My Watch List For November 2014

lookingWhat an October, huh?

The broader stock market was certainly volatile, as we watched the S&P 500 index drop by slightly more than 5.5% from the 1st to the 15th.

And while I don’t really worry about what the S&P 500 index does due to that fact that I’m an investor that focuses on individual companies and their respective valuations, there were a number of companies that I both own equity in and don’t own but track that experienced noteworthy volatility as well.

International Business Machines Corp. (IBM) dropped by 10% over just a few days after a rough third quarter. This took it from an already attractive valuation to one even more so. The Coca-Cola Company (KO) dropped by 6% in one day after what was arguably an even worse third quarter report.

And then there’s American Realty Capital Properties Inc. (ARCP). Down by more than 30% at one point yesterday, but nothing to do with the stock market or any other macroeconomic issues. Instead, it’s come to light that a really disappointing and frustrating accounting cover-up was propagated by certain key managers, leading to the overstatement of adjusted funds from operations. Those managers have since resigned, rightfully so. It appears that AFFO will be adjusted by $0.04 to $0.05 when the dust settles.

So the company was guiding for $1.06 to $1.08 in AFFO for this fiscal year. I guess you have to ask yourself if a ~4% overstatement is worth a 30% reduction in the value of the company, which is off of a value that was already heavily discounted from peers. Now, I’m not interested in buying more shares here because accounting fraud is extremely serious and management needs to indicate that they have it together. Furthermore, there could be additional major headwinds that develop as a result, such as difficulty accessing credit markets and/or legal action. However, I would be careful about automatically selling here before everything is hashed out. I’m personally not real interested in selling here, other than perhaps as a tax-loss strategy (to repurchase later). But if the dividend is cut, I’ll most likely move on.

Anyway, let’s look at what other opportunities might exist in the market right now!

I have three particular stocks that I’m looking at for November’s investment capital. I probably won’t be very aggressive in regards to total capital deployment due to what turned out to be a very busy October. However, I’m always interested in attractively valued, high-quality stocks. As such, I’m confident I’ll be able to make at least one purchase.

The following three stocks are currently at the top of my watch list. I arrived at this list based on current valuations, the quality of the companies, the yields that are currently being offered, and the available space in my portfolio for these stocks due to weighting.

Unilever Plc (UL) 

I initiated a position in this European consumer powerhouse in mid-October. Shares are more or less priced the same right now, so this isn’t really an opportunity to average down, like I’d prefer. However, I don’t think I need to. I think shares are already attractively priced here, as the stock tumbled 7% over the course of the month preceding my purchase.

But you’re looking at an extremely stable business with 14 €1 billion brands, spread out among food and personal care brands. Some of their more popular brands include Ben & Jerry’s, Dove, Hellman’s, Knorr, Lipton, Magnum, and Vaseline.

The stock offers a yield of 3.8% right now, which is really attractive considering the stable and defensive nature of the business, in my view. Unilever is conservatively managed, and I think the valuation here, with a P/E ratio of 17.45, is more than fair, considering it’s been growing earnings at an 11.44% annual clip over the last decade. The company has been increasing its dividend in its native currency since at least 1999, so the dividend growth credentials are alive and well. The dividend growth rate stands at 7.5% over the last decade, but the payout ratio, at 61.7%, is a tad high.

I think shares are worth at least $45, so UL remains very high on my watch list for the coming month.

Armanino Foods of Distinction Inc. (AMNF)

bought equity in this really tiny food company based out of California back in September. Shares are priced more than 7% higher right now, but I’m actually okay with buying more here at a higher price.

This is a really interesting stock. It’s like a value, growth, and high-yield stock all rolled into one. It really checks all the boxes for me. The only special considerations are its small size and OTC status.

But it’s been able to grow earnings per share by a compound annual rate of 39% since fiscal year 2008. And they just reported another record quarter. The stock yields 3.64% right now, and trades hands for a P/E ratio of 18.50. AMNF might not get a lot of attention among dividend growth investors, but it’s been increasing their dividend for the last nine consecutive years, and over that period has increased its payout by an annual rate of 10%. The one item of very slight concern might be the payout ratio, currently at 61%. But the company is growing really fast, so I’m confident this isn’t an issue.

This is a really small company, but it’s just firing on all cylinders. I thought shares were worth $2.19 a month ago, and I’m even more confident of that figure after looking through the third quarter report.

Visa Inc. (V)

I initiated a position in the world’s largest global payments processing company back in July for almost the same price as it’s trading for now. However, after a strong third quarter and a recent 20% boost in the dividend payout, it looks like shares are set to jump here today. That’s not surprising, as this company is just dominating.

The yield here on V is a lot lower than I’m usually willing to accept – only 0.89%, even after the raise. However, the company’s ability to grow the dividend at double-digit rates is really what I’m excited about. And that ability is fueled both by a low payout ratio of only 21.8%, and also by the fact that the company is growing earnings so fast. Over the last 10 years the company grew EPS at a compound annual rate of 25.09%. The company’s reported five-year dividend growth rate of 45.9% is mind-boggling, but set to drop after the most recent increase. However, we’re still talking about massive numbers here.

The P/E ratio seems a bit high here, at 24.45. But it’s warranted, in my opinion, considering the company’s historical growth and huge growth potential moving forward.

Visa is a company that I would love to build up a larger position in, but there are always a number of opportunities competing for my attention (and limited capital) at any given time. That being said, if I can grab shares in V this month near my cost basis I might just load up. I think shares are more or less fairly valued right now, which is probably appropriate considering that the broader stock market is near an all-time high and Visa exudes quality.

Full Disclosure: Long IBM, KO, ARCP, UL, AMNF, and V.

What’s on your radar? Any opportunities you’re really excited about? 

Thanks for reading.

Photo Credit: bplanet/FreeDigitalPhotos.net

Edit: Corrected AMNF’s dividend growth streak.

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145 Comments

  1. It’s watch list time already? Gosh, where does the time fly? Scary how fast it goes by. Guess that means we are all having fun. Well, of the three potential picks for November I must say I’m partial to UL as I just added some this month and from the comments and the DGI community as a whole it really seems to be very popular these days. Attractive price, nice yield, low PE… what’s not to like. Though I don’t own it (yet) V is another solid choice especially with their very generous dividend increase. After this wild ride in October who really knows what’s in store for November. Thanks for sharing.

  2. Jason,

    good to see that you are continuing the great pace you established in October.
    I love the UL pick at #1.
    The ARCP accounting issue is annoying, but that’s why you own 50 different companies in the first place, isn’t it?

    Many dividend investors are aggressively buying into the recent volatility – just like you and myself are.
    This reminds me of the quote by Seneca:
    “Luck is what happens when preparation meets opportunity.”

    Let’s go have some luck.

  3. Interesting about Visa!

    What do you think about UPS? With the drop in oil price and e-commerce increasing about 5%(?) per year, the future of the delivery companies looks pretty bright to me. UPS has an p/e of about 21, not cheap but perhaps fair as their growth seems good.

  4. Hi Jason,

    Thank for the sharing. I’m biased towards UL. It had been in my watch list for many weeks now. I’m waiting for fund to come in before I can pull the trigger.

    David

  5. Jason,

    Great stocks on your watchlist! I wish I had some fresh capital left over to stock up on more Unilever. Great company with awesome products and an excellent track record. (And beneficial from a tax-perspective for me as a Belgian!)

    V could turn out to be a gold mine in the future even though current yield is low. If they succeed in maintaining the yearly dividend growth your YOC could be huge.

    Curious to see what you end up buying!

    Best wishes,
    NMW

  6. I’m a fellow shareholder of uniliver too, it’s a company from my own country 🙂 I think the value is good right now and I love the dividends.

    Too bad ARCP dropped 2 dollars yesterday. I just bought some this month. It doesn’t matter as long as the dividend is save. 1 dollar for every stock = 10% yield at the moment writing.

    Good luck. DD

  7. DM,
    I sold my ARCP yesterday morning. I’ve been through this once before with a REIT and it was ugly. Not that this is guaranteed to also be ugly. My guess is this is a result of growing pains. Since we don’t know everything yet, I decided to take my money that was left and move it to cash. I only had 100 shares and will lose somewhere around $300 on the sell, but it’s a short-term tax loss, and I’d rather put my money somewhere else. If the stock recovers, so be it. I don’t want to have to wonder if my money is OK. Hopefully it does recover for everyone still in! But i’m moving on.
    -RBD

  8. Oh! That reminds me! I spotted some meatballs from Armanino while I was shopping for groceries the other day, and thought of you instantly. Decided to grab a bag and try it out. Unfortunately, I thought it was a bit on the pricey side ($14 for 3 pounds) and a bit too salty for my taste. Seems like other people really like it though.

