Themes For My Portfolio For 2015 And Beyond

lookingI’m currently invested in 51 different companies across every single economic sector. You’d think I’d just call it a day right there and continue to allocate fresh capital and reinvest dividends back into those same companies. And that probably wouldn’t be a bad idea.

Yet, I also see a number of high-quality companies obviously missing from the Freedom Fund.

There are a number of investors out there that like to maintain rather concentrated portfolios. Nothing wrong with that, but I do think there are a lot more than 20 or 30 really high-quality companies that one can invest in. Thus, I see no reason to limit myself.

I’ve often heard the old line about how one’s first or even twentieth idea is going to be better than their fortieth. I’m not so sure about that. For instance, I just very recently initiated a position in Walt Disney Co. (DIS), which became my 52nd idea. Is that a worse idea than Johnson & Johnson (JNJ) – one of my very first investments? I don’t believe that to be the case. I think they’re both excellent companies in totally different industries, offering a very different mix of yield and total return potential. But different doesn’t necessarily make one better than the other, nor does it make Disney a bad investment just because it came later than Johnson & Johnson. Just my opinion on it.

On that note, I feel there are some shortcomings in the portfolio. Some ideas that I still have in my mind, yet have lacked the capital or opportunity to realize. What you’ll see below are a few ideas that I still have that I hope to capitalize on at some point. These will be broader themes across the portfolio with specific stocks I have in mind to fulfill those themes.

Shipping/Transportation

I believe wholeheartedly that the world of 10 years from now will be moving more goods than the one of today. There will almost surely be more people alive, and people tend to buy stuff. Be it food or personal goods, or even energy to power their homes, transportation will increasingly be needed. I’m currently invested in Norfolk Southern Corp. (NSC), which has been a fantastic stock for me. However, I see the need to increase my exposure in this area.

Some stocks on my watch list here include:

Union Pacific Corporation (UNP) – This stock would increase and round out my investment in rail, giving me exposure to the west. UNP operates the largest network in the US. Though the stock is rarely cheap and the yield isn’t particularly high, rail offers huge competitive advantages in the form of barriers to entry. The company currently sports eight consecutive years of dividend increases.

United Parcel Service, Inc. (UPS) – An investment in UPS would offer one even greater exposure to the increasing movement of goods across the world, and in a manner different from rail. Consumers continue to shop online more and more, and these goods have to be shipped from the retailer to the consumer. UPS is one of the key players in this arena. Another stock that’s not particularly cheap, but one I’d love to get my hands on. UPS has increased its dividend for five consecutive years.

C.H. Robinson Worldwide, Inc. (CHRW) – This is a global third-party logistics company. Goods move in a number of ways, but all of that movement needs to be properly executed and tracked. That’s where CHRW comes in. Another high-quality company that I’d love to invest in. CHRW has managed to raise its dividend for the past 16 consecutive years.

Investment Management

This is another area that I’m missing any exposure to. While it’s never been a particular priority for me, I see a number of companies that manage assets that operate at extremely high levels. Though some can be a bit cyclical due to the fact that people tend to pull assets when the economy is tanking, these companies do well over long periods of time.

These are just a few companies on my watch list here:

T. Rowe Price Group Inc. (TROW) – A household name in this sector, they provide global asset management solutions. Though I’m obviously a do-it-yourself investor, many others lack the time, interest, or inclination to follow suit. Thus, they generally allow professionals to manage their investments. This is sometimes required through employer-sponsored 401(k) plans, as those generally don’t allow one to invest in individual stocks. TROW has an excellent dividend growth record, with 27 consecutive years of dividend increases.

Franklin Resources, Inc. (BEN) – They run the venerable Franklin Templeton Investments firm, which is another household name. The yield isn’t quite where I’d like it to be, but this is another company that does really well over lengthy periods of time. More people means more assets to manage, and there continues to be a groundswell of education that points to the fact that people need to invest more. There’s a ton of untapped potential here for BEN and other companies like it. Another great dividend growth stock, with 34 consecutive years of dividend increases.

Eaton Vance Corp (EV) – This stock flies under the radar, but the fundamentals appear to be excellent. Though it’s smaller than the other companies I’m watching in this sector, they’ve done incredibly well as a company for a long period of time. I wouldn’t mind at all being a shareholder in this company at the right price. They’ve increased their dividend for the past 34 consecutive years, which runs right through the financial crisis. Good stuff.

Insurance

Another huge hole in my portfolio. I’m currently invested in just one insurance company: Aflac Incorporated (AFL). Great company and great stock, but I’d love to broaden my exposure here. I lack any investments in property & casualty insurers, which can be lucrative investments. Insurance companies have access to huge amounts of capital via their floats, which can supercharge their returns.

The three insurance companies I’m most excited about include:

Travelers Companies (TRV)I wrote about this stock not too long ago, and totally missed out by not investing right away. My capital is limited, but I still regret not pulling the trigger. Excellent fundamentals here and one of the larger insurers around, which I like. I tend to shy away from real small insurance companies due to the risks of catastrophic losses. TRV has increased its dividend for the past 10 consecutive years.

Chubb Corp. (CB) – Another high-quality insurance firm. Revenue hasn’t grown in some time now, but the company just continues to increase profit and dividends anyway. I regret not buying this stock earlier in the year when it could have been had for much cheaper, but the same could be said for a number of stocks. At any rate, I do hope to purchase shares at some point in the near future. With 32 consecutive years of dividend increases, I think this stock deserves a place in the portfolio.

HCC Insurance Holdings, Inc. (HCC) – This insurer operates a bit differently than the other two on the list here. In addition, it’s a much smaller company. Nonetheless, it sports excellent fundamentals across the board. The stock has been on a tear this year, much to my chagrin. But I still think there’s an opportunity here for the long-term investor. HCC has increased its dividend for the last 18 consecutive years.

