both valued significantly better than their peers.

  24. DivHut,

    Yeah, I really agree with management’s direction over the last few years. Selling off the big media assets and then reducing GE Capital are both prudent decisions. I think the focus on infrastructure and energy will serve them well over the coming decades. I think the valuation and yield leaves a lot to like here.

    We’ll see how it turns out, though I’m not sure if I’ll have enough capital for two purchases. I may have enough for just one, which leaves DE at the top of the list. But GE looks pretty good too.

    Cheers!

  25. DFS,

    I hear you on V. I passed up on it when it was below $100 because of the low yield. Though I regret that, I just wasn’t ready for a stock like that at the time.

    Yeah, I think MCD and WMT are also solid picks. But I remain concerned about MCD execution errors, and the potential merger between DLTR and FDO may hurt WMT because it gives the former more clout/leverage with manufacturers.

    Thanks for stopping by!

    Best wishes.

  26. FGI,

    I don’t use any stop losses. I would actually call those a “stop gain”. I have no desire to sell, so falling prices would just allow me to average down on companies I already own a piece of.

    GE’s net margin isn’t real fantastic compared to some other companies in other industries (like V up there), but is very competitive with other industrial companies in its space. And they’re shopping the appliance division, which has very low margin. But a company with a net margin between 7-10% can still be a great investment over the long haul, if bought at the right price and held long enough.

    Thanks for stopping by!

    Take care.

  27. FJ,

    I think all three have something to like, but for different reasons. They all have different growth profiles, different yields, and different valuations. And they’re in different industries. So there’s something for everyone. ๐Ÿ™‚

    But take a look at DE. I wasn’t real enamored until I took a good look at the business.

    Cheers!

  28. R2R,

    Thanks for stopping by!

    Yeah, I’m not sure if I’ll have enough capital for more than one purchase this month. So I might just be picking one of them. DE is at the top of the list right now, but we’ll see what happens over the coming weeks.

    Glad to have you as a fellow shareholder in GE now! ๐Ÿ™‚

    Best regards.

  29. RichUncle El,

    I do like GE. Some of the metrics are obviously off right now as they’ve been shrinking the business, but I think the growth potential is really strong over the next decade and beyond. I completely agree with a lot of the moves management has made over the last couple of years.

    Thanks for the perspective. ๐Ÿ™‚

    Take care.

  30. Nothing wrong with growing positions that you have when there is a pullback, like you said, if you liked a stock at $88 why would you like it less at $86? Glad to see you are still able to invest after leaving your full time job! That should be considered a feat on itself!

  31. Ravi,

    I agree. Emotion holds a lot of investors back. And it’s incredibly difficult not to be emotional when it comes to one’s money.

    However, I simply try to take a pragmatic approach to all of this. It’s just business. So I try to remove money from the equation and simply look at the business from 20,000 feet or so and see if I could benefit from being a partner. Obviously, there’s a lot more to it then that. But that’s basically the perspective I go into every transaction with.

    Best regards!

  32. took2summit,

    Those are solid names there. I’m not sure if I have room for TUP, and I’ve never really been a big fan of the direct-sale business model.

    But CHD is a great company with very solid brands. Not sure if I’m buying here, but I’ve long wanted to own a piece of that company. However, I do have to be careful as my portfolio is nearing 50 positions here. And there are still a lot of businesses I’d like to own a piece of: CL, ADP, BDX, SU, UL, NSRGY. And then you can add CHD to that list as well.

    Thanks for the suggestions!

    Cheers.

  33. I have a couple hundred shares of GE that I bought in 2007 or so…Unfortunately its still not back to where I bought it, but has continued to throw off an increasing dividend(post cut). I think they are going to IPO their finance group, which is the reason for the trouble in the first place. That should eliminate some uncertainty over the future dividends, so I might buy some more. Thats the good thing about dividends, if you add those back in I’m sure I’m up on the position overall.

  34. Kipp,

    Absolutely. I always look forward to averaging down. I’m sure I’m in the minority where I look forward to a stock I purchased declining in price.

    And I am incredibly lucky and blessed that so far I’m able to keep to the plan. If I wasn’t able to continue buying stocks I would probably have to rethink everything. I just love my current position where I’m able to write full-time, though. I definitely don’t want to change anything.