    I’m hoping UL stays at these levels for a while. I’ve been furiously clicking the “buy” button on my Loyal3 account since the stock dropped below $40. 🙂 And of course, the next time V dips, I’ll be sure to pick up more shares.

    Thanks for sharing your watchlist!

  9. I received my first dividend in my new account today. I’m so excited! It was $12.58. I feel like I’m building a path to freedom and security and this is the first brick I put down.

  10. Hmm, i can´t see that the real estates are gowing down in value or the monthly income/rates for the real estates for ARCP are gowing down – so whats the real impact of the dividends? Even if the divs have to cut to 0,07 or 0,06 – so that gives me 7,2% yield @$10 at $0,06 divs per month.

    i´m here for the long run.

  11. DivHut,

    Yep, it’s that time. 🙂

    UL is at the top of my list right now. I think it’s a great pick. The company is solid with great brands and excellent global exposure, and the stock offers a lot to like with the valuation and yield.

    Looking forward to November!

    Thanks for dropping by.

    Cheers.

  12. Grow Independent,

    That’s a great quote by Seneca. Completely agree. 🙂

    The ARCP situation is unfortunate. They have a great set of assets, but it’s being mismanaged right now. I can’t imagine that over the long haul this doesn’t get squared away somehow. But it’s hard to see things that way in the midst of the moment. The present is all we really have.

    Have fun shopping!

    Best regards.

  13. swedendividend,

    I like UPS. It’s actually on my broader watch list – I watch an additional 30-40 companies outside of what I already own. I think it’s a great way to capture some of the e-commerce growth without betting on just one player.

    Probably not the best deal in the market right now, and I’m hoping to continue building up a position in one or more of the companies above, but I do hope to initiate a position in UPS at some point.

    Cheers!

  14. David,

    I’m biased toward UL as well. Seems like a great play right now. A lot of consumer stocks (that aren’t having specific troubles) are pricey right now, but UL seems like a rather solid deal right now.

    I hope you’re able to get some funds in and land a great price on shares. 🙂

    Take care.

  15. NMW,

    Thanks for dropping by!

    I agree with you on UL. I’m ready to stock up. If the share price stays at this ~$40 level the odds are good I’ll be adding.

    V is a tough stretch for some due to the low yield, but it’s just a fantastic business. I hope it doesn’t pop too much over the next few weeks!

    Hopefully, you’re able to land some capital and add to your portfolio. 🙂

    Cheers.

  16. I had considered investing in ARCP about a week ago, but the extremely high yield scared me away from buying. I think the most solid REIT play would be owning O due to their track record of dividend raises and payments. ARCP does hold a very nice portfolio when it comes to real estate, but the accounting issues are unforgivable for me as an investor. Hopefully the selloff causes a run up, and maybe some people can exit their position and transition that capital into something a little more safe. Good luck DM….i think UL and V are both great stocks to own, and add to at these levels.

    Cheers

  17. DD,

    Glad to be a fellow shareholder! Especially with an investor from the homeland of one side of the company. 🙂

    Yeah, the ARCP situation is a shame. I think they’re rectifying it, but it’s a long road from here.

    Thanks for stopping by!

    Cheers.

  18. RBD,

    Can’t blame you at all, my friend. It could go anywhere from here. I honestly thought about selling for tax-loss purposes, but I just couldn’t swallow the loss. Especially when I think it’s just stupid cheap after this drop (below book now).

    I think they can rectify this, but it’s a long path back to redemption. And new management may be necessary, beyond just those immediately replaced. We’ll see how it goes.

    Best wishes.

  19. SR,

    That’s fantastic! The first brick of what will likely be a very large castle.

    I like to think of my freedom as a castle. And the moat around my castle is my passive income. The more passive income I’m able to generate, the larger the moat. The marauders at the gate are employers, who will attempt to drag me back to wage slavery. Have to keep that moat wide once it’s fully operational!

    Keep up the great work.

    Cheers.

  20. Alexander,

    Great point. Even if the dividend is cut you’re still getting a pretty heavy payout. However, the dividend cut could also be the start of something more sinister. I have a lot of patience. A lot. But I’ll probably have to draw the line there with ARCP after all that’s happened. I’m still along for the ride in the meantime. 🙂

    Cheers.

  21. Josh,

    You’re far from alone in your feelings there regarding the accounting scandal. That’s unforgivable for many investors. Waste Management had a pretty big scandal a while back, but they’ve recovered. Other companies, like Enron, didn’t survive and bilked investors. So there’s a lot of risk here. And I just read Tesco may have a problem of their own now. I don’t think a $0.04 adjustment to AFFO is an issue, but if the rabbit hole is a lot deeper I may have to exit.

    Thanks for stopping by!

    Best regards.

  22. I’m looking at UL and V closely, would love to add them in our portfolio. Unfortunately we currently have no capitals in the RRSP since the contribution room is almost full.

    I did look at ARCP a while ago but since we’re already heavy in REITs I decided to stay away. Might be a good idea to buy more if you already own ARCP.

  23. Nice picks for November. Unilever is a great choice and having just initiated position in it couple of weeks back, I might add to it if it goes down further. As a fellow shareholder, I am disappointed in ARCP as well. Hopefully the dividend is not cut and the stock doesn’t go down the drain like few others. Will have to wait and see how this plays out.

  24. Hi DM,

    UL – is not on my watch list at all so don’t know much about it. However, I have seen a few other bloggers recently buy it recently so I took a quick peek and it looks overvalued at the moment. I will wait to do more DD.

    AMNF – Also not on my watch list, tho I recall when you bought it.

    V – Also not on my watch list too low a yield.

    My top 3 watch list stocks

    UVV – Champ, yield 4.8%, undervalued—but no low dividend increase rate. Sort of like a T. I am close to buying.
    MCD – I’m already an owner, valuation is good, I understand the concerns
    Big Oil – RDS.B, COP, XOM, CVX I am watching closely.

  25. I don’t own ARCP, but i used to own LNCO when it was hit by an SEC inquiry in July 2013. I knew I didn’t want that kind of low quality stock in my portfolio, but I couldn’t swallow the immediate loss so I continued to hold and wait for a bounce. the immediate price dip in LNCO was the most dramatic in the days after the announcement, and then it kind of meandered back up in the weeks after.

    Several months later, it bounced up to $33 and change and my limit sell order triggered. I was able to get out pretty close to break even (with dividends reinvested). But since then, it’s dipped even more dramatically–even lower than when the initial SEC inquiry first happened.

    So I think waiting for the dust to settle is probably a pretty good strategy, and in the back of your mind think about what price you’d be willing to sell ARCP at in case there is a nice bounce in the weeks ahead.

  26. Really appreciate your thoughts on ARCP. Last week I was planning to make a significant addition to my previous holdings of this stock, so I dodged a bullet there. My preference is to continue to hold what I already have, but your strategy of taking the loss if the dividend is cut makes sense (and I would likely follow that same plan).

  27. Well, is it really the best strategy in this case to bail if ARCP cut it´s div to 0,07 for example? After reading the transcript of shareholder and analyst call, all i can say : 3 cents affo decline and 35-40% drop in pps! huh? 6 weeks for Ernst and Young’s forensic accounting team to come out 2014 AFFO correction of 3 CENTS….thats all?

    i will initiate my first batch of arcp shares tomorrow, thats for sure

    all the best
    Alexander

  28. With the inevitable shift toward mobile payments, I guess I’m not seeing the value in V long term, and unfortunately, too low of a yield short term (my savings account yields more).

    Love UL at this level, just like you got in about the same price. Checking into HCP, BP, SYY, DEO and F this month as well. Best of luck as we close out the year!

  29. Thanks for sharing the companies you’re scouting. I will have a tiny bit of dry powder soon, so these are great dividend ideas to consider.

    It’s unfortunate to hear about ARCP’s accounting troubles, but hopefully it’s something that you can capitalize on. I remember the way DLR was getting sandbagged several months ago, and look at it now.

  30. Hello Jason, UL is on my watch list, but fell off my buy list several months ago. Can’t recall why. I need to revisit this stock. Both AMNF and V are winners, especially V. I’m watching the industrials right now. I like UTX, LMT, RTN and ETN.

    Best of luck.

  31. Big fan of UL and its products. Like V but not its current yield. Can’t say much about V today, it’s having a monster day. [Long UL in my top 10]

  32. http://seekingalpha.com/article/2617175-american-realty-capital-properties-inc-shareholder-analyst-call

    From this morning. I haven’t had opportunity to tear it apart and “read between the lines” and summarily “freak out” but figured i’d share. On the surface, exec mgmt seems to be doing what they should be after an infraction like this. Is it really *that bad* from the numbers perspective?