Industrials

I already have some exposure to some great industrials. However, there are still a number of great companies that produce great products that I’m not invested in yet. This isn’t a particular priority for me, but if an opportunity with the right stock comes my way, I won’t hesitate to pull the trigger. This is just another play on a growing economy. A number of industrial firms produce the products that allow a number of other industries to work properly. I love investing in companies that fly way under the radar, yet produce products that are ubiquitous. Big and small products alike – from jet engines to adhesives – remain in demand every single day. It should also be noted that some of the lengthiest dividend growth streaks around lie in the industrial sector.

This list isn’t comprehensive, but does include:

3M Co. (MMM) – A fantastic company. What can really be said that hasn’t already? This is a great example of what I was discussing earlier. I missed out on MMM. I just plain made a mistake not investing in the company earlier. Does that make it somehow a worse investment than one of my earlier purchases, like, say, PepsiCo, Inc. (PEP)? I don’t think so. Both have done well. Just vastly different companies. 3M has been on a tear lately, both in regards to its stock price and its dividend increases. It remains on my radar. 3M has increased its dividend for the past 56 consecutive years, which puts it in rare company.

United Technologies Corporation (UTX) – This is a unique firm that’s heavily diversified. They produce products like jet engines, helicopters, elevators, and air conditioning systems. And they’ve done well with this unique mix. This is another high-quality firm that I’d love to invest in at some point. 21 consecutive years of dividend increases speaks for itself.

Praxair, Inc. (PX) – This would allow me another investment in the industrial gasses area, which I’m currently exposed to through my investment in Air Products & Chemicals, Inc. (APD). I love the industrial gasses companies due to the fact that they basically operate an oligopoly where their clients have to lock up long-term contracts. PX has increased its dividend for the past 21 consecutive years.

Consumer Products

This is currently where my heaviest investment lie. But that’s for good reason. No matter what’s going on with the economy, people are still going to brush their teeth, buy their food and beverages, and take showers. Thus, companies that produce these products make for great long-term investments. Furthermore, their volatility is somewhat low, which balances out some of the more cyclical stocks. However, where I already have a lot of exposure here, there are still a few great companies out there that I’d love to own a piece of.

These are just three select companies I’m interested in here:

Nestlé SA (NSRGY) – The largest food company in the world. How am I not invested yet? Another good example of the possibility of one’s 60th idea being just as good as their first. The problems with NSRGY are that it pays an annual dividend and also has a foreign dividend withholding tax by the Swiss government. This is nitpicking, however, when you consider the quality of the company and its brands. Another glaring hole in my portfolio. NSRGY has increased its dividend for the past 14 consecutive years.

Church & Dwight Co. Inc. (CHD) – An absolute monster in cleaning products, with brands ranging from Arm & Hammer to Kaboom to OxiClean. Great fundamentals, though it’s another stock that seems perennially expensive with a low yield. I’m waiting for the right opportunity, but I expect that this stock will be in the portfolio at some point or another. CHD has increased its dividend for the past 18 consecutive years.

Colgate-Palmolive Company (CL) – This stock haunts me to this day. I regret not buying it years ago, and only didn’t do so because, like today, it was expensive. The stock currently sports a P/E ratio north of 30. I don’t care what anyone says, but I just refuse to go that high. Maybe I’m making the same mistake over and over again, but I’d rather miss out on an opportunity than risk loss of capital. If/when this stock comes back to earth, I’ll be one of the first in line aiming to buy shares. Colgate has one of the longest dividend growth records around, at 51 consecutive years and counting.

Retailers

Retailing isn’t my favorite area to invest in. Typically, it’s just a brutal industry. You have low margins and customers aren’t usually loyal to one particular retailer. If a consumer can get the same product cheaper down the road, then that’s where they’re going to go. However, I think there are a few standouts that offer potential. I’m already invested in Wal-Mart Stores, Inc. (WMT) due to their low-cost advantages and Target Corporation (TGT) for their niche products. But there are some other retailers on my watch list that have done particularly well over the last decade and will likely continue to do well for the foreseeable future.

With that said, three retailers in particular remain on my radar:

Costco Wholesale Corporation (COST) – A warehouse juggernaut, this company has grown faster than I thought they would. They now sport revenue well north of $100 billion, after more than doubling revenue over the last decade (from an already large base). I don’t shop here, but my fiance does. She loves it. From what I can tell, they have a stickier customer base than your usual retail center due to their membership structure. The stock is way too expensive for me here, but I’d be interested in initiating a position at a much more attractive valuation. Costco has increased its dividend for the past 11 consecutive years.

TJX Companies Inc. (TJX) – TJX, via its stores, offers a niche experience through what can only be described as a “treasure hunting experience”. TJX operates the Marshalls, T.J. Maxx, and HomeGoods stores in the US, as well as some stores in Canada and Europe. I love their growth and the fact that their margins are higher than a typical retailer. Their unique off-price apparel and other goods is difficult to replicate in another setting.  TJX has a great dividend growth record, with 18 consecutive years of dividend raises under its belt.

Ross Stores, Inc. (ROST) – Another off-price retailer, Ross has grown like gangbusters over the last decade. Revenue is up more than twofold and earnings per share has grown almost sevenfold. Like TJX, the stock isn’t cheap right now. However, if the valuation happens to come around right at the same time I have some spare capital, I wouldn’t mind at all being a shareholder in ROST. I regret not investing at the beginning of my journey, as the stock is up some 339% over the last five years. So many stocks, so little capital. ROST has a similar dividend growth record to TJX – 20 consecutive years and counting.

Other Opportunities

There are a few other sectors that I’m also interested in increasing my exposure to. I think that I’m currently underexposed to healthcare, and one company that I’d love to invest in is Becton, Dickinson and Co. (BDX). Just another stock I missed out on, as I looked at it when it was trading in the $70s. It’s had an incredible run this year, but would love to pick up shares if it drops a bit from here.

I also need to increase my exposure to REITs after selling out of American Realty Capital Properties Inc. (ARCP). I’m aiming for somewhere around 7% of the portfolio to be allocated to REITs over the long haul, but I’d be willing to move that up to 10% since I don’t own any physical real estate. I’m currently interested in adding to the REITs I’m already invested in, depending on capital and valuation. In addition, W.P. Carey Inc. (WPC) will likely fill ARCP’s now-vacant spot at some point here. WPC is currently at the top of my watch list as far as REITs I don’t yet own. I also think there are some solid REITs in the healthcare space (which could kill two birds with one stone), such as HCP, Inc. (HCP) and Ventas, Inc. (VTR).