    Thanks for stopping by!

    Best wishes.

  35. envisionhappy,

    I’m confident if you added in all of those dividends over the years you’re doing better than you might think. ๐Ÿ™‚

    And they are going to IPO a chunk of Synchrony, while the rest will be offered up to shareholders through a share swap. I’m probably going to keep my GE position intact, however.

    But I’m excited for GE’s future. I think they have a lot of potential with their focus on infrastructure and energy.

    Take care!

  36. Mantra,
    I’m definitely a fan of DE at $86 (thinking of initiating in the coming days) and have also been watching DOW Chemical. It seems a little undervalued at $54 (up 21% this year) and sports a decent yield at 2.75%. It cut its dividend during the financial downturn in 2008 but, like GE, its future is looking bright. Any thoughts?

  37. I am looking to avg down on PG and GE next month..

    Do you have any thoughts on GSK aka The British JNJ? It is down 10% in last 5 days! – They just got sued I believe – I haven’t dug too far into yet

  38. Those are all solid picks and on my watch list as well. I’m also watching OHI, VTR, ETP, TCL.A, ARCC and SCANA plus about 100 others! The more I read about ARCC, the more interested I get in this BDC. I know it seems risky, but ARCC provides capital to small to medium size companies, like PODS, which I’ve used before.

  39. Hey Jason,
    I hold shares of GE and V, but not DE. I have been watching DE for a while and I agree that the valuation is great. I dumped a few shares of INTC and T today (in my 401k so no tax implications) and am considering DE.

    Have you ever looked at Mattel (MAT)? I purchased shares when they got hammered after Christmas, and they are back down to the same price. The PE is 15 with a yield over 4%. I’m lovin’ it (oops, wrong jingle).
    Thanks,
    KeithX

  40. Mantra,
    I am wondering what you think about what I did today. When I first began investing I bought shares of RIG and SDRL. At the time I saw high dividend and that was about it. When I got to researching I began to feel uncomfortable about those two for the time being. So, today I sold both positions and purchased shares in PSEC. Along with that, my portfolio now includes AAPL, BP, MAT, KMI, T, SO, and EFC. How do you feel about selling those two stocks and how my current portfolio looks?

  41. DH,

    Thanks for stopping by!

    I think you got DE at a pretty nice price there. I definitely wouldn’t mind averaging down a bit here.

    I honestly haven’t looked real strong at DOW in a number of years now. But I don’t see anything I really dislike here. Seems like it might be on the rich side, but all the metrics look pretty sound. They’ve been aggressively growing the dividend, the yield is reasonable, and the payout ratio leaves room for future dividend raises. The balance sheet looks good, and growth is back. They look a lot better now than the last time I took a good look.

    However, I chose to invest in APD, which is a somewhat similar company. As such, I’m on the sidelines with this one.

    Best of luck with it if you invest! ๐Ÿ™‚

    Cheers.

  42. GMS,

    I’m with you. The past is pretty ugly, but I like the direction the company is moving in now.

    Glad to be a fellow shareholder. I’m hoping for both our sake the next dividend increase is impressive. ๐Ÿ™‚

    Thanks for stopping by!

    Best wishes.

  43. qazwsxedc,

    Nice buys there. I’ll have to add to my PG position at some point. I love the business, but just haven’t bought any in a while.

    I actually don’t think of GSK as a British JNJ. Their operations aren’t nearly as diversified, and they’re primarily a pharmaceutical company. I like the yield, but I’m not particularly interested in the business. I prefer the diversification of a company like JNJ where I can get the pharma exposure, but also medical devices, and the consumer products. They’re really not comparable businesses, in my opinion.

    Cheers!

  44. Mantra, I think all three of the a for mentioned stocks are all very solid picks. In my investing philosophy, I prefer older more proven companies such as the cokes or proctor and gambles of the world. Companies like visa still haven’t proven they can last for 100+ years. Maybe they will, maybe they wont, think a little exposure is good, but would want to much. I think Deere is the best to buy now for the next 30 years, but just an opinion. Disclosure, long KO, PG, De and Ge

  45. luckydog17,

    Haha. I hear you there on the watch list. So many stocks, so little capital. ๐Ÿ™‚

    ARCC could do very well. It looks like theyโ€™ve crushed it over the last five years. And you have to love that yield. But these BDCs seem pretty risky to me. And after the financial crisis just a few years ago, I prefer to limit my downside risk as much as possible. Especially as Iโ€™m almost 100% equities.