    Guess this will be a learning experience for me. I know it’s not the “run of the mill” correction where you just discount the noise but if the numbers don’t turn out “that bad” i don’t know how i will react. I’m struggling with this one in quantifying my level of “that bad”. Or even worse the emotional “yet to come”.

    A ~30% wack seems awfully heavy handed on the other side of the coin.

  33. Tawcan,

    V is way up today. That’s a shame. I don’t know if I’ll have capital to stretch for it this month, but it would have been nice to see it remain at eye level. Now I have to reach for it a bit, and I probably won’t. We’ll see.

    I contemplated buying more ARCP, but I actually have enough for the portfolio. Accounting fraud notwithstanding, I really don’t want REITs to make up more than 5% to 7% of the overall portfolio. And I’m right about there right now. ARCP was risky even before this event due to the rather rapid ascension and all the acquisitions they’re still swallowing. This puts it into the stratosphere as far as risk goes, and I’d rather just hold here. This isn’t your run-of-the-mill pullback on Coca-Cola or Procter & Gamble we’re talking about here. But I wish those that are buying more here much luck. But I’m really tapped out on this company for now. I don’t regret the logic, but I do regret the timing.

    Best regards.

  34. DGJ,

    I don’t always add right away to a name like I might do with UL. I typically like to let things settle down a bit and wait for a possible opportunity to average down. But I plan on building up a position of at least 100 shares anyway, so if there’s more opportunity down the road then I’ll gladly take it. We’ll see! 🙂

    Thanks for dropping by.

    Cheers.

  35. Mike,

    Thanks for sharing your list. I remember looking at UVV way back when. Something I didn’t quite like about it. Can’t go wrong with some of the supermajors right now. Oil services stocks also seem pretty beaten up, though not as much as a couple of weeks ago.

    Have fun shopping!! 🙂

    Best regards.

  36. kolpin,

    Appreciate the insight there. Sounds like you made a great move abandoning ship at the right time.

    I imagine if ARCP crawls its way back it’ll be in the clear, but who really knows. I’ll probably make my buy/hold/sell decision on the stock just like with any other stock I buy or sell, and that’s based on fundamentals. If the company is okay, and the accounting issue is due to incompetence on the part of a couple of people and the company is otherwise okay, then I’ll probably hold. If the rabbit hole is deeper and/or the dividend is cut, I’ll most likely sell. That’s regardless of the stock price, which is really a function of a lot of other things. But we’ll see how it goes.

    Thanks for stopping by and sharing! 🙂

    Best wishes.

  37. Joel,

    You definitely dodged a bullet. Not only are you not looking at additional unrealized losses, but you also have much more information with which to make a more educated decision moving forward.

    Some investors are out there buying up ARCP right now, but, in my view, that’s crossing the line from investing to speculating. We just don’t really know what’s really going on here. I like to invest when the facts are very clear and I have a generally good idea of what I’m getting into. And the picture isn’t totally clear here yet. Sounds like a rather slight adjustment to AFFO, but could be more. I’d rather not speculate, but I’m especially not interested in doing so since my ARCP position was already about as large as I wanted it to really be.

    Best of luck with this one. 🙂

    Take care.

  38. Dan,

    Keep in mind that the shift to mobile doesn’t necessarily hurt Visa. It may actually help them, as they own a substantial portion of the networks that allow digital payments to correctly process. Apple’s new system, Apple Pay, works with Visa (and others).

    Sounds like a nice list there. DEO is another company I’d like to really take a strong look at here pretty soon. I glanced at it not long ago and it looked pretty solid. Looks like they were slowing down a bit, which isn’t surprising.

    Happy shopping! 🙂

    Cheers.

  39. Spoonman,

    Glad to hear you’ll have some capital soon. I know your rate of buying will probably slow a bit now that you’ve moved past the main accumulation phase, but it sounds like you guys have a pretty robust budget going on. Awesome! 🙂

    ARCP and DLR are different, however. I averaged down on DLR giddily. But one was seeking undue attention that amounted to really nothing, while the other has real and established accounting fraud. ARCP might be fine, but there are a number of major firms in the annals of history that took a while to crawl back or failed outright. If it’s just a $0.04 or $0.05 adjustment to AFFO, then it’s not a big deal as far as the numbers go, but management has a big trust problem. And that could spill over to the credit markets, and there may be legal action. I know the SEC is looking into an investigation. But if it’s more than just a simple adjustment then there could be much bigger problems. We’ll see how it goes.

    Best wishes!

  40. luckydog17,

    V is a winner, indeed. Up big today. May have moved past my ability to grab it this month.

    I like the industrials as well. I’m always interested in adding to my exposure there. Perhaps in December. Good call!

    Take care.

  41. AJ,

    V is having a monster day. We’ll see what the rest of the month brings. Might settle back down and be within range again. My little BB gun can’t shoot quite that far! 🙂

    Big fan of UL over here as well, both as an investor and a consumer. I personally use Dove soap religiously. Any other soap irritates me.

    Thanks for stopping by.

    Best regards.

  42. Zol,

    I read through it. The main gist of it was that Kay believes it’ll just be a slight adjustment to AFFO and that’s it. He’s implicating just the two people that have already resigned, and is basically saying he, nor other members of executive management, had no idea something like this was going on. He intends to keep paying the dividend, and is also open to the possibility of buying back shares here because they’re so cheap. He may sell overpriced assets to raise the necessary funds to do so. He’ll also keep investors updated as new information comes along.

    It’s basically fire control, from my view. But I appreciate it. Seems sincere. But we’ll have to wait to see where all this goes. This could drag on for some time. In the meanwhile, I’ll hold. And I actually wouldn’t mind them at all buying back shares here. That would make their $12 equity issuance seem like a good call after all.

    Cheers!

  43. AMNF in my opinion is an extremely dangerous investment due to the company’s reliance on two big clients. If one client leaves, there will be no dividend raise or no dividend at all.

  44. Makes me wonder… can a company do this with purpose? Issue shares @ >x then have a engineered event and buy them back @ x ?

  45. Khen,

    Good point there. I touched on that risk in the analysis I did on AMNF when I went over why I bought shares in the company. However, that risk has been there for some time and hasn’t caused any issues. I don’t foresee it becoming a problem in the future, but anything is possible. It’s also important to note that a lot of companies, even large ones, sometimes rely on just a few major customers (like Walmart) for sales.

    Either way, I wouldn’t recommend this as a core position for anyone due to its size and other risks.

    Best wishes.

  46. Tom,

    Not legally so. And it wasn’t the company doing this, but rather two specific executive managers. At least, that’s what we know right now. If it runs deeper, then I’m sure you’ll see more people leaving the firm.

    You have to also keep in mind that a number of key executives were buying the stock all summer long at much higher prices. I can’t see any realistic reason why anyone would do that if they knew the stock was going to tank later. Defies logic.

    Best regards.

  47. Spoonman,

    One other key difference between ARCP and DLR, in my view, is that one has been established for a while and one hasn’t. The respective paths they took to get to where they’re at now were totally different. DLR has a 10-year track record of increasing its dividend at fairly substantial rates. ARCP has been gobbling up an entire empire and, thus far, hasn’t been able to show the ability to manage this growth in an effective and reliable manner. I thought the execution risk was more than priced in at ~$12/share, and I still feel that way. Obviously, accounting fraud is an unforeseeable incident.

    Just my take.

    Cheers!

  48. Nice looking watchlist, with UL being the one I’m most focused on, especially since I can pick up shares for free in my Loyal3 portfolio. In October, I added $450 worth and will likely pick up some more over the next couple of weeks. As for ARCP, I am of a similar mindset. The drop sucks, but as long as FFO covers the dividend and things get back on track for 2015, I’m not to concerned. Of course, a dividend drop would be a different story.

    Currently enjoying the beautiful weather in Florida… unfortunately ocean side and a bit further south. If ever a trip to Sarasota pops up, I’ll drop you a line!

  49. With the information we have at this point I see ARCP as a hold. I’m not going to folow the stampede towards to exit. I’ll see what information becomes available the next days and what actions will be taken by management and if an investigation will follow.
    If it turns out that indeed it’s incompemetence of few people and that’s all it is, then this might become a great buying opportunity. But to early to judge now…

  50. Hi DM,

    Unilever is also on my watchlist. Other then that I do have quitte a lot of smaller stocks on my watchlist. I do have some spare cash at the moment after a investment that gave me a return of 15% in 2 weeks ( I normally don’t sell after such a short period, but this was a nice opportunity. If the price didn’t raise so quickly I would probably have owned the stock for a few years).

    Cheers,
    G

  51. W2R,

    Hey, I didn’t know you’d be down here. I definitely hope to meet up sometime. That would be great!