It appears to me that some of the best values remain in the energy sector, but my allocation to energy is above 15% right now. That’s considerably above where I’d like to be over the long haul, so I remain cautious and choosy about picking opportunities in this sector. I’d like to perhaps average down on Exxon Mobil Corporation (XOM) at some point, as well as National Oilwell Varco, Inc. (NOV).

Conclusion

So that includes some of the stocks currently on my watch list that I’m not yet invested in. While some may argue my portfolio is too large already, I don’t believe that to be the case. Managing a large portfolio isn’t time consuming or cumbersome, and yet there are still quite a few great companies that I’m not yet exposed to. I see no reason to put an artificial ceiling on myself.

Obviously, I hope to invest in some of these companies over the course of many years, as this is way too big of a list to think about in short-term measures. But I wanted to share this list so as to provide some readers out there some value and ideas for their own portfolios, as well as to keep myself on task here as far as my own capital allocation.

Full Disclosure: Long DIS, JNJ, NSC, AFL, PEP, APD, WMT, TGT, XOM, and NOV.

What do you think? Any of these stocks also on your watch list? What are you interested in buying? Any general themes for your portfolio for 2015 and beyond? 

Thanks for reading.

Photo Credit: bplanet/FreeDigitalPhotos.net

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157 Comments

  1. Great list of companies. I’m betting on transportation as well hence for my purchase in CNR a few months ago. Costco has a lot of potentials, every time I go there are tons of people in the store. For investment management have you thought about BlackRock Inc?

  2. Great article DM,

    I just started following you a few months ago, and you’ve been a great inspiration. I will finish off 2014 making over $300.00 in dividends, which was my goal. I was wondering, if I have $17,000 invested in my Roth, and plan on maxing it for 2015, if you think $1,000 is too high of a goal to have to make in dividends…

  3. Hey DM,

    Very interesting! I really like the majority of the companies you mentioned. On the Industrials section I really like 3M and UTX and own both.

    Thank you for pointing my attention to Praxair. I was not aware of the company and this looks like a very interesting company to make up for the fact that I never managed to get Air Products & Chemicals at a good price.

    One thing that kept steering me away from investment management companies is that many of people seem to be moving towards index funds to avoid paying commissions to fund managers. Of course, there is still an index fee, but it is much lower than typical fund management fees. If possible, could you elaborate on your mention that the 401ks require management? What moat do you see for these investment companies?

    Thanks!

    Keep Rolling for a wonderful 2015,
    DividendVenture

  4. Hi Jason,

    I understand your point of view. Some might argue that you’d be better off buying an index fund if you’re to have a 100 names in your portfolio. But I don’t agree with that. You want to live by the income your portfolio is going to generate. So you want it to be as safe as possible.

    The more I buy stocks, the more I don’t see why I’d limit myself to 15-20 or even 30-40 stocks… The ARCP crash and the recent restructuring I had to go through at my job made me realize the importance of diversifying our sources of income.

    If JNJ cuts its dividend, it could hurt you a lot… but if you earn money from 75 companies will it hurt you as much?

    Being too diversified can reduce your total return for sure. But I think that you’re more interested by the growing income and the security of that income? Right?

    We don’t want to be gazillionnaire… we want to be free and to stay free! So it’s as important to protect both the capital and the income as much as possible.

    And, as a matter of fact, dividend growth investing is all about earning income while protecting and growing the capital and not about obtaining the greatest possible gain from the market. So, if an opportunity arises to earn income from a great company at a great price than why not take it?

    I guess that there’s going to be a natural clean up in your portfolio that’s going to happen anyways over the years.

    Anyhow, there are always pros and cons to everything…

    Keep going! I think 2015 is going to be an interesting year for the market!

  5. Tawcan,

    I’m with you there. I’d like to eventually own UNP and perhaps even another railroad in there. Maybe one of the Canadian railroads for exposure up there.

    I actually wrote about BlackRock not that long ago for DTA. Good stuff. Fundamentals look a lot like the other asset managers. The good news is that the AUM is absolutely huge, but I also wonder how much they can possibly grow from here.

    Thanks for dropping by!

    Best regards.

  6. Good Post Jason. I also am constantly looking at the Dividend aristocrats and waiting for a reasonable entry point. I was nervous buying UNP at 96 but feel better now. Sent away for my free annual calendar from investor services. Take everything you can. Ha Ha

  7. Wow, great and comprehensive watchlist DM, and certainly we share more than just a few names on that list for potential targets. Prices, as many might say, just don’t always cooperate when we want them too! I really am kicking myself for not pulling the trigger a few weeks ago when everything dropped as a result of the concerns over oil spiked. And I wasn’t even particularly focused on oil at the time either. Oh well, life happens. Fine the next great member of the portfolio, pull the trigger and keep on moving.

    As I said on your ARCP article, I’m sticking with it for now, and will devalue it within my portfolio by adding a bunch of capital over the next few years. I did do some shuffling within the portfolio this month (got out of LO and PSEC) to clean things up and realign myself with where I want to go. LO was a casualty because I don’t want to be invested in RAI, and PSEC because the risk tolerance with that BDC doesn’t match why I want exposure within that sector of finance. Next year should be very little tinkering and mostly additions. Pretty exciting stuff! Long shot would be to hit $100k of DG assets by the end of 2015. Depends a bit on the markets, but we will see.

  8. Hey DM, you listed many stocks that I also have in my watch list. The ones that I am most interested in are TROW, MMM, and TJX. Curious if you have looked at CSX among the transports? That one tops my list as far as railroad players go.

    Happy New Year

  9. DLee,

    Glad you’ve found some inspiration here. That’s what I aim for. 🙂

    Congrats on your success thus far. Big things come from small beginnings, as I earned less than $300 just a few short years ago.

