Recent Buy

buyThe first stock purchase of the month. Always an exciting time, right?

I’ve recently read some commentary that attractively valued, high-quality stocks are becoming somewhat of an extinct species these days. I don’t know if I totally agree, but I certainly see a lot less value across the entire market today than even just one year ago. However, that’s not to say opportunities aren’t still out there, and those remaining opportunities are exactly where I focus my attention. After all, I’m typically investing $2,000 to $3,000 across 1-3 stocks per month, so I can be selective and successful simultaneously.

This recent buy should come as no surprise, as it was the top stock on my watch list for this month. As always, I put my money where my mouth is. I generally try to follow through on my watch list with subsequent purchases, but stock prices don’t always cooperate. This time, however, there was full cooperation in effect and I took advantage of that.

I purchased 30 shares of Unilever PLC (UL) on 11/10/14 for $40.37 per share.

Overview

Founded in 1930, Unilever Plc is a global manufacturer and supplier of consumer products. They sell their products in over 190 countries.

The company operates in four segments: Personal Care (36% of fiscal year 2013 sales); Foods (27%); Refreshment (19%); and Home Care (18%).

They further operate in three geographical product areas: Asia, AMET (Africa, Middle East, Turkey), RUB (Russia, Ukraine, Belarus) (40% of FY 2013 sales); The Americas (33%); and Europe (27%). Emerging markets comprise 57% of UL’s business.

Unilever sports 14 €1 billion brands, among a portfolio of more than 400 brands. Some of their most popular brands include: Axe, Ben & Jerry’s, Breyers, Country Crock, Dove, Hellman’s, Klondike, Knorr, Lipton, Magnum, St. Ives, Surf, and Vaseline.

It’s important to note that Unilever was founded in 1930 following a business merger between Naamlooze Vennootschap Margarine Unie of the Netherlands and Lever Brothers Limited of the UK. As a result, two controlling companies were set up – Unilever N.V. and Unilever PLC. They operate effectively as a single economic entity. Both the Dutch and UK companies offer ADR shares that trade on the New York Stock Exchange, and both stocks represent equal ownership in Unilever. This article will be referencing the (UL) shares, which are the ADR shares of London-listed Unilever Plc. These shares do not have any foreign dividend tax withholding due to a tax treaty between the US and the UK. Unilever N.V. is listed in Amsterdam, and its ADR shares trade on the NYSE under (UN).

Conviction

I just initiated a position in this company last month, and performed a relatively in-depth analysis of it at that time. So I’ll spare you from repetitive content. But if you’re looking for fundamental data and a qualitative analysis, you’ll find it there.

The only thing that has really changed between then and now is that the company announced Q3 results. Much of what I would expect came to pass. Volume and sales growth are both up, especially so in emerging markets. However, overall revenue is down due to currency effects and disposals. Revenue was down 2% YOY for the third quarter after factoring in a (2.6%) currency effect, but a full (1.5%) was related to disposals.

I do want to mention that I have a lot of conviction in this investment. I find that as I grow and learn as an investor, I naturally find myself with varying amounts of conviction in companies. Sometimes that’s due to the cyclical nature of certain industries, or sometimes I just feel like I understand certain products and/or companies more than others. And I find myself drawn to a company like Unilever because it’s easy to understand ice cream, shampoo, soap, butter, and tea, among other products.

And  I can clearly and easily envision a future where they sell more of these products to more people, ensuring more profitability and thus more dividend income my way.

So this purchase comes at essentially the same price as last month. I didn’t feel a need to average down, and I continue to believe this is a high-quality company already trading for an attractive price. I would be sooner surprised to see the stock dramatically drop from here rather than trade 10% higher over the course of the coming months. As such, I’m eager to buy in now.

The stock yields 3.6% here, based on extrapolating out the $0.3637 quarterly dividend. It’s important to note, however, that UL’s dividend oscillates a bit in dollar terms due to the fact that the company declares its dividend in euros, which gets converted to dollars for US investors. I find that to be a pretty solid yield considering the defensive and stable nature of the business, as well as the fact that the company has grown its dividend by a compound annual rate of 7.5% over the last decade in dollar terms.

For those interested, UL has this great introduction to the company on their investor relations site. You’ll note that they have the #1 or #2 market share for products in fabric cleaning, hair care, skin cleansing, face care, tea, and ice cream across a multitude of countries in emerging markets.

I have a lot of conviction in this investment, and if it continues to hover around $40 I’ll likely add to it over the coming months. I’d like to get this position up to 100 shares over the course of the next few months, if my cash flow, competing opportunities, and UL’s stock price allows.

Risks

As I recently pointed out, I believe that UL is a low-risk investment, all things considered. The demand for their products should stay relatively unchanged through most economic cycles, as people still have to eat, clean, and groom themselves even in a recession. However, the consumer products space is highly competitive. So there is always pressure on pricing and competition for shelf space.

Valuation

Obviously, my opinion on the valuation hasn’t changed over the course of a few weeks. The Q3 report didn’t change the long-term investment thesis or quality of the company, as they are well-positioned to take advantage of better economic conditions in the future. The stock trades hands for a P/E ratio of 18.04, which is in line with its five-year average. It’s also on par with the broader market.

I valued shares using a dividend discount model analysis with a 10% discount rate and a 6.5% long-term growth rate. 6.5% is below UL’s long-term growth rate for both earnings and its dividend, so it would appear that’s conservative. The DDM analysis gives me a fair value of $44.27, which implies a ~10% margin of safety here.

Conclusion

Unilever sells high-quality, in-demand branded products to billions of customers all over the world. 400 brands, of which 14 generate more than 1 billion euros in annual sales, is phenomenal, and is certainly a story I want to be a part of. I personally use some of Unilever’s products myself, and I know I’m not alone – the company cites that more than 2 billion consumers worldwide use a Unilever product every day.

I think the odds are very good that UL will be more profitable 10, 20, and 30 years from now and sending shareholders like me even more dividend income.

This purchase adds $43.64 to my annual dividend income, based on the current $0.3637 quarterly payout.

I’m going to include current analyst valuation opinions below, as I use these to concentrate my reasonable valuation estimate:

Morningstar rates UL as a 3/5 star value, with a fair value estimate of $44.00.

S&P Capital IQ rates UL as a 2/5 star sell, with a 12-month target price of $35.00.

I’ll update my Freedom Fund in early December to reflect this recent purchase.

Full Disclosure: Long UL.

What do you think? Does today’s price represent a good value for shares in Unilever? 

Thanks for reading.

Photo Credit: Stuart Miles/FreeDigitalPhotos.net

Edit: Corrected typo in 10th paragraph. 

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142 Comments

  1. Ice cream, shampoo, soap, butter, and tea…that’s a simple business model. UL seems to be one of those companies you can buy and largely forget about. That said, what are your thoughts on 57% of UL’s business coming from emerging markets?

  2. Great buy. People will eat and drink their products always and also within 30 years. It’s one of the best dutch dividend growers available with a nice yield!

  3. I think UL is very attrative around the $40 mark, so great addition to your position. I just recently added UL to my Loyal3 purchases and will slowly add to it as long as the price stays down. Best of luck with the UL investment, as I’m sure you will be reaping the benefits from this company for years to come!

  4. Nice addition to your portfolio, Jason. As it happens, I started a position in Unilever today. That makes us co-shareholders 🙂 The only small negiatve I could see is that maybe the payout ratiio is slightly high. But other than that I believe it’s a great investment.

    Cheers.

  5. I initiated a position in Unilever today as well – pleased to join you in ownership here. I’ve been thinking about it for a while but couldn’t resist anymore so pulled the trigger. Unless something crazy happens I’ll probably own this for decades….