    I notice that many of these BDCs have consistent negative operating cash flow. Any thoughts on that?

    Best wishes!

  46. KeithX13,

    I looked at MAT a couple times over the years. HAS as well. I’m just not a fan of these toy companies. I don’t know how relevant they’re going to be in a world where children increasingly use electronics for entertainment. I could be wrong, but these just don’t suit me.

    Thanks for stopping by!

    Best regards.

  47. Daniel,

    To be honest, I wonder if you might be chasing yield. For instance, I’m going to copy and paste EFC’s business description from Google Finance. If you can understand most or all of that, then you’re in the right business:

    “Ellington Financial LLC (EFC) is a specialty finance company, which specializes in acquiring and managing mortgage-related assets. As of December 31, 2011, its targeted assets included residential mortgage-backed securities (RMBS), backed by prime jumbo, Alternative A-paper (Alt-A), manufactured housing and subprime residential mortgage loans (non-Agency RMBS); RMBS for which the principal and interest payments are guaranteed by a United States Government agency or a United States Government-sponsored entity (Agency RMBS); mortgage-related derivatives; commercial mortgage-backed securities (CMBS), commercial mortgage loans and other commercial real estate debt, and corporate debt and equity securities and derivatives. It also acquires and manages other types of mortgage-related assets and financial assets, such as residential whole mortgage loans, asset-backed securities (ABS), backed by consumer and commercial assets, non-mortgage-related derivatives and real property.”

    Source: http://www.google.com/finance?q=NYSE%3AEFC&ei=3eDWU5CbEcSNqQGCnYC4AQ

    Cheers!

  48. For my watch list: I’m looking to get some US exposure (right now I have none) so I’m hoping to get into JNJ, MCD, KO and PG. All my stocks are Canadian and so I’m really looking to get more diversification through the US markets. Any thoughts? Especially MCD, which is fairly low right now – stay away or good opportunity?

  49. Dividend Investor,

    I hear you on the risk there in regards to Visa. I think there is certainly some risk involved, especially in terms of how technology changes over time. Mobile payments could create some kind of redundancy we don’t see yet. However, Visa has been around for a little while now, as they were originally founded back in the late 50s. So they’re not a brand new company.

    Although, I also see DE at the top of my watch list for this month. I think the valuation, growth potential, yield, and business model all look really great for me.

    Thanks for the perspective!

    Take care.

  50. Dan,

    I might be in the minority in regards to MCD. I’m a shareholder in the company, but I think they have to improve execution, strategy, and customer service before I get real excited about the company again. I’m not interested at all in adding to my position here, unfortunately.

    I think the stock looks great in terms of metrics, but the qualitative aspects of the business leaves me questioning where this fast food giant might be in a decade or two from now. I think customers see the value in their food, but not quality, service, or health. Part of that is marketing, and part of that is execution. Just my opinion on it.

    I think the rest of those companies on your list look pretty solid. ๐Ÿ™‚

    Happy shopping!

    Best wishes.

  51. GE is the best value I can see in the market currently. I picked up another 250 shares on Friday. Also from a technical standpoint, the chart looks like it is ready for a bounce. I think you are better served picking up more GE, and waiting to see if DE goes down even further.

  52. This months lazy action has left me on the sidelines so far, looking for quality, and a motivation to buy. There are plenty of good values out there right now…including the ones you call out in your post, and many of the ones called out in the comments. I think it’s intriguing that even though the overall market is near it’s all-time highs, there are still plenty of plenty of superstars to invest in right now (of course, thinking long term).

    I too have V on the radar, and with it KMB, GIS, MCD, and MAT. All solid companies that have made little progress over the last year, or are down significantly in the case of MAT. I hear your argument on MCD, but I guess I just have faith that one of the best companies for DG out there will figure out how to stay on top. Eating at MCD is not my thing, but each one of the 3 new locations in my area are packed regardless of the time of day, so for plenty of people, it is their thing!