    As far as your $1,000 goal, that sounds a bit aggressive for the amount of capital we’re talking about. I’m assuming a 3.5% yield. If you get up near a 4% yield across your portfolio you’ll come close or exceed it. Depends on the types of stocks you’re investing in. I generally assume a 3.5% yield in most of my calculations, as that allows a nice spread across low-yielding and high-yielding stocks.

    Best of luck!!

    Cheers.

  10. Some good names to consider for 2015! UTX has been one I’ve been looking at, as well as some of the insurance names you mentioned. I really like the pickup of DIS you made recently, so as you mentioned, there is still good companies out there for the picking even with a large number that you have already.

  11. DV,

    Yeah, Praxair is a great company. As is Airgas in this area. They all offer something a bit unique as far as their gasses exposure. APD, for instance, has exposure to electronics. That has unfortunately been hampering their results as of late, but they’re also the world’s largest supplier of hydrogen. Interesting stuff.

    I’m not quite sure about the whole “everyone is moving toward index funds” argument. If you look at the AUM for a lot of these asset management companies, they’re moving in the right direction. I think we sometimes read about this stuff as DIY investors and assume everyone is doing this. But that’s just not the case. As far as 401(k) options go, most of them (in my experience) don’t offer you low-cost index funds. They offer funds provided by traditional asset managers, which have additional fees tacked on. So I’ve never seen a 401(k) that offers VTSAX, but may offer an alternative that is run by a large firm, but also includes fees. And those fees are on top of the fees that the plan’s administrator levies. This is one reason I never invested in a 401(k).

    As far as moats, Morningstar rates them as wide for most of these firms. I agree. You have entrenched players with switching costs. There are established brand names there as well that you can’t just go out and replicate easily. People are loathe to trust their money with a firm they’ve never heard of. And once these firms get their hands on assets, those assets tend to stay with the company.

    I hope that helps. Wishing you a wonderful 2015 as well! 🙂

    Take care.

  12. Kevin,

    UNP under $100 seems very reasonable to me. I wouldn’t mind that kind of opportunity myself!

    I remember buying NSC at around $55, and everyone was concerned they were going to fall apart due to lower coal shipments. I loaded up, but I wish I would have bought more railroads back then.

    Enjoy your calendar! 🙂

    Best wishes.

  13. W2R,

    I hear you there on LO. Not sure if I want to be invested in RAI either. However, I’m going to wait it out, as the price they’re paying for my LO shares exceeds the current price by a healthy margin. So it’s like a guaranteed return in my mind, as long as the transaction goes through. And if it doesn’t, I’m happy to hold LO.

    PSEC seemed interesting to me, but I always passed. I can’t really tell what I own with that company. Falls into the “too hard” pile for me.

    2015 should be very exciting for you. Passing six figures would be fantastic! I didn’t pass that marker all that long ago myself, but I find the compounding really starts to power up at that point. Keep it rolling! 🙂

    Cheers.

  14. BCS,

    This list was pretty comprehensive. There are another 30 or 40 stocks that I watch, but I’m pretty excited about the ones I listed here.

    I wouldn’t mind owning CSX, but it would perhaps be one of the last railroads I’d buy. And I say that only because it overlaps with NSC. So I’d prefer to gain exposure out west and maybe in Canada before I buy another railroad that concentrates on the east. Wouldn’t mind owning a few railroads before I’m done, however.

    Happy New Year to you as well! 🙂

    Best wishes.

  15. Investing in a company like Nestle would result in a 35% witholding tax according to this:

    http://seekingalpha.com/article/248039-withholding-tax-rates-by-country-for-foreign-stock-dividends

    Gotta think there’s better places to put your money than that. I wish you had bought UPS when I mentioned it in a comment a while back…that was a great time. I still think it’s a great time as they are gonna have a great earnings report next quarter.

    As for me personally, my watch list for the beginning of the year is mostly focused on energy stocks. I don’t actually have any energy stocks on my portfolio right now. I am looking to add Exxon, Chevron and Valero to my portfolio after they all report earnings next year. I also have my eye on adding to my DNKN position as well as initiating positions in CAT and DEO in the new year.

  16. Agent,

    UTX is a great industrial. I definitely hope to have it as part of the “collection” at some point. 🙂

    Thanks for dropping by. Hope all is well!

    Best regards.

  17. blahblah903,

    For questions relating to taxation, I’m not quite sure a Seeking Alpha article is your best place. Nestlé has already published information relating to this:

    “The ADR dividend is paid on average one month after the dividend on the ordinary share. Most ADR holders are US residents and are entitled to a favorable withholding tax rate. After the payment of the dividend on the ordinary share, there is an extensive process between Citibank (Nestlé’s ADR depositary bank) and the Swiss Tax Authorities that enables these US residents to benefit from a favorable 15% withholding tax rate. This results in the delayed payment of the dividend to ADR holders.”

    If I didn’t have a ton of exposure to energy, I’d also be looking there. Well, I would have been looking there a few weeks ago when they all cratered a bit. But NOV is one of the few still trading below my cost basis, so I may look to average down a bit on that one. I don’t plan on it being a core position, but I think it’s a great company.

    DNKN is another company I watch. Same with SBUX. I like the latter a bit more than the former, however. DEO is another great company. I don’t have any exposure to anything like that, so that would be a great addition. DEO has some great brands.

    2015 should be exciting. Plenty of opportunities! 🙂

    Best regards.

  18. picking individual stocks is risky business.. I hope your portfolio out performs over the long term. I would wonder how what you are doing will somehow outperform while professional money managers cannot do the same over the long term. On another note I recently read your guest post and related comments on MMM. I sure hope you ended up utilizing tax advantaged vehicles such as a roth IRA for your investments. Investing $2k + a month is not a valid reason for not using every tool at your advantage.. Might as well max it out in Q1 then.. that is unless you prefer paying taxes on your gains each and every year rather than never again after your initial investment. If you are setting yourself up for such a disadvantage I hope your stock picks end up being really great and outperforming. Btw – this is not meant to be very negative. I share the same passion for investing and saving and I wish you nothing but success.

  19. Thanks for the info on Nestle.

    I hear you on the opportunities. You’re close to being able to make investments with your dividend capital alone. Those will be some pretty exciting times, I can’t wait to get there in a few years, myself. Good luck in the new year.