  6. Hey DM,

    Great purchase! Unilever is indeed on of the stocks that hasn’t fully recovered from the pullback and one of the few that still offers great value.

    Their long-term perspectives are very strong in my opinion and I do believe that the most successful companies of tomorrow are the ones that are better able to enter emerging markets, which is something in which Unilever has excelled at in the past few years and will probably continue to.

    Best,
    Dividend Venture

  7. DM,

    That’s a great “bread and butter” pick. It definitely has a better valuation than PG right now. It has been trading in a pretty tight range this year which gives everyone repeated opportunites to buy. Congrats on the purchase.

    MDP

  8. My top 20 in order: KO, PG, GIS, PEP, CLX, IBM, PM, UL, MCD, KRFT, BP, CVX, XOM, K, GE, O, EPD, DEO, TGT, JNJ.

    UL is in top 10 so I am a big fan of it.

    I will add more if it drops under $39.

    I would also like to add to PEP and JNJ but I may have to wait for another recession as I am up big time and I have averaged up enough.

  9. Much like yourself, I see a great opportunity with UL and as a result am continuing to add to my UL position through Loyal3. I think they present a strong value, are remarkably positioned, and have broad international exposure. I’m looking forward owning them for a long time.

  10. Great pick! I’ve been adding small amounts to my Loyal3 account each month. I’m excited to check out the company’s investor info page too. Haven’t read that yet.

    A little off topic since you already owned this stock, but awhile back didn’t you say you were planning on limiting yourself to 50 stocks? Since there are so many great companies out there I can definitely see why you’d remove that artificial restriction.

  11. DM,

    I like the adding to your current position and sticking to your watch list – I dig it, as I usually follow suit with my watch list. Huge brand, as always, large market share and the dividend yield + growth rate is just where you like to see it – an above average yield with an average average dividend growth rate. Seemingly – it shows to be better than other current 3.25-3.75% yielders who only increased their dividend 4-5% this year (Kraft and McD come to mind). I like the play here and congrats DM, great addition to the dividend income.

    -Lanny

  12. Nothing wrong with adding more to a position in a solid company. I’m generally happy to pay the same price as I did previously, certainly better than paying more 🙂 and if iirc you are around the limit of unique holdings that you want to manage. Nice buy, and gotta like another $43 a year 🙂

  13. Looks like a good pick in a stable company – what’s not to like? Another $43 a year to add to the income 🙂 onwards and upwards!

  14. Great choice! I have held this (UK) for several years in my income portfolio and it has provided a steadily increasing stream of income combined with some capital appreciation. I am sure you will not be disappointed – long term buy-and hold-and forget stock!

  15. Hey DM, sounds like a pretty solid investment in a strong company – hard to see too much downside at this price.

    Curious to understand your approach to valuation with your discount rate and growth assumptions. You might have explained this in the past so apologies if I’ve missed it, but do you adopt a constant 10% discount rate for all your investments? I thought you might vary this depending on the specific risks of the businesses and stability relative to the market (i.e. beta). There’s also a trade-off with the discount rate you apply and the growth rate you assume – obviously higher growth assumptions may reflect higher risk or uncertainty of achieving them, which would lead to a higher discount rate.

    And do you adopt a flat growth rate in perpetuity, or do you taper this off at all in the long-run, e.g. to be closer to inflation?

    Appreciate your DDM analysis is probably a sense-check to the P/E and other considerations, but just interested in how you think about this!

    As always, appreciate your well-considered and clear rationale for your investments!

    Cheers,

    Jason

  16. DD,

    I’m with you. I love owning pieces of companies that sell basic products like soap, shampoo, and toothpaste. And UL has some great brands in this space, as well as the food and beverage spaces. No matter what happens to the economy, people are still going to clean themselves. And greater access to these products in emerging markets gives them a nice runway for future growth, in my view.

    Plus, you have to like that yield. You don’t often get a yield like that from a defensive business that’s not in major trouble.

    Best regards!

  17. Agent,

    Glad to be on the same page here!

    I don’t think UL is a steal here, but I’m more than willing to pay fair price for an excellent company. And I think it’s priced at least fairly, possibly better based on the DDM analysis and Morningstar’s evaluation. Either way, the dividend is healthy and growing, which should provide ample income for the long term. 🙂

    Thanks for stopping by.

    Cheers!

  18. Jos,

    Seems like UL is popular right now. I can see why when you look at the quality, history, brands, and yield. Glad to be a fellow shareholder! 🙂

    I agree with you on the payout ratio. Slightly high, though lower than a lot of US blue chips like PG. We may see a slightly lower dividend growth rate over the next couple of years, due to currency effects. We’ll have to see. Though it would have to drop below 6% over the long haul for this valuation to be out of whack. I think we’re okay.

    Take care!

  19. sedin26,

    Another Unilever shareholder. There’s a few of us. Maybe we can combine shares and get a seat on the board. Haha! 🙂

    Glad to be a fellow co-owner. I think we’ll be glad we bought UL at $40 when looking back on this moment 20 years from now.

    Cheers!

  20. Jake,

    I agree. It’s a simple business model, and they’ve been at it for a long time now. Not too much changes in regards to shampoo and soap.

    The emerging markets exposure should be a boon for the company. Developed markets, especially Europe, aren’t growing much, if at all, right now. Meanwhile, most of their growth, as you can see from the Q3 numbers, is occurring in emerging markets. I think that’s where a lot of the growth will be had for a lot of multinational companies over the next couple of decades, and UL is positioned particularly well there.

    Best regards!

  21. DV,

    Yeah, the stock is basically flat after the pullback. It started to climb back, then took a tumble after Q3 results. Fine by me! 🙂

    I’m with you all the way. Their exposure to emerging markets around the world should provide them a strength when the global economy starts picking up some real steam again. In the meanwhile, consumers in these markets are slowly seeing their purchasing power rise, which gives them more access to some of the products that UL manufactures and sells.

    Thanks for dropping by!

    Cheers.

  22. MDP,

    Bread and butter. You got it! 🙂

    PG’s valuation has been a little too rich for a while for me, but I’m glad I bought in a long time ago. The choice between UL at ~18 times TTM EPS and PG at ~25 times TTM EPS seems like an easy pick, but that’s just my view.

    Thanks for the support. Keep killing it over there!

    Cheers.

  23. AJ,

    Seems like a solid list there. GIS and DEO are a couple of companies in particular that I’ll probably invest in at some point. Just haven’t gotten around to them yet.

    I hear you there on PEP and JNJ. Both are larger positions for me, so I’m not in any hurry to add. I’m a happy fellow shareholder, though. 🙂

    Good luck hunting down some targets over there!

    Take care.

  24. W2R,

    I’m with you. I’m looking forward to this being an extremely long-term investment, like every other investment I make. I’m looking forward to things really picking back up for them, and their emerging markets exposure should work toward that end.

    Thanks for dropping by!

    Best wishes.

  25. That feeling when you buy a stock that I already own! An amazing company and that you also think its a quality company makes me sleep well at night! Keep up the good work!:)

  26. Scott,

    The investor relations site has a lot of great info. I would definitely recommend checking it out. That’s always the first place I go before investing with any company. 🙂

    I planned on stopping around 50 or so, maybe going over a touch. I’m at 51 right now. I still see at least a dozen high-quality companies that I’d love to own a piece of, so I may end up managing a larger portfolio than I originally planned. The good news is that many of these companies don’t really require a lot of attention from little ol’ me and I now spend a great deal more time at home where it’s easier to check on things sporadically. Whereas managing a portfolio full of 50 stocks was a bit difficult with a full-time job and the writing, I’m a little freer these days. We’ll see.

    Thanks for stopping by!

    Best wishes.