  53. I understood most of EFC’s business model from what I learned in my business courses but certainly did have to research how they do business as well. I agree 100% that I have focused too much on yield rather than growth. I definitely need to improve my positions in dividend champions such as JNJ. Your blog has certainly helped me learn more about dividend investing. Before, it was a concept that was somewhat vague to me.

  54. presone,

    I think GE is definitely a pretty solid purchase here. The valuation, yield, and growth prospects all add up to a pretty compelling buy.

    I hope to have enough capital for two purchases, which might make it possible to buy both GE and DE. We’ll see what happens. ๐Ÿ™‚

    Thanks for stopping by!

    Take care.

  55. Thirsty Investor,

    That’s good news about the three new MCD locations in your area staying busy. As a shareholder, I like to hear that. ๐Ÿ™‚

    I hope they turn it around. It’s actually one of the few businesses in my entire portfolio that I’m currently concerned about. I remember growing up and everyone genuinely enjoying eating there, for the most part. I mean it was never considered a fancy night out. But people generally enjoyed their food. Now I can’t find one person that actually enjoys eating there. It’s more a matter of price and/or convenience, but there’s this undertone of “eww”. Rather unsettling. And that seems to be bearing itself out in their results. They can certainly turn it around, but I think a more effective marketing strategy is necessary, as well as a renewed focus on customer service. I can’t tell you the last time I had great customer service at a McDonald’s. And I go there often enough to know.

    Best wishes!

  56. DE has been bouncing between #1 and #2 on my watchlist for a while. Then the #2 has a pullback right when I’m about to buy and jumps to the top of the list instead. My order for August is DE, BP, JNJ, so one of those will probably jump ahead like always.

  57. I have 460 GE bought at 22.5265 back in Feb 2013. I’m up 22.91% plus have received 597.31 in dividends over that time period, bringing my total gain at today’s price to 29%.

    I bought some Enbridge Preferred Shares ENB.PR.D last week and some Brookfield Asset Management P/S BAM.PF.B as well. I wrote a post on that if you are interested.

  58. Hi DM,

    some quality companies there! I might pick up some DE too. Already have V and GE, although could do with some more GE too, that backlog (and that moat) isn’t going away any time soon. I am looking to add more core positions.

    Last month was a busy month for me. I sold out of some managed etfs (no more yearly 1% expense ratios for me!) and used some of that capital to buy shares in:
    AFL, (new)
    BP, (added)
    CL (new, expensive but I wanted the quality, I highly doubt I will regret this buy 20 years from now),
    CLX, (new)
    MCD, (added, They can not afford not to fix their issues, and they have been good at fixing issues in the past).
    MKC, (new, economies of scale, both consumer and corporate segments, acquisitions into new markets,…)
    NSRGY, (new, the only thing I don’t like is they only pay the dividend once a year, but wanted to diversify into Europe)
    O (added in roth ira for great untaxed yield, also a bit expensive),
    OHI (added in roth ira for great untaxed yield, also a bit expensive – but babyboomer trend is guaranteed),
    PM, (added)
    TGT (added, slowly dollar cost averaging down)
    So 5 new companies, 6 additions out of 11 buys.

    I am now waiting for more energy and defense companies (very strong moat), too bad Chevron ran up so much recently. (XOM, CVX, LMT, HRS).
    Maybe a bit of medical (MDT, OMI, and another healtcare reit – HCP).
    I want to also still get more utilities as I am underweight in them. Probably more WEC and a water utillity.
    And finally I might double down on MAT, we’ll see if it keeps dropping. I think there will continue to be a market for toys, lots of kids under 6 or so won’t switch to electronics any time soon I think.

    As I approach more holdings I am aiming for building stronger core quality positions. The tricky bit is that those core positions seem to be mostly fair/overvalued.

    Good luck to you the coming month and hopefully the market pulls back a bit so. The VIX is so low – this July it reached the lowest in 5 years (this is partially why I decided to sell out of my managed funds also it no longer aligned with a more self-managed dividend growth investment approach, but it was good whilst it lasted for starting and seeing how they managed it). I like looking at the VIX, because it shows me the spikes much better. The fundamentals help me decide what to buy, the technicals help me decide when to buy.