  20. You mention a lot of great names many of which are already in my portfolio. I fully agree that one should not limit a portfolio to some arbitrary number of holdings such as 20, 30 or whatever. If you find a good company to invest in then go for it. It’s like the financial advisor that says because you are X age you need to own X% stocks and X% bonds. Who says? Currently, I’m 100% stocks and plan to stay that way. I like your two health REIT considerations as I have both on my watch list as well. Thanks for sharing your 2015 outlook. UPS in the transport sector seems to be underrated often as well. Look forward to a solid 2015.

  21. DivHut,

    Absolutely. I never understood the argument that one’s first idea is somehow better than their 20th. That would infer that there are only 20 or so really fantastic companies out there. Or one can only read 20 annual reports and somehow loses their ability to read and make great decisions.

    UPS is a great company. Like many others, I wish I would have invested in it a long time ago. But you just can’t win them all. I’ve done well with what I already have, so there’s no regrets there.

    Best of luck throughout 2015. I’m very excited!!

    Take care.

  22. Joe,

    Food for thought… I think the industry has brainwashed us into thinking individual stocks are too risky. That’s why you need them. But, assuming you own enough to be diversified (may 20 or so and not all in the same sector/industry) then why is owning a solid blue chip dividend paying company any more risky than say… SPY? Of course, I own some ETFs to provide even more diversification but I do like individual blue chips.

  23. i read both.. and I disagree with your thinking:

    #1) regarding the roth IRA it is not “just” $49k that is tax deferred.. it is all of the gains for the coming decades.. if anything make it the last $49k + compounding you ever spend.. it is an effort free way to ensure you are not leaving money on the table. If you are putting so much work toward financial independence why shoot yourself in the foot like that?

    #2) regarding comparison to the S&P 500.. you should hope you at least stay comparable to the returns even if you do not outperform.. you are basically saying that you would rather have more dividend paying shares than more money.. as if you could not earn more through your returns now and then replicate your exact dividend paying portfolio anytime in the future.. i.e. do you want $600k of dividend shares in the future or $700k.. why not be smarter now and have more $ in the future.. you can then have the largest possible portfolio to deploy however you see fit in 9 years from now.. the only reason to stick with your hand selected portfolio is if it somehow outperforms.. i.e. you should compare your results to the relevant benchmark.

  24. trostock,

    Another point is that the S&P 500 index is market cap weighted. Although you have exposure to 500 companies there, the larger companies are going to hold more sway over your performance. Furthermore, if a dividend growth investor puts together a portfolio of 50-100 high-quality companies, I can’t imagine they don’t perform as well as the index or better, as they’re exposure and weightings are likely to be similar anyway. My portfolio will operate like an index when it’s all said and done anyway, except I won’t have exposure to what I feel are low-quality companies or those that don’t pay dividends. And I won’t be paying a fee for the privilege.

    Cheers!

  25. blahblah903,

    Agreed. I think UPS should just continue to grow from here with the increase of online shopping. But I’d prefer a much lower valuation, especially with the somewhat ordinary dividend growth.

    Best regards.

  26. joe,

    You’re free to disagree. But you’re off-topic here. Furthermore, after five years of these discussions over and over again, I have no desire to continue them ad nauseam. In the end, we must all do what we feel is best for our objectives. I’m doing what I feel is best for mine, and I’m actually ahead of schedule. If my biggest complaint in life is thinking I left a little money on the table as I’m financially independent at 40 years old and relaxing by the beach…well…life could be worse.

    Cheers!

  27. I think of UPS as more of a stage 1 stock than a stage 2 or 3 (Or was it a stage 3 stock? Sorry I’m blanking at the moment) in the same vein as Visa. The difference being that UPS has a better yield. With that in mind, they still have a 5 year dividend growth rate of 8.70%. I’ll take it.

  28. blahblah903,

    I actually think of UPS more like a Stage 2 stock. It has numbers very similar to KO or PEP. Slightly lower yield than the beverage giants, but similar dividend growth rates. I wouldn’t really compare it to Visa with its dividend growth rate that’s about three times higher (but with a much lower yield).

    That’s just me, though. 🙂

    Cheers!

  29. I think that the stock price is going to really jump and outpace that of KO and PEP. That’s why I classified it as is. Either way works with this stock, though. The bottom line is management would really have to trip over themselves to screw things up as it currently stands.

  30. blahblah903,

    Hmm, I’m not sure I’d classify it anywhere near V if that is your line of thinking. UPS just hasn’t displayed any ability to grow that fast.

    Food for thought:

    UPS’s EPS has a compound annual growth rate of 5.16% over the last 10 years.

    PEP’s EPS has a compound annual growth rate of 6.55% over the last 10 years.

    UPS may grow faster over the next 10 years, but it would have to do so just to make the current valuation worth it. There’s a pretty large spread between these two stocks in terms of valuation. If UPS doesn’t grow significantly faster than PEP over the next decade, then it’s a bad purchase at today’s price. But just looking at the fundamentals, you have to like PEP. Better growth, higher yield, and lower valuation.

    Cheers!

  31. Luckily, I’ll be putting that up to the test in my own portfolio. Bought UPS on 7/29/14 @ 99.20 and PEP on 9/11/14 @ 91.65.

    I’ll be dripping both positions.

  32. When you get to 60 companies I’ll have to make a Side Income #2 motif. The stock package has gotten quite a bit of popularity. Cheers to you. Also some of the stocks are starting to break through the $1 dividend mark.

    Which leads me to ask, what are your thoughts on WSR?

  33. Nice read and good stocks list Jason. I already own many of them: JNJ, WMT and XOM and watching some of the others like DIS, PEP and NSC. My main theme for next year could be energy stocks if they tank and some REITs. I doubled my portfolio value this year and another doubling next year 2015 would be really fantastic, taking me closer to $100K! Cheers.

  34. Nice watch list and funny timing. I was just thinking about my growing portfolio. I own shares of a lot of the companies you mention. The funny thing is that I was looking at TROW and I’ve been eying COST, but it’s just too rich and has been for some time, in my opinion. I am sitting at about 43 companies or so and like you, looking to add more. Diversification is the reason and it pays off well thus far. Good luck in the new year, it will be a great one I’m sure.