  27. Lanny,

    Thanks!

    Yeah, I think the sum of the yield and dividend growth rate is pretty attractive, all things considered. Kraft is another stock with a similar yield, but if I’m not mistaken, management has already indicated that they want to grow the dividend by about 5% per year. So a lower growth rate is already baked into that one. Every stock competes with every other available stock, and I think UL is a pretty attractive competitor here with the brands, products, yield, growth, geographical exposure, and lengthy track record. We’ll see how it goes!

    Best regards.

  28. DW,

    Certainly better than paying more, indeed. 🙂

    I love averaging down, but I think this is an attractive price. If it drops substantially then I’ll certainly be more than happy to add more.

    Another $43 just continues to add to cash flow, which will buy more cash flow in the future. It’s a wonderful cycle!

    Cheers.

  29. Nicola,

    Not much to really dislike here. They’ve been having some trouble with currency, but they’re far from alone on that one. Otherwise, it appears to be a high-quality company on the right track. And I’m certainly loving an extra $43/year in passive dividend income. 🙂

    Take care!

  30. diy investor,

    Thanks for the support!

    Glad to be a fellow shareholder. I’m new to the Unilever family, but I definitely plan on sticking around for a while. 🙂

    Cheers.

  31. I was wondering when you’d make the jump and add some UL to your portfolio bc I know you’ve been looking at them for awhile. Great product and location diversification. One other company I’d love to get my hands on is Nestle. I like the buy ive been adding through Loyal3 but started a position in UL sometime last year. Definitely falls in the high conviction list. Thanks for the update.

  32. Jason,

    Great question there. Perhaps I’ll write a post up on it someday.

    You could use a different discount rate to account for risk, but I account for risk in the margin of safety. I usually seek a larger margin of safety on what I deem to be riskier plays, whereas more defensive companies, like UL, are freed from that requirement for me. The 10% discount rate is simply the return I’m aiming for, which I think is sizable and appropriate, considering it’s above the long-term broader stock market’s return.

    As far as the growth rates, I typically use a one-stage model because most of the companies I invest in aren’t young startups. They’re mature companies that aren’t growing in the upper double digits and have lengthy and repeatable track records. The DDM analysis, like a DCF analysis, takes that growth rate out to infinity. I have no idea where UL will be in 100 years, let alone infinity. But I’m only going to be alive for the next 50 or whatever years, and I see no reason why they can’t continue to grow at 6.5% for another three or four decades and possibly beyond. Some people might question that, but I think those same people probably would have questioned it 10 years ago or 20 years ago. I have no reason to believe that after ten years a high-quality company like UL will only grow at the growth rate of inflation. If so, I wouldn’t invest.

    But my DDM analysis output generally jives with Morningstar. I think they use a DCF analysis for their FV number.

    I hope that helps!

    Best wishes.

  33. JC,

    Yeah, I was happy to finally jump on board last month. Seeing it at the same price a few weeks later with fresh capital in my hands made the decision easy. 🙂

    Nestle is another great company. They’re incredibly diversified and a monstrous company. The annual dividend and Swiss withholding is kind of a bummer, though.

    Glad to be a fellow shareholder. May have to celebrate with some Cherry Garcia!

    Best wishes.

  34. Interesting that fastgraphs shows it as overvalued. Normal 15yr P/E is 17.1, and it is currently at 19.6, so it’s 2.5 “points” above it’s “average” P/E that people have been willing to pay over the last 15 years. Although it has come down quite a bit, looking at the graph, it looks like it went from very overvalued to just overvalued. I agree it is a very high quality company however. I don’t currently own it but it’s on my watch list.

  35. KeithX,

    Agree. I see no reason this stock won’t deliver total returns in the high single digits or low double digits, with part of that return being in the form of a healthy and rising income stream. Glad to be on the same page! 🙂

    Thanks for stopping by.

    Cheers.

  36. dividenddad,

    I think F.A.S.T. uses some blend of TTM and forward earnings, which is a bit different than everyone else. For purposes of consistency, I always include TTM P/E ratios here. The TTM P/E ratio is roughly 18, which compares well to its five-year average P/E ratio, the broader market, and peers. Morningstar has the forward P/E ratio at 18.5, which seems about right based on H1 numbers, so I’m not quite sure where that 19.6 is coming from.

    The DDM analysis I came up with jives with Morningstar, but S&P Capital IQ seems to possibly jive with F.A.S.T. As always, valuation is subjective, but if you don’t think it’s attractively valued here I would definitely take a pass. 🙂

    Best wishes!

  37. Jason,

    I’ve been buying UL this year as well.

    One annoyance with non-us dividend stocks, though: the div payment seems to bounce around from Q to Q because of changes in the exchange rate. As all DG investors, I love a steady and growing dividend (in dollars!).

    Still, like you, I like the product mix. It always feels a bit like paying myself when I buy that Cherry Garcia now!

    IB

  38. Can’t say I disagree with the buy since I just purchased UL as well. I may even add to it sooner than later.
    In related news I heard on the radio that UL is suing another company over a product that uses the word “Mayo” on it. Crazy stuff.

    Cheers,
    CD

  39. IB,

    I hear you. I’d also prefer a consistently increasing dividend YOY, and one that is steady from quarter to quarter. I’m okay with a couple positions that deviate from that due to currency effects, but I’m glad the bulk of my portfolio is in US stocks where the payouts are more consistent and predictable.

    Yeah, I do enjoy some Cherry Garcia from time to time. My favorite ice cream brand is actually Häagen-Dazs, and my favorite flavor is White Chocolate Raspberry Truffle. But I’ll have to stick to B&J ice cream until I own a slice of Nestlé and/or General Mills. 🙂

    Thanks for dropping by!

    Cheers.

  40. Captain,

    I hadn’t heard about that. I think Kraft actually calls their product “Kraft Mayo”. So maybe that’s what’s going on? I find that weird because Hellman’s lists the product as “mayonnaise”. Sounds like useless litigation to me, but I’m no lawyer.

    Thanks for dropping by. Glad to be a fellow shareholder! 🙂

    Best regards.

  41. Great buy, Jason.

    I picked up 1000 shares of UL at $39.43 so basically at nearly the same level.

    Have you done an analysis of GSK? I’d like to read about your take on this company.

    Cheers and keep rolling,

    Mike

  42. Mike,

    Nice! 1,000 shares? I might meet you there in about 30 years. 🙂

    I took a quick look at GSK a while back, and I didn’t like the lack of diversification. It seemed to mostly be a pharmaceutical and biotechnology company, but their recent JV with Novartis seems to be changing that. Could offer a lot to like with that. Overall, I just preferred JNJ for a number of reasons, but mostly due to their diversification across the healthcare industry.

    Thanks for the support. Great job on the big position there with UL!!

    Best wishes.

  43. DM,
    I’m thoroughly enjoying following your journey to financial independence. I just had my first month of $200 in dividends, so I’m hot on your heels to my own financial independence.

    It was interesting to see that another long-term dividend-focused investor, Tom Gayner at Markel, has been adding UL to the portfolio he manages, according to the most recent 13F. Great minds do think alike. I’m adding small chunks of the company myself through my Loyal3 account.

    Keep up the good work,
    Chris

  44. Great buy! What are your thoughts on the slow revenue growth in the past decade? UL went from $40b to $49b in sales. Book value per share is flat too.

  45. Chris,

    Thanks for dropping by!

    Glad you’re enjoying the journey. But I’m even happier that you’ve started down your own path. Congrats on your first month of $200 in dividend income! You’re definitely hot on my heels. 🙂

    I have a lot of respect for Tom Gayner. Seems like an incredibly intelligent guy. Haven’t followed his recent investments, but it does look like UL is on the list. I see TRV and CB are some of his recent purchases as well, and I regret not buying TRV when I initially looked at it and wrote about it. Can’t win them all, though.