  59. Jason,
    I do like Visa and debating between that and Mastercard. With the rise of emerging markets both have a great future, charging fees without holding inventory.
    I bought CVS, although the dividend is at 1.4% they’re on pace to double their dividend every three years. What are your thoughts.

  60. You are a man after my own heart; my portfolio has many of the stocks you own. I’m a little over weight on utilities (ED, ERF, NWN); they are steady payers. Also, give some thought to writing covered calls against your holdings; it’s a painless way to boost yield. You have to own 100 shares of any stock to be able to sell a call, however. Once you get to that point, though, the cash will fly in.

  61. What about ARCP looking good after earnings. I think some of the negatives have gone. Congrats to investors who jumped in @ the $11-12 area. BP I think will get quite interesting on further neg press! Whats your thoughts?

    Good luck

  62. Justin,

    If you’re looking at BP, now might be a good time. However, I think the risk needs to be considered with their 20% stake in Rosneft.

    But I hear you on DE. It’s pretty much #1 on my watch list for this coming month, but that could change. The more I look at GE, the more I like it. And V is obviously in the mix as well.

    Always exciting to go shopping, though. ๐Ÿ™‚

    Thanks for stopping by!

    Cheers.

  63. Debs,

    Nice position there with GE! And I think you have a pretty good cost basis there. I can’t imagine you being unhappy with that over the long haul.

    I’ll definitely head over in a few minutes and check out that post on the preferred shares! Enjoy that great income. ๐Ÿ™‚

    Best regards.

  64. Alphatarget,

    Thanks for sharing all of your recent transactions! I really appreciate it. Always good to know what other investors are doing out there, and the rationale behind it. ๐Ÿ™‚

    Those look like some really solid purchases there. CL and NSRGY remain a couple of stocks very high on my watch list, but just not right now. I just can’t get over the prices, but I also agree with you in that I doubt you’ll regret the buys 20 years from now.

    I’m not quite as bullish on MAT, though. And that’s simply because I think there is a fundamental shift in toys and entertainment for children. But I could very well be wrong on that.

    MKC is a fantastic company. I need to really take a look at some point and see if I want to add. The business model is very solid and easy to understand.

    I think BP has a lot of potential, but also a lot of risk with what’s going on over in Russia. Not only do they have to worry about sanctions, but now the ruling over how Russia took out Yukos. So I’m not sure how that’s going to play out, and how much of Rosneft is the former Yukos.

    Keep up the great work over there!

    Best regards.

  65. Charles,

    I’m with you on Visa. The amazing thing about Visa, in my opinion, is how fast they’re growing for such a large company. The potential is pretty amazing.

    I honestly haven’t taken a good look at CVS in quite a long time, so it’s hard for me to comment. But I can’t imagine them doing badly. One of my biggest regrets is not investing in pharmacies a while back, specifically when the Express Scripts issue came out. Oh, well. Can’t win them all!

    Thanks for stopping by!

    Best wishes.

  66. mike,

    I haven’t looked into selling calls because I’m not interested in selling any of my positions. But I can see how that can be lucrative and generate additional income on your holdings, especially in a rising market (as we’ve experienced over the last few years).

    I don’t have a lot of utility holdings, but they’ve done really well over the last year. I’m just concerned about growth potential, and the rise of solar energy. But you have to love the current income many of those companies offer.

    Take care!

  67. j-harr,

    I still think ARCP is a great opportunity here. The occupancy rate is near 100%, most of their tenants are pretty solid, and their scale is massive. The yield is obviously quite attractive, and the valuation is low. I think the risk/reward is favorable. I’m probably not buying any more right now, but I don’t think it’s expensive right now, even after recovering.

    BP is interesting. Not sure what to make of it. Great quarter, and they’re recovering. However, I knew going in that the exposure to Russia provided an aggressive risk/reward relationship. And now we see the risk showing its face. It’s not just sanctions BP has to worry about, but I’m not sure how this $50 billion ruling against Russia will affect Rosneft assets, Russia, or BP. I’m still kind of just watching that one. Not interested in adding, but also not interested in selling.

    Best wishes!