    – HMB

  35. Awesome post, lots of info and opinions conveyed orderly and concise. Also I thinks it important to look at possible purchases laid out like this. Diversification is key, and it’s very ease to find yourself over weight in one sector without meaning to be. I’m watching a lot of transportation stocks right now and I’m interested to se what January & February bring for retailers. I really like Chubb, Colgate and 3m of the Afore mentioned, if I can catch them cheaper in the next year. Thanks for the insight, assessing someone else’s strategy is a very useful tool for formulating your own. Also a nice vote of confidence that our watch lists have some overlap! It’s snowing here so I’m gonna say keep on rolling that snowball.

    Good luck in 2015!

  36. Hi Dividend Mantra,
    You have inspired me to write a blog! I’m very excited about it. My biggest goal for the next year is to buckle down and save more money and to invest it. What do you think about Apple (AAPL) stock?

  37. Ive always wanted to buy DIS, but at the current price and yield and especially cause my portfolio is still small, I feel like I would benefit more in another good company with a much higher yield. But with the upcoming Marvel and Star wars movies in 2015, I do feel like the stock will increase nicely. Thanks for the informative post!

  38. Some very strong companies on that list…I have been thinking a lot about UPS as well and really like what I see. Still a lot of research needed before I put any of my money to work, but I totally agree that when it comes to investing – your first or twentieth idea is not necessarily any worse than your fortieth idea. Keep investing and building on your portfolio….your journey is an inspiration to a lot of people.

    Best wishes for the new year
    R2R

  39. Jason:
    Very nice list of companies in this article. Quite a few sectors have no representation in my portfolio. My goal is to change that over time. Since I began buying dividend stocks a couple years ago, I’ve been hesitant to buy a lot of the companies you mention. Not because they are bad companies, but they aren’t priced in my comfort range or the current yield is not attractive to me. Of course, I’m learning more all the time as it pertains to evaluating stocks and my view is changing on some of these stocks.

    I’m quite heavy in some sectors (like energy) and very light or at zero in others. I have a large cash pile to invest though because of my 401K rollover. When I can find the right stocks to buy, that will help shrink the heavy allocations a bit. We differ a bit in that you can look at lower current yields. You have time that I don’t have (darn it).

    I agree that Exxon is a great company that I’ve been buying as of late. But I have a lot of it. I wouldn’t mind averaging down, but it will have to drop a fair amount from here before I bring in more.

    As for VTR and HCP, I’ve held them since early this year. They seem to be solid choices. I recently read an article on SA from Brad Thomas, whom I respect when it comes to REIT investing. He evaluated a group of REITS for reliability/dependability and scored them, allowing for a maximum of 15 points. HCP scored a 13 and VTR a 14. Pretty solid in Brad’s opinion. I plan to add more HCP if it hits $42 and VTR if it hits $66. FWIW… WPC was on the list with a score of 12.

    And yup, JNJ was one of the first stocks I purchased as well. It’s been a great pick. I’m liking your articles. Always an enjoyable read.

    Steve

  40. The “20th/40th idea” thing never made any sense to me either. Last year investing in TGT or V or PG was a great idea. Now they might be less so since the valuations have climbed, and now IBM or BP or NOV are the ideas. Are they worse somehow because they went on sale later?

  41. I’m not so bullish on equity managers given trading commissions are already so thin so the only growth comes from adding volume. Some robo advisors are getting some share here like Betterment, Wealthfront, and Schwab will be getting into that game soon as well.

    Either way, it’s a relatively low risk business given it’s mostly transaction fees and fund management fees. I’m not an expert on the space, but generally I know the fixed income markets are far less efficient than equity markets and I do see significant ways to improve access to bonds for retail investors to be able to buy them directly in amounts smaller than 1k. Of course, bond funds are a great way to gain exposure, but physicals are hard to beat for some people.

    Intense competition, and I’m not really sure where the industry goes in the next 10 years.

  42. Awesome list DM!
    I totally relate with your frustration on missing MMM and CL….haha. waiting for an opportunity that never comes.
    I own rails (UNP, CSX and Burlington through BRK-B) which has been one of my favorite themes.
    I have owned NSRGY since the very start of my portfolio. It is a rock solid name but yeah, definitely painful for the frenchie that I am to pay those Swiss taxes…UPS is an incredible company that has all my respect….and I want to add shares in XOM and get into NOV….In the insurance sector, I love Markel but they don’t distribute any dividends….
    I would certainly consider SBUX and their fast growing EPS. Schultz raised the dividend by 24%….Starbucks is a horrible place for a frugalist but it may deserve a slice of your freedom fund 🙂
    As always, thanks for the great read !
    LTI

  43. I’m also looking forward to the first rate increase announcement. I know people will overreact and the REITs will get creamed. At least, that’s what I’m hoping for.

    1 point of inflation will create more upward pressure on rents than it will hurt on increased borrowing costs, so I’m bullish that for most well capitalized REITs that a moderate increase in rates will be a good thing a few years out.

    Looking forward to more fear in the markets next year!

  44. Happy New Year DM. You are an inspiration to us all. I am gonna soon buy 100 shares of HCP. I love their long term prospects given the population demographics.

    If you are looking for a solid insurance stock with a good yield and a great history of increasing dividends, consider MCY (Mercury General).

  45. PIM,

    Excellent! I certainly hope you’re able to double again. That would be fantastic. 🙂

    I’ll definitely be adding some REIT exposure as well. That’s one of the few sectors I’m now underweight in, relatively speaking. We’ll see what opportunities come our way in 2015!

    Best regards.

  46. Pat,

    Glad you enjoyed the post. Hope you found some value in it. There’s certainly a large number of stocks up there, but this is a list I’ll be looking at over the coming years.

    Best of luck to you as well throughout 2015! 🙂

    Cheers.

  47. Steve,

    Hmm, I’ve never come across WSR before. Looks like the dividend has been static for a few years now, which is probably why it’s not on my radar. It’s also a rather small REIT, which I tend to shy away from.