    I hear you on UL. I’m also focused on that one. I think it’s almost a lock for this month. We’ll see if I have enough capital for something else as well, but if I only get to unload a few BBs on UL I’ll be just fine. 🙂

    Enjoy the weather. This time of year is just perfect down here. This weekend is supposed to be just ridiculous. Low 70s, low humidity. I’ll be at the beach!

    Best wishes.

  52. Jos,

    I’m with you. It’s a hold for me as well. Not really enough information to make a compelling case either way. The people who automatically sold and lost 30%+ is a good example of why the pendulum can swing so far in one direction on a stock.

    We’ll see how it goes. I’m not particularly excited to buy any more shares here because I’m maxed out on ARCP. And that’s notwithstanding the accounting problem. I might be tempted to add a tiny bit here in the $9s if I think this is an extraordinary event that will quickly pass, but it’s really just impossible to tell what’s going to happen. I’ll be watching with everyone else.

    Cheers!

  53. Geblin,

    Nice gain there. 15% in two weeks is tough to replicate very often. That’s fantastic on an annualized basis. 🙂

    I’m excited to potentially add to UL here. The other two stocks also seem attractive, though V is less so after today .

    It should be a fun November! Happy shopping.

    Best wishes.

  54. On first read through I missed the potential buyback statement at the end. Nice! I agree with your summary, it all sounds reasonable on the surface. Crossing fingers it’s not smoke and mirrors.

    I’m seeing other comments saying future/today lawsuits could bite into things. But i haven’t been able to find anything outside of unsubstantiated commentary.

  55. Don’t blame you! I enjoyed a few hours earlier this afternoon before retreating to do some schoolwork and whipping a quick post together for tomorrow. 🙂

    Soon enough I’m sure. Since Sarasota is the home of my favorite baseball team in the spring, I’m likely to make a trip that way at some point. That, or I’ll make it to Omaha or FinCon one of these years.

  56. It’s funny that I left this comment on your blog a couple weeks ago: “you did a great job of helping me pull the trigger on ARCP for exactly that reason. It became a decision of “unless there’s accounting fraud, this thing can’t go any lower.”” I guess I should stop using that as a rhetorical device 🙂

    For my part, I more than doubled my position, although it’s still not that big. I understand they are trading at less than book value, even excluding good will. That seems to provide a pretty solid price floor… unless there are accounting issues related to their book value 😉

  57. Jason,

    You are right about Tesco, Serious Fraud Office are investigating, and even Warren Buffet has said investing in them was a mistake. Particularly bad for me as I own shares in Tesco, and foolishly thought they would turn things round so held on. I am now down just under 50% of purchase price, so have fallen into the classic hold on to losers trap (must learn from experience for future). Need to really get my act together and sell, but pressing the actual button and confirming a whopping loss is not proving easy to do.

    Luckily have had some winners, and my ongoing dividends to offset the Tesco debacle.

    Best Wishes
    FI UK

  58. Jason

    Unilever are on my list, I already hold these but looking to top up when I get more funds (would have loved to have had lots of free cash a week ago to buy at what now seems the low point, but I didn’t have the spare cash, and chose not to dip into my emergency funds, so as the saying goes “keep calm and carry on”.

    I think the global brands of Unilever are pretty much a steal at 3.8% yield, the potential growth as emerging markets move into the next growth phase should be massive from the consumers moving to brand names as has generally happened in previous growth markets.

    Hope all goes well in November for you
    FI UK

  59. Tad,

    Hey, I’m right there with you. My money is on the line as well.

    It was cheap before, considering all known risks. Obviously, one cannot know about potential accounting fraud. I wish my ARCP position was smaller not just because I’d have less capital at risk here, but also because I’d be a bit more flexible in regards to adding more if/when we find out this was just simple incompetence. But that’s why we diversify and limit high-risk exposure.

    I imagine it will be a long road back, but I’ll be okay holding as long as the dividend keeps on streaming in.

    Sorry this one didn’t work out for you right off the bat.

    Cheers!

  60. FI UK,

    That’s a shame. What are the odds of something like this happening with two firms at once? Yikes.

    I had heard Tesco was having problems for a while now, but this has to be salt in the wound. I wish you much like with this one, either way.

    Cheers!

  61. FI UK,

    I’m with you all the way. The yield is competing with a lot of utilities right now, but you get a lot more growth. I’m excited to get November rolling so we can buy some stocks. 🙂

    I hope you’re able to round up some capital at some point here. There aren’t deals abound, but I still think there are pockets of value here and there.

    Thanks for stopping by. Sorry again to hear about Tesco’s troubles.

    Best wishes!

  62. Hey DM, you have a great following and you deserve it. I am on board with you re: Unilever. They started paying regular dividends in 2004 at @ .26 cents and have raised it to .38 cents now. They have split 3 times since 1998, the latest being at 9/5 split in 2006. With earnings of approx. $2.30 and paying out $1.50 in dividends it seems they are well suited to keep growing. Since UL is known as a defensive stock, even in a tough economic environment, people simply do not stop eating and cleaning with UL products. UL fared very well during the economic downturn of 2008 albeit they did skip a couple of dividends. So I am on board with you on UL !! Dan

  63. Jason… A word about ARCP: I am not a shareholder at this point. I was thinking of buying in now as I would not care if they cut their dividend from 10% to 5%. Are they a good enough company to pull the trigger now? Interested in your response. Best, Dan

  64. I have been watching AMNF since you first mentioned it. I like low cost stocks with good growth potential and with the added benefit of dividends it is attractive to me. I decided to sell 24 shares of a stock that was a spin off of another stock I own but the stock has gone nowhere and doesn’t pay a dividend so I sold it and used the proceeds to buy 400 share of AMNF. It is only 0.85% of my IRA portfolio but I intend to reinvest the dividends to grow the position as I continue to monitor the company. Thanks to you I am slowly converting all my IRA positions to dividend paying stocks. Little by little it will one day be invested 100% in dividend paying stocks.

    Best wishes and happiness in you coming marriage. I was single 37 years before I married my wife seven years ao and life has not been better since then. I now manage both our IRA’s and hers in already 100% invested in dividend paying stocks of course I am much more conservative with her account than I am with mine.

  65. My current want to buy list is UL, NSRGY, BBL, WAG, and WMT, and maybe more ADI depending on prices. I will probably keep waiting on BBL as I think the price will be depressed for longer with their exposure to oil and spinoff coming up. There is time to wait for more funds next month IMO.

    V and BLK would have been on there but they have really spiked the last couple of weeks. V was up over 10% today after divvy raise and buyback announcement. Wish I would have had enough cash to buy more V at 200 and BLK at 303 around the local bottom! 🙁 At least a dividend hike is more money in my pockets coming up for V, but I wanted to get more shares on the cheap. My stock went up 10% in one day and increase my dividend, boohoo, I can’t buy more cheap now. . . First world DGI problems, haha.

  66. Don’t feel bad for your timing…it might be ARCP this time around, but could be something completely out of the blue, as long as how we think through the investment is right, I think we will be ok in the long run (hopefully…..). Good luck on UL, if it drop to yield 4%, it would be really interesting 🙂

  67. Dan,

    Thanks so much!

    UL’s defensive nature is exactly why I like it. They sell basic products that people just can’t really do without. And they have great global exposure and they also appear to have a great corporate culture going on. Plus, you can’t ignore the valuation here, pushing that yield up to really attractive levels. I mean the yield is competing with some utilities here, which is crazy.

    As far as ARCP goes, I’ve discussed that quite a bit. It’s really impossible for me to say if it’s a good buy for you or anyone else. I can only say that, on the surface, a slight adjustment to AFFO isn’t really a problem. Accounting incompetence for sure, but it’s pretty small on the scale of historical corporate accounting issues. However, we don’t really know all the facts yet. This could run deeper. The company could run into problems accessing credit markets, especially if their credit rating is dropped to junk. There could also be legal action. So there’s just a lot of risk here. Is all that risk priced in? It’s hard to say because we don’t know exactly how much risk is there because the picture isn’t very clear. I’ve always been a big fan of buying when a quality stock drops, but this isn’t a Coca-Cola or something here. This is a pretty new player in the real estate space, and they’ve already had some issues leading up to this accounting fraud. So tread very carefully here.

    I hope that helps!

    Best regards.

  68. Bob,

    Hey, glad you found something of value there in the AMNF article. I obviously put my money where my mouth is, so I’m right there with you. The latest quarter was another blockbuster for the company. I’m strongly considering adding here.

    Congratulations on your very happy and successful marriage. Life is a lot better when you have a wonderful, loving, and supportive partner on your side. Just makes everything easier. 🙂

    Keep up the great work over there. I’m glad you’re enjoying the slow conversion to high-quality stocks that pay and grow dividends. Stay in touch!

    Best wishes.