    Appreciate the support. Keep up the great work over there!

    Best wishes.

  46. Henry,

    Well, I don’t see real impressive revenue growth among the big competitors either. Not that it’s the ultimate indicator of growth, but it’s always nice to see healthy top line growth along with bottom line growth.

    UL has grown revenue by a CAGR of 2.21% over the last decade.
    PG has grown revenue by a CAGR of 4.33% over the last decade.
    NSRGY has grown revenue by a CAGR of 0.70% over the last decade.

    So UL is in the mix there, but I don’t think any of the bigger players have increased revenue at extremely impressive rates. Colgate has more impressive revenue growth, but it’s a much smaller company with a much more expensive stock.

    As far as book value goes, I didn’t break out the balance sheets, but Morningstar shows that BV per share has more than doubled over the last decade.

    Thanks for dropping by!

    Cheers.

  47. Hey DM,
    I really like this purchase and I agree with you about being able to find fair valued stocks in todays market. For example BP, VIAB, CVX, and MCD seem fairly valued to me. I will also be picking up some more UL this week. Thanks for write up.

  48. Great purchase Jason! My finance had a sore throat today, so I whipped up some Lipton tea for her 🙂 Love this company and added about $600 to my own position today via Loyal3. I’m hoping the price stays within a dollar or so by the time the transactions go through. Keep at it and I can’t wait to see what you purchase next.

    Best wishes,
    Ryan

  49. Jason –

    My uncle sent me your way in June and I must say, my will for financial independence is fierce, despite the long bridge that still must be crossed to reach it. Since September I picked up RDS.B and CVX at the very bottom of the recent spell, got lucky there. Some GE. I have held a very small position in GM since the spring time (getting crushed there). I have added to a position in DIS that I have held since before I was 10. It is crazy to go from an initial share price of $27, to the $89ish I picked it up at yesterday. Looking forward to getting this journey ramping up quick. Getting married myself in January. Enough of me.

    My question to you is this, would you be up for adding a piece in regards to how your investments change your cost-basis, in all your recent buys posts?

    I am curious to see whether you care about averaging down, or just solid company picks. With a portfolio of 5 stocks I am at the diversification stage, but eventually would like to add to all my positions.

  50. Nice buy Jason…We’ve been watching UL for awhile. I would like to initiate a buy before the end of the year and also hoping to get in under $40. Stock price has floated around $40 for at least a few weeks now so I hope I don’t miss the train.

    Hoping to become a fellow shareholder very soon…cheers to future dividends from a solid company! AFFJ

  51. Mongrel,

    I see you’ve been picking up UL quite a bit recently. Glad to be on the same page here. I don’t think it’s an absolute steal, but it’s at least fairly valued. And one could do a lot worse than pick up equity in a high-quality company like UL at a fair price with a yield this high. 🙂

    Thanks for dropping by!

    Best regards.

  52. JAL,

    Thanks for dropping in. Glad your uncle sent you my way! 🙂

    Sounds like you’re on the right track over there. Great companies there. I’m sure you’re awfully glad you bought into DIS when you did.

    As far as your question goes, I wrote an article a little while back specifically discussing that. I hope you find some value in it:

    https://www.dividendmantra.com/2014/09/price-and-value/

    Congrats on the engagement! I’ll be joining you in the world of marriage not long after that.

    Stay in touch.

    Best wishes!

  53. Ryan,

    Oh, I appreciate the use of Lipton. 🙂

    Glad to be a fellow shareholder with you here. Especially since I know we’re both long-term shareholders. It’ll be interesting to see where this investment takes us a decade or two from now. I think we’ll look back on the decision to buy here as a great choice.

    Keep up the great work over there. You’re having a great 2014!

    Cheers.

  54. AFFJ,

    There doesn’t seem to be any catalyst on the horizon, so you’ll most likely be able to buy in before it rebounds. I’m honestly a bit surprised it trades down here, but I’m certainly glad to be in a position to take advantage.

    Would love to have you on board here. Fantastic brands, great management with a lot of corporate responsibility awareness, large yield, growing dividend, great international exposure, good product diversification, and lengthy track record. Not much to dislike. 🙂

    Thanks for stopping by!

    Take care.

  55. Have you heard of the investing site http://www.motifinvesting.com? I just read an article on Yahoo about this site. You can create up to a 30 stock portfolio for $9.95 trade commissions. Much like an ETF, but you actually own all the stocks in fractional shares. A great way to start an investing portfolio.

  56. Hi Jason

    Another good pick (and also another share I hold, and looking to top up).

    As you say, dividend in GBP & USD can fluctuate as they are based in euro’s so can be impacted by currency changes (euro is weak right now, so dividends in GBP are lower than they have been, but still rising in euro’s).

    I will have to update my portfolio, and then you can see if there are any more UK shares that I hold that you may like to buy :-). Diageo may appeal, but yield is a bit lower although their profits should continue to grow in developing markets to support decent increases).

    Best Wishes
    FI UK

  57. As always, it’s fun to read what other dividend income bloggers are buying. UL, as I have seen, is a very popular pick these days. I have been adding to my UL too last month with 25 new shares in my ROTH. Mid-November is already upon us and I haven’t pulled the trigger yet on anything this month. Still a couple weeks to go with BNS as my top pick along with UL, TD and RY. We’ll see how things go in the coming days. Thanks for sharing and happy to be a fellow shareholder.

  58. Nice buy DM!

    I bought shares in Unilever back in April, and I hope to be a shareholder for a long time. I will undoubtedly extend my position in them at some stage as I want my portfolio to have a foundation of defensive companies just like Unilever.

    Bring on those Divis!

    Cheers
    Huw

  59. Hi DM

    It really feels good having to purchase a stock you have fundametally research that remains solid at a lower price. It almost feels like give me the bargain ecstasy right away.

    Unilever is unilever and they are a conglomerate in their own industry. You definitely saved a few hundred dollars there purchasing at current price as compared to last month.

    B
    http://Www.foreverfinancialfreedom.blogspot.com

  60. I don’t know much about its financials, but seems to be be well diversified on products and geography. It has the risk all spread around the world, so it has all to continue to be a happy story. And the yield is very good!
    Keep on!

  61. Another Unilever shareholder here :). I’m not sure if I made the right decision by buying the Unilever NV shares on the Dutch stock exchange instead of Unilever PLC. The NV shares have a 15% dividend tax at the source but they’re trading at a 3.5-4 percent discount versus the PLC shares (US is a bit cheaper than UK). Excluding all other factors, it would take up to 7 years to recoup the share price difference between the PLC and NV shares based on the 15 percent dividend tax difference. And that’s assuming the UK doesn’t introduce a dividend tax in the near future.

  62. Jason, thanks for your site and congrats on your accomplishments toward FI. Your story has inspired me in many ways and given me lots of ideas. I understand the disadvantages of additional dividend yield volatility inherent in ADRs, but one has to like the strength of the dollar since July! With the USD up about 10% since then, it’s put all your European ADRs on a 10% off sale! I think that is a pretty nice factor given the relatively high valuations we are seeing in the US.

    I own BP and am thinking of picking up some more… it is throwing off basically a 6% yield at the current dividend yield, wow. You’ve gotten me interested in UL, but I need to do more research on the company before pulling the trigger!

  63. Nevermind, seems I was focusing on the wrong metric. For each 1000EUR invested, the NV shares return 30.91EUR in dividends whereas the PLC shares return 34.91EUR. Looks like I bought the wrong shares.