    60 companies. Crazy to think I’m getting near that level now. We’ll see where 2015 takes us! 🙂

    Let’s hope we see some opportunities.

    Thanks for dropping by.

    Take care.

  48. Miss Sea,

    So glad to hear that. I wish you nothing but the best of luck both with the blog and with investing. 🙂

    I think Apple is a great company. However, I’m not sure if I can really envision where the company might be 10 years from now. Tough to predict demand for smartphones and all that. In addition, it’s tough to see how they grow substantially from a base of almost $700 billion. Of course, I’m just biased against tech companies in general.

    Thanks for dropping by!

    Best wishes.

  49. HMB,

    Agreed that COST is a bit rich here. In fact, a number of stocks on the above list are too expensive right now, which is why they’re still on my watch list rather than in my portfolio. But I suspect opportunities will present themselves for at least a couple of these stocks over the next 12-24 months. We’ll see!

    Good luck to you throughout 2015. I’m very, very excited to see how it all turns out. 🙂

    Best regards.

  50. R2R,

    I plan to keep investing right through 2015 and beyond. I hope to still be at it for another 8-10 years. 🙂

    UPS seems like a solid company. Not the best growth over the last 10 years, and it seems a bit pricey right now. But I’d love to have some exposure there.

    Cheers!

  51. Steve,

    Right. I hear you there. Many of these stocks have valuations and yields that aren’t all that attractive to me right now. But I’m always hoping to catch that next Dividend Champion or two right at the beginning of their lengthy dividend growth streak. And I also notice that some stocks are just perennially expensive, where the P/E ratio might constantly be above 20. Just like you constantly see oil stocks in a range of 10-12.

    That’s good news there with HCP and VTR. Ventas doesn’t have a lengthy dividend growth record, but I took a quick look at it and it looks pretty solid. I don’t want to go too crazy with the REITs, but no physical real estate in my portfolio means I can probably be a bit loose there. We’ll see. The combination of yield and growth with some of them is pretty compelling, especially in the healthcare space.

    Glad you’re enjoying the content. Always enjoy sharing ideas!

    Keep enjoying the good life over there. 🙂

    Cheers.

  52. Justin,

    Right. Agreed. I never understood that line of thinking. And as you rightly point out, some stocks are on sale when others aren’t. Doesn’t make one any less of a good idea. Quite the contrary, it can make one stock a much better idea than the other, even though it might be your 80th idea.

    Best wishes!

  53. DFD,

    Glad you enjoyed some of the content.

    I hear you on DIS. I passed up on it early on in my own journey due to the low yield. I obviously regret that as it went on an absolute tear. I’ve noticed that many of the best performing stocks on a total return basis in my portfolio have been those stocks with fairly low yields and higher growth rates. Just an observation.

    Thanks for dropping by.

    Cheers!

  54. Ravi,

    Right. The asset management game is certainly seeing more players. Though, there’s always more money as well. And with more people and more money is more opportunity. And many people need to save/invest a lot more than they are. So there’s a lot of untapped potential, in my view.

    The thing of it is that the average layman probably isn’t going to be investing in Betterment. They’re going to be investing in their 401(k) through their job, and that’s where the asset managers come into play. I think sometimes those of us who are more DIY assume that there are a lot of us out there like this, when that’s really not the case. I’d have to look up the numbers, but the vast majority of people are happy to let professionals run their money for them. I think the bigger threat to the industry will be continued move toward passive funds, which naturally reduce the possible fees. Though even in that arena, you see fees because there’s still a captive audience.

    Best regards!

  55. LTI,

    SBUX is another great company. Definitely on my watch list. I think that’s a great company. Never been in a dirty branch or one where people were unhappy. I’ve read some potential concerns over the availability of coffee beans over the long term, but I’m sure a company like SBUX will figure that out.

    Markel is an interesting company. Could be the next Berkshire Hathaway, but no dividends is no bueno for me. 🙂

    Appreciate the support. Excited to get 2015 underway!

    Cheers.

  56. Mike,

    Thanks so much for the kind words there. Really appreciate it! 🙂

    Nice idea there with HCP. I suspect I’ll be joining you sooner or later.

    I’ve looked at MCY before, but the dividend growth is way too low for me.

    Best of luck throughout 2015. Let’s keep it rolling!

    Cheers.

  57. If there really is a shortage in the long term, it’s probably best to hold the name with the most pricing power in the bunch or the strongest balance sheet to withstand margin compression.

    I like shortages if I own the gorilla. 🙂

  58. Appreciate you sharing your list with us readers! A couple of stocks that are also on my watch list for next year and beyond, including CL. I agree with you on the fact that a P/E of ~30 is way too high. I might give up on this stock.. I already changed some products they make and I use daily to products that UL and JNJ make :D.

    I hope we both get a chance to initiate positions in MMM, it’s a wonderful Company! Enjoy the New Year’s Eve!

    -Ville

  59. Hey Jason,

    Seeing as I just started investing in DG companies this year, my portfolio is rather small. Though I did manage to take advantage of buying shares of BBL and VZ when they recently took a hit. The stock price of both are still pretty low, but both have risen some since.

    Anywho, since I’m still figuring a lot of this stuff out, I’m happy to see that we share some interest in future buys. I too am looking to buy into WPC, HCP, CL, and MMM when the price is right. I’m glad to see my ideas are compatible with someone who has significantly more experience than I do.

    -Josh

  60. Hi DM,

    Love your blog !

    May be you already adressed that but I’m wondering how/if you track each stock you own. As a dividend investor myself I don’t even want to sell any of these but sometimes it is the best thing to do. With 40+ ligns in your portfolio that’s a challenge.

    Thanks,

  61. Jason,

    Excellent list of companies on your radar for 2015 and the coming years! Too bad it’s focused mostly on North-American companies because I’d like to grow my exposure to European stocks a bit more over the next coming months.

    What I really like about your thinking is how you take very general trends and worldwide changes and translate them to possible strong plays for certain companies, like the shipping sector. It doesn’t take a master mind to figure that out, but people often forget that simplicity is key to succeed as an investor.