  69. Daniel,

    Yeah, I saw the spike in V shares. Unfortunate, but not surprising. I hope it settles back down and maybe drifts back to $215 or so. I probably won’t have enough capital for it this month anyway, but I’d at least like a fighting chance! Of course, as you stated, these are definitely first world problems. 🙂

    Sounds like a great watch list there. NSRGY is another one I watch. Massive company. I don’t know if a lot of people really understand just how large that company is. A behemoth. I’m a bit concerned about a move away from processed foods and how that may affect them, but they’re incredibly diversified – pet food, ice cream, cosmetics, candy, baby food, coffee, etc. Good stuff there.

    So many stocks, so little capital. First world problems, indeed.

    Cheers!

  70. youngdiv,

    That might be the correct move here. I’m giving them the benefit of the doubt, but you have to do what’s right for you and your goals. At least you don’t have to bother watching any more drama. 🙂

    Cheers!

  71. Seek444,

    Thanks! Definitely can’t predict things like this. And that’s exactly why I diversify. You can have a great idea, work out the valuation, feel confident about the prospects, run all the numbers, figure out competitive advantages…only to get blindsided by accounting fraud.

    I regret my timing just as much for the unrealized losses as I do for now having enough ARCP. If I didn’t purchase my last lot earlier in the month I’d have a lot more flexibility to add at these levels if/when things come clean and the company starts to move on.

    We’ll see how things go, right? 🙂

    Thanks for dropping by!

    Best wishes.

  72. Well, I just purchased a little more ARCP. Averaged down and will take a wait and see approach. Those rushing for the exit have locked in 30% losses. However, how many of those are individual investors relying on the dividend for income and are not used to riskier companies? Lots of retirees looking for yield and the 30% plus drop freaked them right out of the stock.

    Jason, I know you mentioned selling if the dividend is cut, but the day that happens, what will be left of the stocks value? It seems like you wait for a pop and sell or keep ridin’ this one until its conclusion-good or bad.

  73. Bought first tranchen of UL @ €30,78 and ARCP @ €7,675 today – i feel good with them 😉

  74. Can’t say I really like your decision to hold ARCP, but I understand it. I sold as soon as I heard, even with a solid loss. I just don’t trust the company anymore. I already was having doubts because of Red Lobster and share dilution, and this settled it for me. I couldn’t sleep well still owning it, so to speak. On a positive not, you’re not the only one considering V, what with the recent share pop!

  75. Visa is just crushing it right now so glad to see you’re interested in open your positon.

    IBM is more worrisome. Sure the valuation is cheap but that is only if you assume the E in the PE ratio is holding steady or moving higher. They recently abandoned their $20 guidance for 2015 and they really seem to be struggling against the smaller competitors. However the yield looks safe, and if you can be really patient it might be a good move.

  76. How about this for dumb luck… I sold out my ARCP position last week to fund a buy of UL when it dropped after earnings. Mostly because I didn’t want to wait for transfers to pool cash from different accounts and ARCP was my least liked holding.

    10/24/14 Bought 150 of UL @ $38.89 (Order #184) -5,843.49
    10/24/14 Sold 500 of ARCP @ $12.251 (Order #183) 6,115.37

    Not really sure whats on my watch list for Nov. — I may consider adding to UL if it stays <40 or I may just let some cash build up and wait for another market drop – a lot harder to find value right now than 2 weeks ago. October I went through most of the cash that had been building for a while adding to BAX, COP, CVX, KMI, HON

  77. Jason,

    I’m with you on UL. I loaded up a little early before the recent drop. If it hangs around $40 very long, I may still add more. It’s hard to pass up at these prices.

    I had been looking at ARCP as a second REIT in my portfolio but decided to sell some puts instead of buying outright. After the huge drop, I sold a few shares of ESV at a loss to get some tax credits (I plan to buy those back after 30 days), then I used the proceeds to buy 300 ARCP @ $9. I watched as the stock dropped to $8 and then went up to $10, it was a wild afternoon!. After reading more into what happened, I decided to sell out at $10 for a $300 gain. I used the gain to offset some of the losses from the four puts I wanted to buy back. I still ended up with a net loss but I was more comfortable with that than hanging on to ARCP to see what happens. I think I’ll stick to one REIT , OHI, since I already have plenty of real estate exposure.

    Thanks for the list!

  78. Dana,

    I wish you luck. That might be a very profitable move for you. However, I could also see it taking a while for ARCP to recover. But it sounds like you’re in it for the long haul, so you should be fine.

    As far as the dividend goes, a cut could be the sign of something more problematic. The most recent CC stated the dividend was fine. So if they have to cut it then that would suggest to me that either management is once again being deceitful or management doesn’t really have a good handle on the finances, or both. In either case, reduced dividend income isn’t cutting it for me and my goals. I hope they right this ship, and I’m still along for the ride. But if the company shows a continued lack of ability to command its own vessel (a dividend cut would be indicative of such to me) then I’ll probably have to hitch a ride somewhere else.

    “It seems like you wait for a pop and sell or keep ridin’ this one until its conclusion-good or bad.”

    My primary directive is to protect capital. The ultimate conclusion could actually be that there’s substantial fraudulent behavior occurring here and the company becomes unable to continue operations as it currently stands. So I wouldn’t want to be there all the way through to something like that. However, I think that scenario is unlikely or else I would have already sold. On the face of it, it’s incompetence and the numbers weren’t altered in a way that’s material enough to warrant a 30% reduction in the company’s value.

    Just my take on it.

    Best of luck. 🙂

    Cheers.

  79. Alexander,

    Nice! I have more than enough ARCP for me personally, but I do hope to join you there on UL in the next couple of weeks. I can’t imagine UL not being a more profitable enterprise that pays out substantially more in dividends 10 years from now. Just can’t see a world where that doesn’t happen. 🙂

    Best wishes!

  80. DD,

    I don’t blame you at all. If you can’t sleep well at night, it’s time to move on. I’m personally sleeping just fine because it’s a very small part of my overall portfolio and I haven’t actually lost anything until I sell. And I’ll only sell if I think the company is permanently impaired, rather than just set back by incompetent managers. I would actually sleep less well at night if I had to swallow a $1,000 loss. But that’s just me.

    V might have spiked beyond my reach. It was probably already a stretch for me, as I highly doubt my cash flow will be positive enough to allow for three or more purchases next month (like what I was able to do in October). But it’s also not necessary. One or two high-quality purchases will be more than enough. 🙂

    Thanks for stopping by! Have a great weekend.

    Best regards.

  81. Brian,

    V is doing very well. I’m glad I bought in when I did. I planned on it being a small part of the portfolio simply because the yield doesn’t offer me what I typically need. But that’s okay. If it lives up to its end of the bargain and grows as I think it will then it will naturally grow into a substantial position over time anyway, regardless if I add much.

    IBM’s E is moving higher. It’s set to increase 7% YOY, and that’s in a ridiculously off year for the company. But people are worried because that’s slower than what it used to be. I find that interesting, because a lot of other companies that are growing in that range have P/E ratios about 75% or 100% higher (like KO). But that’s what makes it a market, and that’s where I find opportunities. The yield does look safe here. Even if the company completely stops growing earnings (unlikely), the dividend could still grow at rather substantial rates for at least a decade before we’d even start to question it.

    One more note: The $20 guidance for 2015 seems to confuse people. It wasn’t actual GAAP earnings they were shooting for, but rather operating earnings.

    Thanks for stopping by!

    Best wishes.

  82. pacer45,

    Sounds like you made a great move there. Excellent timing! You now have more facts in front of you if you want to buy back into ARCP, but if you disliked it before you may like it even less now after the accounting fiasco.

    I hear you on having a busy October. Same here. I expect November to be a bit light as a result. UL remains top on my watch list, though. I’d like to eventually build the position up to 100 shares or so, so I’ve gotta get busy. 🙂

    Thanks for stopping by. Great job there with that move!

    Cheers.

  83. Brent,

    UL is definitely hard to pass up at $40. The yield is competing with some utilities out there.

    Sounds like you made a good move there. The ARCP drama could play out for a while. But I’m still collecting a very solid dividend and the losses aren’t realized unless I sell. However, you have sizable physical real estate holdings on your balance sheet, whereas I lack any. So I have a bit more REIT exposure in the portfolio, although I’m aiming to limit that to around 5% to 7% over the long term.

    OHI has been doing really well. I wish I would have bought more. 🙂

    Have a great weekend!

    Best wishes.

  84. DM,

    It’s hard to find a dividend-related blog that doesn’t have UL on their watch list! It seems there’s a line drawn in the sand at $40. I’ve been tempted to add the past few days, but I’m already heavily weighted and don’t want to repeat past over-weighting mistakes.

    The recent market run is slimming the pickings in a big way. Energy remains the best play imho, for those not already holding a ton of it. Great call on V, btw.