  64. David P,

    I’ve heard about Motif. I looked into a bit and it seems a little gimmicky, but also a nice way to build an instantaneous portfolio via a “motif” for little money. My problem, however, is valuation. I doubt I could come up with 30 stocks (or even 20) right now off the top of my head that I’d want to buy at current prices, and I’d probably have an even more difficult time coming up with a portfolio’s worth that is widely diversified across multiple sectors. So buying a bunch of stocks at one time to form a motif seems like a distraction away from focusing on fundamentals and valuation so as to build out a portfolio instantaneously.

    That being said, if you want to build your own customized fund for little money right from the outset, then it seems like an easy and cheap way to do that.

    Cheers!

  65. FI UK,

    Thanks for dropping by. Always nice to hear some perspective from the UK. 🙂

    Diageo is another company I watch. It dipped not long ago, but, unfortunately, so did a lot of other stocks at the time. It just didn’t make the cut, yet. Hope to change that at some point and become a fellow shareholder!

    Take care.

  66. DivHut,

    Happy to be a fellow shareholder as well.

    I think the valuation is solid here. I hope to build this out to around 100 shares or so over the course of the next few months or so, depending on price, capital, and competing opportunities.

    The Canadian banks seem solid as well, though. The exchange rate sometimes causes some fluctuations there, but I think BNS is now trading near my cost basis again. Wouldn’t mind the opportunity to average down on that one.

    Happy shopping!

    Take care.

  67. Huw,

    Bring on those dividends, indeed! 🙂

    Glad to be on board with you here. It’s about as blue chip chip as it gets, and I also love the defensive nature. I’ve been looking at my portfolio lately, and I want to continue to add to defensive companies like UL. I love stable businesses where the visibility is pretty clear.

    Keep up the great work over there.

    Best regards.

  68. B,

    Definitely. If you do the research and think a stock is a good purchase, then it makes sense to double down or triple down in short order. I have a history of doing this, buying stocks in chunks over short periods of time. Earlier this year, I purchased Deere twice in two months, as I thought the value was there (and still do).

    Thanks for dropping by! Appreciate the support.

    Take care.

  69. Nuno,

    Well, some companies have more inherent risk than others, but I happen to feel that, all considered, UL is probably a low-risk stock. Currency headwinds are certainly giving them some fits right now, but they’re far from alone on that front. I think that stuff tends to even out over the long haul.

    Appreciate the kind words. I hope all is well with you over there on your side of the pond. 🙂

    Cheers!

  70. ThomasDV,

    Good point. The UN shares do trade at a discount to UL shares. I chose UL over UN due to the tax treaty. I’d probably end up ahead with the UN shares, but I’d prefer all my income up front. I plan to eventually earn fairly substantial dividend income, and the more I can avoid tax issues, the better.

    Cheers!

  71. Tim,

    Appreciate the kind words very much. Glad you’ve found some inspiration here! 🙂

    Yeah, some of the foreign stocks have become a bit more attractive lately when factoring in the fluctuations due to currency effects. I’ve noticed that quite a few of the Canadian stocks have come down as well.

    I’m actually thinking about BP lately as well. It’s trading slightly below my cost basis now, and that yield is pretty amazing. It’s down over 6% over the last trading week, which just adds to the appeal. It’s a high-risk stock, and I don’t want to go too crazy there. But I might have room for a little more here. If I didn’t already own 80 shares, however, I’d be all over it.

    Happy shopping over there!

    Best wishes.

  72. Nice analysis and good luck.An interesting topic as well as explanation would be to discuss buying a foreign stock like this and its tax ramifications for the average U. S. Investor. Companies ike BP, Royal Dutch Shell, Unilever, etc., are all worth looking at but many investors have shied away from foreign investments due to tax considerations and are you really getting the yield here that they report. Thanks.

  73. Hi Jason, what makes you wait with a buy in NOV? 🙂 I read the very interesting Daily trade alert article about it. Do you feel that NOV would be a too aggressive buy, that the oil price will continue the down trend or that you want a more defensive buy in UL? Thanks for you writing!

  74. Jason

    Another good write up (as they always are) and nice selection of UL as the new position. Sitting on a limit order @ $40 and hoping to join you in UL. As a side note I am still holding out on a limit order for AMNF @ $1.80.

    Good Investing
    DJ

  75. Just noticed that you purchased just after the ex dividend date?
    Is that intentional as prices often go down after? Or just coinkydink?
    Newbie here so sorry if dumb question!

  76. Hi Jason,

    It looks like you missed out on the recent dividend payment, since you pulled the trigger on this a week too late.

    How do you find out what the ADR fees will be prior to buying a stock? Also, do they deduct it from the stock price, dividend, or from cash in your brokerage account. Is this deduction done monthly or quarterly?

    Joel

  77. Hi DM,

    Great buy. Its seems to be a coincidence but I did buy UL to yesterday.
    Good company, solid moat and a good dividend.

    Cheers,
    G

  78. So far have not purchase any thing in month of November, but getting itch to buy. I am watching BBL and OKE. I currently do not have any positions in these two stock.

    Do you think BBL and OKE is attractive for small position at current level?

    I am already familiar with BBL, but I need to do research on OKE this weekend.

  79. Sup Jason,

    We must be on the same wavelength because I just added to my UL position the other day as well. Now it’s time to just sit back and let it do it’s thing.

    But the reason for my comment today is to get your take on this – “Warren Buffett unloaded Berkshire Hathaway’s entire 4.7 billion dollar stake in PG?!?!” What the heck does he know that we don’t??? I don’t like it.

  80. Nice purchase DM. I initiated position in UN last month and I am looking to add to my position as well. But also noticed that Morningstar as reduced the fair price since last month and the rating has also dropped because of this. Any idea why?

  81. First of all, thanks for a great and inspiring blog!
    I have been eying Unilever for a while and found the company to be a worthy candidate to my portfolio. I have calculated EPS growth to on average 10% per year and the dividend growth to on average 15% per year during the period 2004-2013 which is impressing.

    The company also has a wide moat according to Morningstar thanks to its broad portfolio of brands, bargain power through scale as well as pricing power.
    I agree with you on that the exposure to emerging markets (roughly half of the company’s revenues) lay the foundation for promising growth to come. The cash flow is strong as well.

    However, with that said, I’d like the stock to get a bit cheaper before (don’t we all) I consider to add the company to my dividend portfolio.

    Best regards

  82. wtd7576,

    That’s a great suggestion!

    I think I’ll put something together in short order specifically about foreign stocks and the benefits/drawbacks. 🙂

    Thanks for dropping by.

    Best regards.

  83. swedendividend,

    NOV seems very attractive to me. Oil has come down substantially, but so has NOV’s stock. Furthermore, the recent buyback announcement comes just as the stock took a tumble and orders are slowing down, which seems to be great timing. Of course, if the stock tumbles even more from here, then the buyback becomes even more accretive for EPS.

    NOV’s growth over the last 10 years is nothing short of stunning, in my view. The dividend is well-covered to the point where growth could permanently halve and it would still be a solid investment here.

    I may have bought shares today. 🙂

    Cheers!

  84. DJ,

    Thanks so much for the compliment. 🙂

    I hope those limit orders hit for you. Those would be great prices, especially AMNF. I’ve been watching that particular stock like a hawk, but I just don’t know if I want to average up here on a small cap food company. It’s firing on all cylinders, though.

    Good investing to you too!

    Take care.

  85. Bill,

    Well, I purchased my initial lot before the ex-dividend date. This one came after. It all depends on my cash flow – I receive some cash flow at the beginning of the month, and some after. So I didn’t really have the cash flow to go out and purchase another 30 shares last week, before the ex-dividend date. That’s mainly because I invested well over $4,000 last month and kind of tapped the well dry. I was coming up with lint! 🙂

    No dumb questions around here. Feel free to ask away!