  68. I like DE too. Now that I have some cash after selling INTC, it’ll be a good time to initiate a position. I like GE too, but I might have to wait a bit until more fun become available. Do you like any particular utility companies? I need a bit more investment in that area. I’ll check your portfolio page.

    Hope things are going well. -Joe

  69. Joe,

    Thanks for stopping by!

    I think you made a good choice selling INTC. I don’t regret selling, but my timing could have been better. Of course, this just proves why I’m a long-term investor, not a market timer.

    I’m not particularly interested in any utilities right now because I think they’re all expensive. However, I wouldn’t mind adding a bit more to AVA, which is a stock I own. The P/E ratio is modest, the yield is decent, and they’ve been well-run since I’ve been following. At a cheaper price, I would be more interested in SO. And I think WEC is a great utility at the right price.

    Best regards.

  70. Yes, feeling the same way on BP. We are starting to see share prices on certain assets come down, and I bet we see further price depreciation thru sept. Holding a sizeable amount of cash to put to work. hope we can make some good purchases in the coming months!

    All the best,

  71. Looks like July wasn’t quite over yet. This morning I bought shares in ESV and GE as well. That should be it for this month.

    It would be interesting to see your deeper analysis of MAT (a few others have mentioned it too) if you have the time, especially because most of the time you cover stocks you want to buy. This could be a counter-review article.

    You have shared so much, and although I don’t have the time to write up full articles, I do like to share my transactions as it can only help to bounce views off each other.
    All the best to you too!

  72. The negative cash flow could be an indication of rapid growth. ARCC is the largest BDC and F.A.S.T. Graphs is projecting 20% total return for the next 5 years. They also currently have a special financial relationship with GE.

  73. 1. V – I wouldn’t buy stock that yields 0.75%
    2. DE – good fundamentals, looks better than CAT at current prices, may consider…
    3. GE – imho fairy valued, not too appealing

  74. I’d say the future looks very green ๐Ÿ˜‰ I just bought a lantern at Costco by GE… a lantern, yup if they sell to everyone (consumers, industrial, military) and they have a dividend they should at least be considered for a portfolio, really like the list!

  75. DM,

    I think you just explained why MCD will continue to do well. Despite the “eww” factor, people still go there often enough because of the value and convenience. Plus the breakfast menu destroys everyone else. I see MCD in a similar light as MO. Traditional fast food restaurants seem to be in decline. MCD, like MO, will dominate in a declining market pushing out the weaker competitors (or having them merge, a la LO and RAI). Additionally, no new serious competition is going to sprout up in the traditional and cheapest fast food market. Lastly, MCD seems to be recession/bear resistant (at least in 2008). For these reasons, I did just purchase a small amount of MCD on the recent dip. With all that said, you could be spot on and MCD could begin to decline. Only time will tell.

    I hope lots of people are still lovin it 20 years from now!

  76. DM,

    You purchased three stocks in my portfolio. In fact, V is my largest current holding and stashed away in my Roth. I don’t think you could really go wrong with any of them long-term, especially now that all three have pulled back recently. I won’t be adding to those three anytime soon because I am currently obsessed with accumulating GILD for my Roth. Although not a dividend stock, I think it is by far the best large cap value in the market.

    Thanks for the great article and let us know what you choose! Happy investing.

    Andy

  77. DE is a very open company. They have a great investor relations page and post sales performance monthly. Last post was the 10th of July (its usually the 10th) and was poor. I am not expecting great news for the quarter (due Aug 13th I think) or guidance for Ag as corn is below $4, but construction is likely up and their non-North America sales may be OK. For me, I really like the name and will wait till after the next quarter and then sell puts in the low 80’s and collect the premium or be happy to buy at that price.

    For long term, consider that they just increased the divi by about 18% and the price now is lower than it was then!
    go figure. Mr. Market is saying Deere is not popular so I won’t argue its a good time to buy now. Just that it may be a better time to buy later.

    cheers.

  78. Interesting choices, DM. For me, I’m liking PM and MCD right now. I had my eye on adding to my ARLP position, but it’s popped out of my range recently. I’m also interested in KMB to lower my cost basis, but I still can’t seem to figure out if it’s too overvalued for my tastes.

    (Long time reader, first time commenter, woo!)