    Best,
    DWC

  85. Hey DM,

    Great watch list! I myself went for Unilever recently. I was considering Visa and while it looked like it could provide incredibly strong returns the dividend yield is quite low, so it would bring my yearly average down too much (I already own CBI with 0.4% yield).

    I think IBM is tricky case, but if they manage to reposition themselves again, you’re in for massive gains as you get incredibly strong buybacks at low prices.

    Best Wishes,
    Dividend Venture

  86. What do you think of GLD and SLV as a hedge? I really love dividend growth stocks, but I believe there is a place for GLD and SLV should there be increased inflation as Fed removes stimulus.

    As for Nov stock picks, I like UTX, EMR, BA, UL, DEO.

  87. DWC,

    I really like UL here. Not much to really dislike about it, to be honest. I’m not drawing a line at $40, however. I honestly doubt I’ll be worried about whether I bought UL at $39 or $41 when I look back on it 30 years from now. That being said, cheaper is ALWAYS better. 🙂

    Some of the big energy plays have bounced back big already, though there is definitely some value there for the long-term investor. I thought about picking up a little more XOM recently, as that’s the one supermajor I’d like to add to. I also like the some of oil services stocks. Pipeline plays remain attractive, and some of the Canadian stuff doesn’t seem bad either.

    Thanks for stopping by. Keep up the great work!

    Best regards.

  88. DV,

    I hear you on V. It was definitely a stretch for me, considering the yield. But I think the growth will make up for it. I don’t want it to be a large position, but it may end up that way if it grows the way I anticipate it will. And I won’t be complaining. 🙂

    IBM is tricky, but the risk at $160 appears to lower than at $180. I think it’s basically priced for very low expectations here, which I like. It’s a low bar to clear, so now it’s just up to the company to step over it.

    I hope you’re able to pick up some nice opportunities in November. Have fun!

    Cheers.

  89. Stockman22,

    Neither GLD nor SLV pay a dividend, so they’re not in my wheelhouse at all. For instance, I’m more concerned with whether or not Norfolk Southern will move more goods and coal over the next five years, whether Coca-Cola will sell more beverages, whether the world will consume more energy, and whether people will still buy supplemental insurance from Aflac. What the Fed does is really just not a concern for me.

    I like your watch list. DEO and UTX are two stocks in particular that I’d like to possibly add to the collection at some point. So many stocks, so little capital. First world problems. 🙂

    Thanks for stopping by. Have a great weekend!

    Best regards.

  90. Jason,
    I sold my shares of ARCP on the accounting news and bought shares of V. I lost faith in ARCP, particularly since I believe the lawyers are going to have a field day with them. I could be wrong, but I strongly believe in V and was glad to add shares at $215. Lately I have been wondering if having 50 stocks is too many and I have been selling shares of weaker companies (or over valued companies) and using the funds to increase positions in strong companies with reasonable valuations. I’m down to 47 stocks now, and I like the mix. I don’t plan on just selling to reach a certain number, though. It has been more of an exercise in culling the weak and feeding the strong.
    Long IBM, KO, UL, V
    Best wishes from the unshine state,
    KeithX

  91. ARCP buying and selling assets, management changes, buying red lobster REITs, selling Cole. It so crazy that I felt like someone is trading properties like a day trader trading stocks.

  92. It’s no surprise Visa’s yield is so low – the shares have been on a real tear over the past few years. My brother, Rick, was able to pick some up while they were still sitting in double digits. At the time I was insisting on a five dollar drop before I’d pick any up due to the low yield. Needless to say, instead of dropping $5, they’ve gone up well over a hundred. The business model and their brand position are incredible and it’s ironic they are so well financed while enabling the world’s consumers to get into debt.

    Take care!
    – Ryan from GRB

  93. A few great companies there. I had been doing more research on V (looks good) and then they popped up today. Probably a little higher than I want to pay for V right now, should have taken the opportunity a few weeks ago. A pesky thing that due diligence is!

    I am in the process of buying another small piece of UL and probably will continue adding to it weekly for a while

    Take care!

  94. KeithX,

    I hear you. Some sold right away and took the loss, others are holding, and some brave souls are buying here. I’m hopeful this is just incompetence and that’s it. Of course, they’ll still likely have lingering issues even if that is it. Can’t blame you for exiting. They’ve definitely lost trust at this point.

    V is a long-term winner, in my view. Most transactions globally are still cash. Just a huge runway for them. 🙂

    Thanks for dropping by. Hope you have a great weekend!

    Cheers.

  95. AJ,

    They’ve grown incredibly quickly. Operational/management risk was something I actually mentioned when I purchased ARCP earlier in the month. I obviously didn’t expect/anticipate accounting issues, but rather I suspected they might have a problem properly managing everything because there’s only so much you can focus on at one time. I suppose that’s maybe how something like this slips through the cracks.

    It’s unfortunate because what’s getting lost in all the noise is that the portfolio of properties is still very high-quality. The lease terms, tenant credit quality, and diversification across industry all look great. They arguably have a better portfolio than Realty Income. So it’s a shame we have a case of mismanagement, which I thought was a low probability.

    We’ll see how it turns out.

    Cheers!

  96. Ryan,

    I’ve had a few big misses in my short time investing. And passing on V when it was around $90 is one of them. I looked at the stock heavily back then, but the yield (around what it is now) was just too low for me. I just wasn’t ready for the stock at that time. I was still building the dividend income pretty aggressively. It’s unfortunate, but I’ve now allowed some room in the portfolio for a couple of low-yield stocks like V. Very excited about the future for this company. The amount of growth potential for such a large business is almost mind-boggling.

    And it is quite ironic that they play some part in consumers going into debt while remaining debt-free at the corporate level. Of course, I’m happy to use my Visa card at every opportunity, collect the reward dollars, and pay it off quickly. So I get the reward dollars AND the dividends. Go Visa! 🙂

    Best wishes.

  97. ILG,

    I figured V would be up big today. I wish it wasn’t that way so I could continue building out a position, but it’s also nice to see that big green number next to the position in the brokerage account. It’s a win-win. 🙂

    UL seems like low-hanging fruit here. The yield is competing with some of the big utilities out there, while you get a lot more growth. Not much to really dislike here about Unilever. Looking forward to topping my position up fairly soon here.

    Have a great weekend!

    Cheers.

  98. DM,

    Very nice dividend increase by V recently. 20%???

    I have been thinking about my initial investment in ARCP a lot this week, for obvious reasons. As an investor, it can be very easy to get upset at yourself about investing in the company, questioning your investing decision making, and irrationally selling and taking your losses now. These crossed my mind for a brief minute, but I quickly forced those thoughts out of my head. At the end of the day, as an investor, there is nothing you can to do to predict managment fraud or misstated financial statements. Everyone who made a decision on the stock, including Wall Street analysts, used the readily available financial statements to base their investment decision. The good news is that both the parties involved in this cover-up are no longer with the firm. The healing process can begin. I appreciate taht you focused on some of the positives of the company and provided potentially worried investors reasons to remain invested in the company. If you don’t mind, I would like to consider that the company is still strong and has a solid portfolio of assets. This is not an Enron situation where the company was covering up that it was insolvent. Instead, as you stated, the error was in the calculation of AFFO. For now, let’s take this opportunity to re-invest our monthly dividends at a much lower share price. Hopefully now the company will slow down and let the healing begin.

    Bert

  99. ARCP down another 6% today. The stock has been it hard, with 33%, 7%, 6% in the past three days. I went through this with SDRL last month. It’s hard.

    I saw that Brad Thomas sold out today. I don’t follow his buys/sells because I think he is too optimistic on the whole Reit sectors but he has a lot of followers

    I am getting real interested at this price so I will continue my own DD and wait for the floor.

  100. Bert,

    Absolutely. It’s impossible for anyone to foresee an accounting issue like this. I thought ARCP was already a high-risk play, but this puts it into another stratosphere. Totally out of my wheelhouse now, but I’m already along for the ride. Could be a long road back, but if it’s really just the slight adjustment to AFFO and things really settle down over there then we could be okay. There’s a lot in the air right now, however. We’ll see how it goes. At the very least, it’s a good learning lesson on diversification and risk. 🙂

    But I definitely wouldn’t beat yourself up about it. Nobody should feel bad about buying ARCP before all of this. And they still have a massive portfolio of real properties sending real rent checks which get converted into real dividends. So I’m okay holding for now, but they’re on thin ice with me. My patience is pretty strong, but their next move will be telling.

    Have a great weekend! Thanks for stopping by.

    Best wishes.

  101. Nice list there, DM.

    I’m looking seriously at Unilever. I’ve got zero of it now. It’s likely to be my choice at the end of the month.

    V @ <210 may also find its way to my portfolio at some point. At 240 I'm sitting at the sidelines still. Probably a mistake 🙂

    Cheers

    Jarmo

  102. Seraph,

    I’m so sorry I missed this comment somehow the first time around.