    Cheers.

  86. Joel,

    I discussed the ADR fees in the last article on UL. UL deducts $0.005 per share per quarter off the dividend for the costs of administering the ADR program. I’ve noticed some (most) ADRs also get a penny or so knocked off from the dividend by the domestic bank for custody fees. I haven’t personally received my first dividend from UL yet, so I’m not sure if that’ll be the case and/or how much. I’ll try to drop a note on that on the next dividend income report that includes the first UL dividend. 🙂

    Edit to add: The dividend published by UL that you see elsewhere (such as Morningstar) already includes the fee. So the full $0.3637 is what you’re looking at, before any bank custody fees.

    Best regards!

  87. AJ,

    Well, I purchased BBL not long ago at right around this same price. So I’m a fan there. It’s cyclical, however. So that’s something to be mindful of. But I can’t see how the company isn’t profoundly more profitable a decade from now and spitting out more dividend income.

    OKE is one I honestly haven’t really taken a close look at it in a while. I would recommend taking a look at OKS to really decipher the health of OKE, since OKE is the GP. You’ll want to due some DD there, especially on the distributable cash flow at the MLP level. I’ll have to get a good look at it myself here again pretty soon to see if I want to add, but I’m already pretty heavy on pipelines (which is probably why I haven’t really looked strongly at the valuation in a bit).

    Cheers!

  88. DGJ,

    That’s a good question. I assume it’s due to the Q3 results. That’s just an assumption on my part, but it’s the only thing I can think of. Either way, there’s still a pretty solid margin of safety, if you think that number is accurate. Of course, one has to always take those numbers with a grain of salt, as there is no exact science with valuing stocks.

    Cheers!

  89. Nice. Let us know how your brokerage account handles this ADR fee for the domestic custody fee. If that fee is deducted quarterly(off the dividend) then I’m ok with that. If it is deducted monthly, then I might have to keep a few dollars in my brokerage account to allow for this monthly deduction.

    Joel

  90. LTI,

    Thanks for stopping by. Glad you found the blog, and enjoy it thus far! 🙂

    UL’s growth has actually been pretty solid, and stacks up very well against peers. I actually calculated its CAGR in EPS as over 11% from 2004-2013, which, I believe, is pretty impressive for a defensive stock like this. Even if that growth rate slows down a bit permanently it will still be a solid investment.

    I’d love to get it cheaper as well. I’m hoping it drops a good amount below $40, which would allow me to average down. And that’s certainly possible if the broader market drops and/or the dollar continues to strengthen. We shall see, but I’m keeping my fingers crossed. 🙂

    Take care!

  91. Geblin,

    Glad to have you on board here! 🙂

    I hear you all the way. Great company, solid track record, excellent brands, fair valuation, and generous dividend. Not much to really dislike here. I hope it drops a little so I can add more.

    Thanks for dropping by.

    Best regards.

  92. Joel,

    I’ve never heard of or experienced a monthly fee like that. They always, in my experience, get lopped off of the dividend.

    But I’ll share my experience with UL when it comes around. 🙂

    Cheers!

  93. Yeah, I guess I just don’t understand why he would rather own Duracell than Proctor and Gamble. The article states they reached out to Buffett’s assistant to find out why and they haven’t heard back yet. Sounds ominous.

  94. Stugats,

    Seems like a win-win to me, but that’s just my view.

    Buffett probably feels his PG shares are overvalued here, and this allows him to exchange them away for a brand he has confidence in tax-free. I can’t say I think PG is so overvalued that it warrants selling, but maybe he sees something I don’t.

    Meanwhile, PG gets to unload a business that is in secular decline in exchange for some cash and receiving some of their shares back. I happen to think PG did well here if they got the price they were looking for. A lot of consumer electronics these days use rechargeable batteries, so you have to wonder what Duracell looks like in the future.

    I’m sure there’s more to it then that, but just how I view it.

    Best regards.

  95. I’ve noticed you generally use a 10% discount rate when performing your DDM valuations. Why do you use 10%. Generally the discount rate is (as i’ve understood it) a rate that represents what you would be getting on the money if you had it all now. (I know of no account that will get me 10% .. which is why we’re all here) Now its also true that you can’t value an asset using this model if the growth rate exceeds your discount rate, and since good companies tend to grow dividends above 5%, you have to pick something bigger…so is 10% just a value that “seems to work” as far as matching valuations in the market, or is there some other reason you use 10% as a discount input?

  96. I just read some info on ADRs from my brokerage account. You’re right about ADR fees being deducted from the dividends. For ADRs that don’t pay dividends, brokerage firms can charge you a “pass-through fee” and deduct if from(I’m guessing) any un-invested cash that’s sitting in your brokerage account.

    If anyone out there has a Non-Dividend paying ADR, please let us know how the pass-through fee gets deducted.

    Thanks,
    Joel

  97. jman,

    Good question there.

    I use a 10% discount rate because that’s the expected rate of return. I’m basically aiming for 10% total returns when I use that discount rate. That’s actually a fairly high hurdle, as it’s higher than the long-term stock market return.

    A business is ultimately worth the sum of all future cash flow it can provide. The DDM analysis tailors that to dividend stocks because it simply substitutes cash flow for dividends. You’re basically trying to estimate the entirety of all future dividend income and then discount that back to today. You’re discounting that back to today to account for the time value of money.

    The discount rate is your expected rate of return. You can think of that as opportunity cost, as in what you can get elsewhere as your hurdle. But you’d have to factor in risk. You can’t just say “I’ll use 2% because that’s more than I can get down at my bank.” There’s a lot more risk in equities than your local CD. I feel 10% is an appropriate long-term return on my money, but you may expect something else. As such, you’ll want to use your own discount rate for what you perceive to be the appropriate cost of your capital.

    I hope that helps!

    Best regards.

  98. DM:

    I know you (or anyone for that matter) cannot give perfect stock advice. However, if you were deciding on whether to enter or stay out of the market today, which way would you lean and why? This blog (and subsequent research) has seriously inspired me to begin dividend investing, but with the market being in steady incline in recently years, I am hesitant to enter in now. Thoughts?

  99. Great pick. I picked up 31 shares last week. Got a little bit better price than you at $40.07. Though in 20 years that thirty cents won’t matter. This added to my small initial position that I started in a Loyal3 account. Love shopping and a sizable chunk of my purchases at the store are Unilever products. Getting some of my money back.

  100. Tim,

    Right. It’s tough for me to give advice on something like that, because it really depends on so many factors.

    However, I’ll tell you how I look at it. I wrote an article a while back that kind of answers your question in regards to investing new capital when the stock market is breaking through new records:

    https://www.dividendmantra.com/2014/06/why-investing-new-capital-during-all-time-market-highs-doesnt-scare-me/

    And I wrote an article on what I would do if I were starting all over again:

    https://www.dividendmantra.com/2014/05/if-i-were-starting-all-over-again/

    Basically, my answer is this: I’d do everything the same all over again. Even if you start investing, say, $2,000 per month for six months straight and build up a portfolio of $12,000, you’d be off to the races. But what if the stock market corrects by 20%? Well, your portfolio, assuming it declines by the same amount, would drop by $2,400. You’d be able to power through that with just one month’s contributions. Besides, you have to be thinking about where your dividend income might be in a decade or two, not what’s going on with the stock market from day to day.

    If you can’t stomach 20%, 30%, or 40% losses, you probably shouldn’t be in stocks at all. And that’s regardless of where the market is at, because, frankly, it’s probably on the upper end of fair value right now. But the stock market is full of thousands of stocks. It’s said that it’s a market of stocks, rather than a stock market, and I believe that. Some are still attractively priced here, or I wouldn’t be continuing to buy.