  79. luckydog17,

    ARCC could very well turn out like that. I view negative operating cash flow year after year as a pretty negative sign, though. That means they’re not making any money, and worse, losing money. Unless I just don’t completely understand how a BDC works. But no matter how you structure a business, if you’re losing money you’re eventually going to be in trouble.

    Of course, I’m rather conservative. And I look at well-known investors who are good at making money. And I can’t think of one who invests in these. I don’t know if that’s because they’re losing money or what, but that must mean something.

    But I wish you luck if you invest here. Could turn out to be a fantastic investment. I would only caution that it looks like many of the major funds and institutions that hold shares in ARCC hold very small positions (relative to their portfolios). So be careful. ๐Ÿ™‚

    Cheers!

  80. gibor,

    I hear you on V. The low yield is off-putting. Can’t say I disagree there. That’s probably the only major aspect of the stock I don’t like.

    I think GE is valued a little better than fair, but I also don’t think it’s a steal here. Really depends on how well they execute some of these major transitions. The Synchrony IPO is exciting, though.

    We’ll see how it goes!

    Thanks for stopping by. ๐Ÿ™‚

    Best regards.

  81. anti1b,

    I hope my future is very, very green! ๐Ÿ™‚

    Glad you liked the list. I think all three picks offer something a little different. You’ve got yields and value across the spectrum from companies that operate in different areas of the economy.

    Best wishes.

  82. andy,

    As a shareholder, I hope you’re right.

    But I find the “people still go there often enough because of the value and convenience” part of the complacency that I hate to see from this company. It’s kind of like “Yeah, people think we’re gross. But we’re convenient and cheap. So deal with it.”

    I would love to see a marketing shift away from the dollar menu. We all know they’ve got cheap food. That’s nothing new. Let’s talk about quality. Let’s talk about fresh ingredients. Where are they sourced from? People care about this stuff in ways that wasn’t common even just five years ago. And great businesses fall by the wayside because they don’t see the corner coming.

    I’d also love to see a shift in customer service. Anyone who says that low pay leads to poor customer service has never been to a Chick-Fil-A. I’ve always had exemplary customer service every time I’ve been there. And their chicken sandwich offerings kills anything MCD offers in this department, in my opinion.

    I just think MCD has so much potential to so much better.

    And it’s not like I’m the only one feeling this way. The SSS is horrible lately. I get that part of that is cannibalization, but there’s more to the story than that. Let’s hope they turn it around!

    Best regards.

  83. Andy,

    Nice job there with V. If that’s your largest holding, and you’ve held for a while, you’re likely doing very, very well. I really missed out below $100, but the metrics just didn’t make sense for me back then. I’ve grown as an investor, and my portfolio has obviously grown as well.

    Happy investing to you too! I hope Mr. Market gives us some solid opportunities over the coming month. ๐Ÿ™‚

    Cheers!

  84. tuliptown,

    I agree. I think DE has a great IR page. I always enjoy when a company takes its communication mission seriously. ๐Ÿ™‚

    I’m not sure what’s going to happen over the short-term, but as I referenced in the last article on DE, I think it could be quite volatile. The earnings forecast isn’t pretty, and so you’ll either see share price destruction or a P/E ratio expansion…or both. Not sure really. But I think if you’re looking at DE for the next 20-30 years or so, you could do much worse than buy right now.

    Best wishes!

  85. DividendDeveloper,

    Hey, thanks for taking the time to comment for the first time! ๐Ÿ™‚

    I’ve never really looked at ARLP, but PM and MCD seem like solid choices. I think both are having some difficulties right now, but correct execution could lead to fantastic results over the next decade or two. I’m more worried about MCD than I am PM, but both are obviously dominant businesses in their space.

    Hope you stay in touch.

    Best wishes!

  86. From those big solid blue chips , I’m watching those whose P/E less than S&P500, like JNJ 17.2
    PG 17.9
    KMB 17.1
    MCD 16.3
    Hold all of them, but want to add shares at some point

  87. Well, that’s what makes it fun. I can’t imagine a world in which kids don’t actually play, but just sit on their butts all day. Sad world, that one. I understand your POV, but will respectfully disagree. And that means cheaper shares for me. ๐Ÿ˜‰

  88. Tawcan,

    I like them both as well here. Hope I have enough capital to buy equity in two companies this month, but we’ll see how it goes.