    Thanks so much for grabbing a bag! That’s awesome. It’s too bad that they were a bit salty, though. Sounds like you were unimpressed. I wish they were sold around here so I could try them out for myself.

    I’m with you all the way on UL. I’m very interested in adding to my position early this coming month. Seems like a no-brainer to me. 🙂

    Thanks again for trying the product out. Sorry I somehow missed this comment.

    Best regards!

  103. Hi DM,

    I love reading all your postings, they’re really helpful as I start my investing career. I was wondering how long you project UL staying at this lower price for…I have this fever of beginning to invest and don’t have a lot of funds at the moment. I bought 20 shares of BBL right after you did, and then 125 shares of ARCP after you as well. I was looking at UL to be my 3rd stock. Hopefully ARCP will bounce back in the long run.

    What do you think about the class action against ARCP? Do you think it’s worth getting in on? Are you going to?

    My last question is, at a $7.00 transaction fee, what would you recommend being the minimum amount to invest so that the $7.00 fee isn’t too big of a premium?

    Thanks for being so transparent with all your work!

    -DL

  104. Jarmo,

    I hear you on V. That recent pop probably put it a little out of my reach, for now. But it was probably going to be a stretch purchase for the month anyhow.

    UL does indeed seem pretty attractive here. The growth, yield, product lineup, brands, and management all look good to me. Anxious to pick up more shares this coming month. 🙂

    Have fun shopping!

    Cheers.

  105. ARCP lied to its investors. Investment analysis was based on these lies.

    Maybe it lied a little. Maybe it lied a lot. Maybe the stock goes up. Maybe the stock goes down.

    Why risk it? Why not move that $ to a company that you can trust such as the three on your watch list?

    Oh and by the way – the us government will absorb a portion of your loss in the form of a tax loss credit. What could be better?

    Even Buffet buys some losers on occasion.

    Roger H

  106. DL,

    Thanks for the support. Really appreciate it! 🙂

    Tough to say how long UL will stay here. Europe seems to be having trouble right now, which is bringing down a lot of stocks based out of the UK and other countries over there. But UL is obviously not just a European company, which is where the opportunity lies. There doesn’t seem to be any catalyst on the horizon that would allow UL to appreciate significantly from here, but you never know with the market.

    As far as the transaction fees go, I try to make sure my purchases are around $1,400. That means my commission fee is 0.5%. I think that’s reasonable during the accumulation phase, keeping in mind that once one is living off of dividend income the fees largely go away.

    There are actually a number of class action lawsuits that have been filed. Hard to say where all of that is going. It’s just a shame. From what we’re being told, there are two people responsible for this (and they’ve resigned). But it’s probably going to drag on for a while. If it’s really what they say it is, it’d be easier for the company to just operate and get things repaired without having to deal with legal issues as well. But I can also understand the desire for investors to want to be made whole. Just a real shame. I can’t say what I’m going right now because we just don’t have all the facts in front of us. Reacting emotionally without knowing all the facts doesn’t really lead to a proper decision-making process. That’s why I didn’t panic sell on the first day. It’s easy to follow the herd, but I like to have the facts in front of me and react accordingly.

    Best wishes!

  107. DM,

    Thanks for your prompt response! I hope it stays around $40 until the 15th when I get paid…if I have these stocks in a Roth IRA, the $7.00 will be the only fee I’ll have to pay, is that correct? I will hold onto ARCP and see what happens as well. I’d love to hear updates on what you choose to do about your stance with ARCP!

    -DL

  108. Roger,

    Right. The analysis was based on incorrect information. Information that wasn’t just incorrect, but purposely concealed once the original mistake was made.

    But there’s a lot of maybes there. I think you used four in your comment alone. We don’t know what happened. Now that we know we didn’t have all the facts, I’d like to have all of them once and for all now that the opportunity is in front of us. It’s easy to react emotionally and get angry and sell. It’s much more difficult to really sit down and hash out all the information and make a rational decision. So we should know more in a couple of weeks.

    The unrealized loss is already sitting on my balance sheet. Could go lower, but I don’t see it going dramatically lower unless there really is a much larger problem with the company than what’s already been publicized. If it’s really just a slight adjustment to AFFO, then I suspect things will start to settle down. We’ll know more with the Q3 report.

    But I imagine even if things do start to settle down I’ll probably move on. Just too much drama here, and it’s taking up a disproportionate amount of my time now. However, I’d rather realize a smaller loss, if possible. In the meanwhile, they’re still paying a substantial dividend, which also helps mitigate the loss.

    We’ll see how it turns out. Maybe I should have gotten out right away. But the slight adjustment to AFFO just doesn’t warrant a 1/3 cut to the company’s value, in my view. And that’s even factoring in a higher cost of capital and other potential issues. The litigation is a big X factor, though.

    In the end, it’s a great lesson on risk and diversification. Can’t win them all. 🙂

    Best regards.

  109. Hi Jason.
    Thoughts on adding Starbucks to a future watch list?
    They grew revenue 11% YOY and just increased the dividend 23%. Yield is lowish at 1.7%

  110. Joel,

    I have about 30 or so stocks on my watch list, a list that I keep active in my brokerage account. SBUX is on that list. I like the stock. Great brand, and the dividend raises over the last few years have been impressive. Sticky customers, which I like. Not much to really dislike, other than the yield. I hope to add it at some point. I have to limit the stocks with yields below 2%, however, and I have a few already allocated there. Plus, I continue to watch other stocks with low yields, like DIS, NKE, and others. But SBUX is one of the better brands I don’t have exposure to. The only thing I worry about is the restaurant industry in general. Brutally competitive. But SBUX is high on the quality quotient. At least, that’s the perception of their products.

    Thanks for dropping by!

    Take care.

  111. Hey Jason, another dividend month over, gotta love it when things roll over and you get paid. Re: the stocks above, with you and everyone else on UL, i do like it, great long term hold. I am still accumulating AIG, i think this one is going to be a stellar performer over the next few years as they improve efficiency – the dividend should improve nicely swell. BP was mentioned, love this anywhere in the upper 30’s, low 40’s. Great risk/reward play. Taking advantage of the drop in oil n drop in energy sector which will only go down so much until demand starts kicking into high gear. have a great weekend.

  112. Don’t sweat it 🙂 You have so many comments to respond to, so I don’t blame you when one or two slip through the cracks.

    If we both end up going to the Berkshire Hathaway meeting, bring a cooler and I’ll bring a bag of their frozen meatballs along. Consider it a wedding present!

  113. DM, I’m glad you got into V when you did. Nice job. I have substantial positions in both MA and V that were acquired in early 2012. I still kick myself for selling some MA 1-2 years after IPO. Was a little shortsighted on my part, but I won’t be making that mistake again. Visa is a great company, its definitely a bottom drawer position in my book.
    I’m a little more guarded on IBM. Great business, but its earnings and dividend growth is all cost generated currently. I own Cisco, which is going through its own transition issues, but IBM appears to be in even worse shape. Both companies rely in making a successful transition to cloud computing, no mean feat if you derive significant revenues from proprietary, legacy architecture. Still, I understand why you hold it, I have Cisco in my portfolio for a similar reason. I guess sometimes you need a leap of faith that steady incumbents can ride changing industry conditions.
    Best.

  114. Tales,

    Thanks for stopping by!

    I’m glad you had a great month of dividend income, my friend. That’s what it’s all about. 🙂

    AIG is an interesting play. I hope that works out for you!

    I agree on BP. It’s a rather interesting opportunity right now. I’ve thought a few times now about increasing my stake in the company. The recent dividend increase was certainly very nice, and the dividend raises since the cut after the Deepwater Horizon tragedy have been really strong, especially considering the yield.

    Hope you’re having a great weekend.

    Cheers!

  115. Seraph,

    Yeah, I get a lot of comments. But I rarely miss one. Feel bad about that. Sorry!

    I’d definitely love to try some of those meatballs. I’ll have to remember to bring a cooler along if you decide to go. Appreciate the offer. 🙂

    Enjoy the rest of your weekend!

    Best wishes.

  116. Integrator,

    I regret not buying V in the $90s when I first looked at it. One of my big misses. Live and learn. But I’m glad that I’m along for the ride now as a fellow shareholder! 🙂

    IBM is definitely not a low-risk stock due to the transition away from some of the big hardware and toward cloud, mobile, security, etc. I think they’re making the right moves, but will these moves be big and fast enough? It’s hard to say. I can see that they’re getting more aggressive, but what does IBM look like 10 years from now? I’m giving IBM the benefit of the doubt because they’ve been the one tech company to be able to change so much over their history. And the dividend could grow at a rather attractive rate over the next 10 years, even without earnings growth. In the meanwhile, the cheap stock allows management to buy it back at a great price while they attempt to really ramp up some of these other businesses. We’ll see how it goes.