    I’m often thinking in terms of where I want to be 10 or 20 years from now, and I think that’s an important perspective to maintain when we’re talking about long-term investing.

    So I suppose you just have to have an honest discussion with yourself, because I highly doubt we’ll be talking about today’s S&P 500 index level 20 years from now, just like we’re not talking about the S&P 500 index’s level back in early 1987.

    I hope that helps!

    Best wishes.

  101. Chad,

    Nice buy there! I think we’re getting a pretty strong value here, all things considered. I can’t see how UL isn’t substantially more profitable company 10 years from now.

    I’m also enjoying the fact that I can now use Dove soap with impunity. It always bothered me that I was using a Unilever product, but it was the only soap I could really use. My showers are more enjoyable now that I own a chunk of the company. 🙂

    Cheers!

  102. Hi Jason,

    Nice pick up. UL is a forever stock in my opinion. I thought you were going to pick up some BRK-B shares this month. I believe you need at least 1 share to get into the annual meeting. Will you be buying BRK-B this year?

    Thanks
    Frank

  103. Just FYI they cited exchange rate as the reason for the change to fair value and that it would continue to fluctuate as exchange rates did…I guess your estimate changed since your previous UL article also when the latest dividend was announced and was lower than the previous in US $

  104. Frank-NY,

    I’m with you, bud. I plan on holding this one for a long, long time. Of course, I plan the same for pretty much every position I enter. 🙂

    That’s funny you mention the BRK shares. That was brought up quite a few times, but I’m pretty certain that’s not the case. You simply need “credentials”, or a ticket to go. Berkshire releases a fair amount of tickets to the general public, beyond what shareholders are allotted.

    But to answer your question, no, I won’t be buying any Berkshire.

    Thanks for dropping by!

    Best regards.

  105. pacer45,

    Ahh, I didn’t look into it much. But it seems it’s actually not the currency fluctuation that changed the fair value, but the modest top line growth (which was a key feature of Q3 results).

    “The fair value decrease reflects more modest fiscal 2014 top-line expectations.”

    I just assumed that’s what the decrease was related to due to the timing (since the dollar has been rallying for a while now), but it looks like that’s what it was. Although, they do state that they’ll review it from time to time due to currency fluctuations (as they should and most likely already did).

    Best wishes!

  106. DM:

    For the more inexperienced investor just starting out, what are your thoughts on Vanguard Dividend Appreciation ETF (VIG). I am a newbie to investing and not yet confident in my ability to value individual stocks. As such, might this vanguard fund (or something similar) but a safer method for us inexperienced investors to get into the market? What are the disadvantages of taking this approach?

    Thanks!

  107. Hi Jason,

    I thought you might pull the trigger with this one, since the price has been stable. If it stays that way, I’ll probably buy some more next month. And I’m loving the new B&J flavors we got here in Finland, so you’ll see some revenue growth from here, haha :D.

    I’d loved to read more on your thoughts on the currency issue with dividends from European companies. This is an everyday problem from us in Europe investing in US stocks.

    My broker has a campaign going on with fees for US stocks “only” 10€’s (normally 15€), so this allows me to diversify my portfolio with smaller purchases. I’m looking at COP now and will probably initiate a position next week when additional funds roll in.

    -Ville

  108. Landi,

    Thanks for taking the time to comment. Remember, we’re all inexperienced until we learn. 🙂

    I think investing in something like VIG is okay. Just keep in mind that you’ll probably be paying a lot more in fees over the long term and the income/income growth likely won’t be what you could achieve on your own. In addition, I’ve never heard of any funds considering valuation. But those aren’t necessarily bad things if you’re looking for someone else to run your investments for you. Not everyone enjoys the intricacies of investing, which makes some of these funds excellent vehicles for building wealth. As a side note, I’ve also heard good things about SCHD.

    I actually compared VIG to dividend growth investing a while back, if you’re interested:

    https://www.dividendmantra.com/2013/04/why-i-vastly-prefer-dividend-growth/

    Wishing you much luck. 🙂

    Take care.

  109. Ville,

    Appreciate any additional revenue from over there in Finland! I don’t have ice cream very often, but I’m actually thinking of buying a pint this weekend. Maybe some Phish Food. We’ll see. 🙂

    Currency issues aren’t something I really worry about. Currencies fluctuate up and down. The dollar has been particularly strong over the last few months, but who’s to say how long that will last? And it goes both ways. UL’s stock recently became cheaper, but the dividend is a bit less now with the exchange rate. I don’t really focus on this too much, unless opportunities (like UL) find their way onto my radar. Even then, I’m still looking at long-term growth rates to try and model some kind of valuation.

    Glad you’re getting a break there on the fees. Those are still kind of high, but I understand that’s somewhat common in your market. We Americans are spoiled a bit in regards to low fees.

    Thanks for dropping by!

    Best regards.

  110. First November buy, Initiated position in BBL close to $51 today in pre-market. I don’t buy into commodities companies other then oil, but I see value in BBL.

  111. AJ,

    Nice move there! There’s a number of ways to look at the valuation, but it seems pretty compelling to me here. I notice the P/B is at a historic low here, and the yield is near an all-time high.

    Glad to have you on board as a fellow shareholder. I never intended for BBL to be a large position, but I wouldn’t mind adding a little more here. We’ll see if it stays this low into December.

    Thanks for sharing.

    Best regards!

  112. Jason,

    It happens with me too. I get bigger position in certain stocks when it keeps dropping and I keep adding due to its valuation to the current market.

    If the company is must own (like my top 20) then I keep the bigger position in them (even if its bigger then I intended), but with other companies I trim to my desire position and take profit (like my bottom 40 to 50) holdings.

    I don’t sell much but when the position get bigger in my last 40 to 50 holdings, I trim and take profit when it goes up.

  113. AJ,

    I don’t trim profits, but I share your thought process regarding stocks where the conviction is higher. I bought lots of PM and JNJ when they were a lot cheaper, even allowing the weightings to become pretty far out of whack for a while (they still are). But I was okay because there’s a lot of conviction there and I think the future earnings visibility is fairly clear. BBL, on the other hand, is a bit different there as a commodity producer. So you have to weigh those decisions out a bit, which is really just part of the fun. 🙂

    Cheers!

  114. DM,

    3 questions:

    1) Typically, how do strong/mature dividend stocks react during a large buy off and do they typically take years to get back to the level they were trading post market drop. I notice they seem to have slower (but steady) growth over the long term, but was wondering if you could shed some light as to how long they typically take to get back to pre-market drop levels. I am just getting started and I know the market is high now. I’d hate to buy in only to ride a large down turn that would take 5 plus years to recover from. I know you cannot predict the future, but was curious what trends in this regard you may have noticed over the years.

    2) My second question is the following: as I mentioned above, I am just starting out and would like to invest roughly 15k. Would you recommend a core set of dividend stocks that every dividend portfolio should have. I intend on investing or the very long term.

    3) I notice you own PM and Altria…so called “sin” stocks. You obviously have no reservations about investing in tobacco companies, but other on the web feel different. I reason with the sin stock people. With all the health consequence associated with smoking and the supposed fact that number of smokers are decreasing each year, why should I feel safe about owning PM and Altria long term?

    Thank you! Love your blog!!! and recommend it to everyone I know!

    Ehan

  115. Ehan,

    Appreciate the support and the recommendations! 🙂

    Your questions are pretty tough for me to answer, but I’ll do my best.