    Happy shopping! ๐Ÿ™‚

    Cheers.

  89. We recently purchased shares in DE and GE. Both companies look very attractive at the moment. I have my eye on V and may add some shares on a dip as I like the long term prospects.

    Thanks for sharing your watch list for August…wishing you continued success Jason! AFFJ

  90. I like PM and MCD too. I just added those to my portfolio this month and last. Solid all around and with the recent flub of MCD, might be a good point to jump in.

  91. AFFJ,

    Thanks so much for the support. Really appreciate it.

    I’m with you on DE and GE. Both look pretty solid right now. I hope I don’t have to choose, but I likely will due to capital constraints. It might be a coin-flip. ๐Ÿ™‚

    Cheers.

  92. Hi Jason, thx for the post allmost everytime when I look at my watchlist and think of buying just a particular stock, you release an article and you want just to buy the same stock /business as me :). Thats wonderfull! i think we are in the right track! at the moment im buying DE and IBM. Im a subscriber of Valueline and Fastgraphs so if you want some copys i can send it to you via email!? DE and IBM looks really undervalued if u use fastgraphs, also with valueline they got a ranking of 2/1 for Safety and 2/1 for Timeliness. For the growth of my portfolio i just bought ROST and CBI, CBI is not a “dividend maschine” but the growth ahead and the low pe looks pretty intresting. what about more MCD at 95$ for your portfolio jason? Regards from Zurich. SDG,

  93. SDGI,

    Thanks for stopping by from Zurich! ๐Ÿ™‚

    I hear you on DE and IBM. IBM was actually on my watch list last month, but the fast appreciation led me to look elsewhere. And that’s when I started looking at (and purchased) DE.

    I’m not quite sure about MCD. I think they’ve lost their way a little bit. I think they need to focus on quality, marketing, and customer service. I’m hopeful that they can turn it around, but we’ll see. But I’m comfortable with my position here.

    Best wishes!

  94. Today shook up my watchlist. XOM back below 100? TOT down 7% in a week? Kellogg? MCK? AFL at 9 times earnings? I don’t know what to do with myself.

  95. Pingback: 4 Stocks to “Re-Up” My Position | Dividend Diplomats
  96. DFG,

    So many stocks, so little capital. Indeed!

    Yeah, DE remains at the top of my list. I’m starting to become more interested in KO now. And I think V and GE still both look very good here.

    Happy shopping. ๐Ÿ™‚

    Cheers.

  97. Well I’m glad that you think so positively about GE because that’s who I work for! Over the years, the company’s gone through good, bad and downright ugly times! Right now, things are looking good and the future looks bright!

  98. weenie1,

    That’s awesome that you work for GE. Seems like they’re really moving in a great direction right now.

    Like any big company there’s ups and downs, but I think the next decade should have more ups. ๐Ÿ™‚

    Thanks for stopping by!

    Cheers.

  99. Hey DM,

    Great blog you have here, lots of good info. I have a question for you though!

    What stock will you recommend to someone new to the market (like me) with very little capital to start investing (around $500)?

    I ask you this because I have read that now is a good time to start a position in GE and since this post is talking about GE I thought it would be appropriate to ask this here.

    Or maybe you can suggest another stock where to start a position right now with the capital I mentioned before.

    Thanks and greetings from Dominican Republic.

  100. noferz,

    It’s not so much finding the perfect stock, as it is to focus on savings and be consistent. As far as where to invest today, I think GE is a great prospect. As is DE. I also think KO has come down to the level to where one could initiate a position.

    Remember, it takes time to get the snowball rolling. But it will start to roll over time!

    Thanks for stopping by! Best of luck on your new journey. Very exciting. ๐Ÿ™‚

    Take care.

  101. Thanks for your reply DM, I initiated my position today in GE and I am very happy about it ๐Ÿ™‚

    Too bad I am out of money now and can’t purchase any more companies!!

    Have a good day.

    Emir-

  102. noferz,

    That’s great news! Glad to have you on board as a fellow shareholder. ๐Ÿ™‚

    The cash goes quick when you’re regularly investing, but the passive income starts to build up before you know it. Keep it up!

    Take care.

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