    Thanks for dropping by. I hope all is well!

    Best regards.

  117. Hi DM,

    Thanks for sharing your thoughts. I’m currently considering a position in GM. I’ll do some further analysis and might make a first purchase this month if all works out well.

    Cheers,
    TM

  118. I am having a lot of fun, as I just used my emergency fund to pile up on a bunch of shares. I don’t have available cash for November but I sure took advantage of the dip! 🙂

    Too bad that V spiked so much with the results as I wanted to open a position eventually.

    Cheers.

  119. DM,
    I missed the opportunity on Visa when it dipped below $200 during the October selloff as I was busy buying healthcare and energy sectors 🙁
    I am not very familiar with AMNF, I will check it out. Thanks for sharing your watchlist!
    FFF

  120. TM,

    Thanks for dropping by and sharing your thoughts as well!

    I hope GM works out for you if you decide to invest there. I’ve never personally been a fan of auto manufacturers due to the business being pretty capital-intensive and very low margins to be had. Could be a great play, though. 🙂

    Best wishes.

  121. FFF,

    Hey, can’t win them all. As long as you’re picking up equity in high-quality companies at a great valuation that works for you and your goals/portfolio, then you’re sitting in a pretty good spot. 🙂

    We’ll see what happens with V. May drift lower after that initial spike. Never really know.

    Best regards!

  122. Jason,

    I’ve looked at V and UL and they look really good, especially, when I see my Visa card every time and think, geesh, I need to get something out of it 🙂

    I never looked at AMNF as it is a micro cap and out of radar of most investors. Where did you heard about this company from ? just curious.

    Good weekend!

  123. PIM,

    I’m totally with you. I love using my Visa card now. Not only do I collect my reward dollars that add up pretty quickly, but I also contribute a little profit to the bottom line of a company I own a stake in. Love funding a tiny piece of my own dividend via something I’d do anyway. 🙂

    I found AMNF when writing about stocks that increased their dividends a while back. I discussed that when I analyzed AMNF. The most recent dividend increase was impressive, so I decided to investigate further.

    Thanks for dropping by. Hope you have fun shopping this month!

    Take care.

  124. Hi Jason! Im currently thinking about buying Visa or Starbucks. Both are growing their dividends at a very rapid pace. Do you think that those companies are a bit too expensive now? I might buy a small position now and add more later if a better opportunity comes. Thanks for a really intresting blog!

  125. I initiated a small position today in CINF that I plan to add to over the years. Thoughts?

  126. TGGD,

    Hmm, I’m not a real huge fan of CINF. The yield is nice, but there has been little or no dividend/EPS growth over the last 5-10 years. I think there are better insurers out there, like TRV, CB, HCC, and AFL. Not all in the same space, but they sport better metrics and growth profiles. Just my thoughts on it, but I wish you the best of luck with the investment. 🙂

    Take care!

  127. DM,
    Based on the fact that UL cut its dividend, wouldn’t that be grounds on selling the stock?
    I see that you are considering on buying the stock in November but am confused as you have discussed selling a company that has cut its dividend. Also, looking at the dividend history closely, it show that UL has been inconsistent and up and down with their payments. Maybe I’m missing something here because of the company being located outside of the US.

  128. Hbkid,

    UL didn’t cut its dividend. As I noted in my recent analysis, UL declares its dividend in euros and then that gets converted to local currency. In our case, that’s dollars. So there’s a currency effect there.

    I would recommend going straight to the investor relations site any time you have questions like this. That’ll straighten everything out. 🙂

    Best wishes.

  129. Hello,

    I first want to say I look forward to every new article as it’s not only inspiration, but more of guide map for new ideas. I have been coming to this site almost everyday since April of this year after I opened up a brokerage account and started buying stocks. I have occasionally followed the market before that point, but now I’m constantly following it and reading your articles for perspective.

    My initial positions in April were Google, Wells Fargo, and Las Vegas Sands. I knew when I started buying stocks that I need to diversify at first. I definitely wanted Google and a Casino stock (I’m a life long gambler who takes calculated risks). Those first three stocks provided a solid diversified base to expand upon.After reading your site I realized that out of those three positions I will not see any returns on GOOG unless I sell at a higher price. I’m ok with that because after reading your blog I realize that as long as I back up pure growth plays with dividend stocks I will have a “snowball” of capital that will steadily grow without any further trades on my part. After digging into your site your rocket fuel article really hit home for me.I plan on taking a similar dividend growth strategy, but with the addition of slightly more riskier plays to boost my portfolio.

    Since my initial purchases and after reading almost every article on your blog I finally had some more capital to invest in October. I purchased 126 shares of ARCP for $11.85 soon after your purchase. I was shocked after the accounting news broke, but determined not to react until I knew exactly what was going on. The issue has been repeated so many times by so many, but it all sounds like fear and I decided to take the opportunity to purchase 117 more shares this past week at $8.50. I believe as soon as they declare November’s dividend in a few days then the stock should regain a significant portion of market confidence. Also the news broke after an independent auditor confirmed it. If the auditor found anything else it would’ve been stated at the same time. I’m a person who doesn’t mind risk and ARCP looks like a steal right now.

    Aside from from all that background information, I really wanted to post a comment to see if you have looked at Las Vegas Sands at all. It’s down about 15% since my initial purchase, but they recently declared a 30% dividend increase for next year. It currently pays over a 3% yield and the payout ratio is around 60%. The majority of its income is derived from its Macau operations. Macau has been a major growth player the last ten years and there is news that Japan is considering legalizing gambling in time for the 2020 Olympics.This stock has been beaten down this past summer with stagnant YOY revenue growth, but with a new casino in the pipeline for 2015 along with new markets this company has the potential to keep up its rapid growth. The company is very shareholder friendly with consistent dividend increases since 2008 even offering a huge special dividend back in 2012 before the new dividend tax laws went into effect. If I didn’t recently double down my ARCP position and have a portfolio that isn’t fully diversified yet I would look to purchase more shares at today’s prices. Alas at the moment I only plan on DRIPing my dividends back into the stock until my portfolio is diversified to my liking or if the price continues to drop further.

    A Loyal Reader

  130. TayDiggsMoney,

    Thanks for stopping by. I appreciate the readership very much! 🙂

    Sounds like you’re off to a great start there. ARCP is an interesting scenario, and certainly something that nobody saw coming. It’s unfortunate, but I’m hopeful that it’s just two bad apples, and not a bad bushel. I think we’ll know a lot more with Q3 results. In the meanwhile, they have an enviable portfolio of real properties paying real rent which gets converted to real dividends.

    I’ve never actually looked at LVS. I just took a quick glance at it. Revenue growth has been impressive over the last 10 years, but EPS has bounced around a lot. Up until the last fiscal year, EPS growth was actually quite poor and was negative for a couple of fiscal years there. And it looks like their dividend history is very new, which is surprising. I wonder if there was some kind of change there that led them to start paying a dividend? The balance sheet is also fairly leveraged, though not worryingly so. I’m not surprised to see this since it looks like they’ve expanded quite a bit in the last decade.

    Could be a solid play. Some of their recent openings could propel a lot of growth moving forward, though the relatively short dividend history gives me pause. I’ll watch this one a bit more. 🙂

    Thanks for following along. I wish you the best of luck on your journey!

    Cheers.

  131. Hi Jason,

    UL is a fantastic company. Super diversified. It’s like buying a little mutual fund. However, they don’t allow you to automatically reinvest dividends. You still get dividends, but you have to actively reinvest them. At least, that was my experience. Not the worst thing in the world at all. I just wasn’t sure if you already knew this or if it was already mentioned in the comments. The more you know… *shooting star*

    Happy investing!

  132. Phil,

    Oh, great point there. I wasn’t aware of the reinvestment issue. I don’t DRIP, so I don’t follow which companies allow automatic reinvestment. But thanks for pointing that out!

    I’m with you on the quality of UL, though. Great products, great history, great brands, great company. I’m excited to increase my position. 🙂

    Happy investing to you as well!

    Best regards.

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  134. Personally I feel that V will be around for a long time as long as they keep their wits about them. Cash will, probably, always be a factor in anything people do, but more and more transactions are becoming credit-based or electronic debit.

    Same with any decent real estate trust or healthcare fund in the US. I can’t see real estate prices going anywhere but up.

    Thanks,
    Wallet Engineer

  135. WE,

    Yeah, I’m with you on Visa. I can’t imagine they aren’t a much bigger and more profitable company 10 years from now. However, they’re definitely on the upper end of their fair value range right now. I hope to see it back down to $215 or so, at which time I would love to add to my position.

    Thanks for stopping by!

    Cheers.

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