    1. Most of the well-known dividend growth stocks typically fall much less than the broader market during a major correction. Just taking a look at the recent financial crisis, we can see the S&P 500 index fell by 40.52% from September 5, 2008 to March 27, 2009. Meanwhile, PG fell by 30.39%; KO, 21.55%; and JNJ, 27.64%. That isn’t accounting for dividends, but it gives you some context. That’s one of the more attractive aspects of this strategy, that you have these high-quality companies still doing their thing, regardless of what’s happening in the stock market. Furthermore, each continued to pay and grow dividends. As far as what they’ll do years after the fact, that’s really more company-specific. Over the short-term, companies can react like the rest of the market, but long-term performance is driven by earnings. So each company’s stock will perform differently, and that’s not something that’s really possible to pontificate on in general terms.

    2. Again, tough to say. That really depends on your income needs, risk tolerance, time horizon, etc. However, if it were me and I were starting out today, I’d probably be looking at stocks like GE, KMI, UL, CVX, PM, and KO to varying degrees. Those are just some names off the top of my head. I don’t think there are any steals out there, but $15k will probably be a relative drop in the bucket by the time you’re all done, so the key is really to start building your cash flow out.

    3. I’m not here to sell anyone on PM, MO, or any other stocks. So you have to go with your gut there. Tobacco is a legal product, and people have the choice as to whether or not to buy tobacco products. I have no desire to curb other people’s choices in that regard, or limit my potential profits therein. That said, I think almost every stock out there could be classified as a “sin” stock in some way or another. Defense companies build weapons that kill people. Oil companies harm the environment. Food companies contribute to obesity. It goes on and on. I think if you take it to the nth degree you’ll never find a company you can invest in, so you’ll have to find your comfort zone.

    Thanks again for stopping by!

    Best wishes.

  116. Very solid buy Dividend Mantra. UL is on my list and I’ll probably pull the trigger once I have some more capitals in the RRSP account so I can avoid paying the 15% withdraw tax. 🙂

  117. Learned something new! I have shares of UN and never realized they also had UL shares, doh! Well I’m still learning the game, but thanks for helping me avoid a tax nightmare and profit loss. I’m selling the UN shares for a profit and buying some UL shares instead. Thanks again.

  118. Dividend Mantra:

    I have a long time friend investing $75k into 4 higher yielding dividend stocks. I’ll spare you the details, but he insists that his strategy will pay off. He plans to keep them basically forever with the thought process that the dividend stream will eventually cover his entire initial invest while also providing him passive dividend flow for life??? Is this possible with a “portfolio” of 4 or so stocks? Higher yielding stocks typically grow between 7%-10% per year over the long term from my understanding, so I do not understand how this can possibly work?? Am I missing something? Had to ask because he and I were debating this for an hour over lunch today and it goes against everything I’ve heard about investing.

  119. Mike,

    Impossible for me to say how that will work out for your friend. It’s certainly a strategy I wouldn’t want to take on. Investing in high-yield stocks is typically very risky, so sticking to just four of them creates an extremely high-risk scenario/portfolio/strategy. High-risk sometimes correlates with high-reward, depending on the company. But I wouldn’t want to invest in just four stocks, regardless of yield and/or risk.

    I aim to take on the least possible amount of risk with the greatest possible income and income growth by focusing on high-quality dividend growth stocks. Risk isn’t fun when it swings the other way. Some have pointed to ARCP as a great recent example, though accounting issues aren’t limited to just high-yield stocks.

    Cheers!

  120. HMB,

    I don’t know if you need to sell your UN shares. You can always just reclaim the 15% at tax time if you’re a US investor. There’s a slight discount for UN shares as well, so you can probably just keep rolling there. I prefer to have all of my income up front, however, so I bought UL.

    Thanks for dropping by!

    Take care.

  121. What I always say about owning a sin stock is to invest, collect dividends, capital appreciation and then use the profit and dividends to donate to your favorite anti-smoking cause.

  122. UNLVF is a rock solid company, but it has grown very, very slowly over the last couple of years (EPS) which means they will need to increase their payout ratio for future dividend raises. Also, you write that the P/E is in line with its five-year average, but according to Morningstar the five-year average is 15.6, which means the current P/E is nearly 20% higher than the 5-year average.

    As I said, rock solid company, but slow growth over the last decade, and critical valuation in my eyes.
    Good luck, though!

  123. UL, good choice. I added some of that last month and if the price keeps hovering around 40, I’ll probably add some more.

    I added more AFL this month and lowered by cost basis a bit.

  124. Justin,

    Glad to have you on board with both UL and AFL. I think both are really high-quality companies. Gotta love Aflac’s dividend growth streak, though the recent increases have left a bit to be desired. Either way, it’s more than most people get at their day jobs! 🙂

    Thanks for stopping by.

    Best regards!

  125. Hey Jason,

    I’ve been reading your blog for most of the year now with much interest. Thank you for keeping up a great blog.
    I’ve started investing for dividends myself this year, and as a newbie, I have a couple related questions for you.

    1. 51 holdings is a lot to keep track of. How do you know when your holdings (or any future holdings) are trading at fair/great values?

    2. Similarly along those lines, how often do you review your holdings to make sure that the companies themselves are still worth a place in your portfolio?

    If you’ve previously answered these questions elsewhere on your blog, feel free to just send me links. Thank you, from an avid reader. Oh, congrats on the upcoming marriage by the way! 😀

  126. Josh,

    Thanks for your readership. I really appreciate it. 🙂

    Those are good questions. Most of the companies I invest in are major companies. My largest positions are JNJ, PM, KMI, NSC, and PEP. These are fairly large companies that don’t really require a lot of oversight.

    As far as valuation goes, I can check professional analyst opinions on almost any of my positions in just a few seconds, or as long as it takes to load a webpage. So if there appears to be a large difference between its current price and fair value, I’ll generally go a little further. But the longer I do this, the more I have a generally good idea in my own head about what’s trading where and how much that stock might be worth. I suppose that just takes time and/or interest, but that’s where I find myself. I have a good idea of what I paid for each of my 51 stocks off the top of my head, where they’re currently trading at, and what’s happened since I last purchased shares. Furthermore, I get email alerts on earnings reports for all of them, which allows me to gauge valuation on an ongoing basis, though that kind of thing doesn’t change radically over an extremely short period of time.

    I hope that helps!

    Appreciate the support very much.

    Best regards.

  127. DM,

    Congrats on all your efforts and accomplishments with your fund! Just started following you recently and you’ve been a great help. I bought 20 shares of BBL, 125 shares of ARCP the day before the news came out, and 30 shares of UL yesterday. These are the first 3 stocks I own, and they’re in a Roth IRA. Any suggestions for me as a new investor?

    Of your 51 stocks in your portfolio, are there a handful that you feel are the backbone of your portfolio that you feel like you can rely more than others?

    I wonder how to strategize in terms of purchasing some more defensive stocks like UL, and maybe some mutual funds to build up a sort of foundation prior to diversifying more, or to just go straight into buying more single stocks…

    Any advice would be greatly appreciated!

    Thanks in advance,

    DLee

  128. DLee,

    Sounds like you’re off to a great start there. ARCP is unfortunate, but I hope for both of us they recover. Accounting fraud just isn’t something you can really predict, which is why it’s important to diversify.

    I actually wrote an article a while back explaining what I would do if I were starting all over again:

    https://www.dividendmantra.com/2014/05/if-i-were-starting-all-over-again/

    Now, the stock picks were just examples. But I think the majority of them are still solid today. Nevertheless, the process I laid out in the article is where the content is focused. A portfolio is usually built one stock at a time. Most people don’t have the patience for that, but I think the rewards are there for those that are. Either way, the key is to focus on your savings rate more than your ability to generate huge returns in the market. Your savings rate will most likely determine how quickly you’re able to become financially independent.

    I hope that helps!

    Best wishes.

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