    One company I’ll definitely add to my portfolio is Nestlé. It has a great business model and incredible dividend history. The Swiss withholding tax (15% both for you and me) doesn’t bother me too much since I have to deal with that in almost every purchase I make. The annual dividend is a bummer, but that’s how it often works in Europe, so nothing we can do about that.

    Looking forward to what you’ll add to your portfolio next year!

    Best of luck,
    NMW

  62. Jason,
    I found your blog some days ago! Keep up the great work and fantastic writing. Thanks for all this!

    You’ve shown here a great list of companys. I’m already invisted in some of them. Too bad I couldn’t find one single company from my homeland Germany. We are some kind of small country but we have the 3rd largest exporting industrie and in some industries sectors we’re ahead of the US.

    What about some car companies? like BMW? Porsche?
    or the biggest chemical company in the world – BASF ?

    regards form good old Germany
    Thomas

  63. Thanks for the great list. Yeah, I missed out on MMM and V this year by waiting for a lower price. Well I’ll be on the watch when we see some sales!

    Question: I own a few utilities – D, DUK and SO. I bought a few to juice up my portfolio yield and they seemed inexpensive at the time. They make up a very small part of my holdings. All have appreciated a lot. I am tempted to sell D ( I have a 40% appreciation) and it now sports a PE of 30. What do you think? Sell D? See some if the others.

    Thanks again. Great site.

    ST

  64. Great read, I always enjoy your “Watch List” posts. You should still look into PSA (Public Storage) for REITs, and it’s never too late to invest in LMT (which I almost did two years ago and wish I had).

    This month I am making an inital investment into COP and adding to my position in MAIN (Business Development Corp.). In the first few months of next year, I am looking to put more money into PM, WFC, GE and HQL. Will initiate positions in LMT and JNJ if there is a market pullback as well, two stocks I have missed out on.

  65. The fact that you write such detailed, well thought out articles AND reply to every comment made by your reader base impresses me very much. Keep up the amazing work.

    DividendMantra FanBoy

  66. Jason,
    Where to start? That’s a long list. Okay, in order of your listing, here are my thoughts:

    Shipping/Transportation: I am not really interested in this sector with the exception of UPS, and it is too expensive at this time (P/E > 22 and earnings growth < 9%).

    Investment Management: TROW and BEN are great companies. I don't know anything about EV, but DGI listed them today so might be worth a look. I don't have any exposure to this sector and don't look to initiate any in the near future. If the stock market corrects significantly these companies could become bargains and it might be time to back up the truck and buy as much as you can.

    Insurance: Long AFL. Came close to buying TRV earlier this year; don't remember what kept me from pulling the trigger.

    Industrials: Long MMM and UTX. Along with GE, I'm fairly well represented in this area.

    Consumer Products: I'm over represented in CP and Consumer Staples for the reasons you listed. I looked at NSRGY and decided that the 15% loss in dividends to the Swiss government is a huge disadvantage. Would love to buy CL or even CHD if they weren't way over priced.

    Retailers: I'm down to just WMT after selling COST and TGT recently after they ran up in price. Brutal industry, low margins, low barriers to entry. Look at all of the names that have disappeared over the years. I would buy COST back if the price comes back down to earth. Heck, I would buy AMZN if the P/E fell to 20. 🙂

    Others: Long BDX. I worked for Becton-Dickinson when I was in my twenties. Great company, you might have to pay over twenty times earnings but should do very well over the long haul (but I wouldn't be buying at current valuations). Funny, I was also thinking of replacing ARCP with WPC. I currently have HCN and O in the REIT sector. As far as oils go, I'm long BP, CVX, XOM, KMI and NOV and have been adding on dips. Since this is now over 10% of my portfolio, I'm doing more waiting than buying these days.

    Good luck, and Happy New Year!
    KeithX

  67. I’m sure this is a FAQ for you, but why so many stocks? 🙂 Getting exposure to more sectors is great … but the returns of the new companies you mentioned is not likely going to be higher than the return of other companies already in your portfolio. It’s true that MMM is a great investment … but so are the other 50 companies in your portfolio.

    On the other hand, if you think that one of the new companies you mentioned like UPS will outperform other holdings in your portfolio, wouldn’t it make sense to sell an existing company to invest in UPS?

    Not criticizing … just want to hear your thoughts on this. 🙂

    Cheers.

  68. Dear Jason,

    another interesting article – thanks for sharing! A lot of interesting companies.
    I’ve been following your blog for a couple of weeks now because I am about to start building my own portfolio soon (first acquiring as much knowledge as possible by reading books and following blogs like yours).

    Out of interest – one question: What do you think about investing in a divided etf? like – for instance – the SPDR S&P US Dividend Aristocrats ETF (ISIN: IE00B6YX5D40). Some other blogs do invest in those dividend ETFs and I was wondering what you do think about this?

    Looking forward to your reply, cheers from Berlin – Germany,
    Daniel

  69. Ville,

    Haha. I hear you there on CL. I stopped using Colgate toothpaste years ago, after investing in PG. Crest all the way now. 🙂

    MMM is a great company. I’ve been surprised by the huge dividend raises over the last couple of years, after a rather established history of more mediocre/normal dividend growth. But shareholders should be very happy. Missed out on that one.

    Happy New Year!

    Best regards.

  70. Josh,

    “…when the price is right.”

    Isn’t that the truth. A lot of great companies up here, but the valuations aren’t warranted in a lot of cases. No matter the stock, valuation is always paramount. Pay too much for even the best company, and your returns will likely suffer. Plus, you’ll be buying in at an unnecessarily lower yield.

    Thanks for dropping by. Happy New Year! 🙂

    Best wishes.

  71. NMW,

    Absolutely. Investing is often best when it’s simple and boring. I’m not trying to sift through the next biotech winner. And I don’t have to to be successful. Fortunes can be made with very simple products. Might take a bit longer than it would by striking a home run with the next start up, but you also have a lot less risk of complete loss. Singles and doubles will allow you to round the bases. 🙂

    Nestlé is a great company. I hope to be a fellow shareholder with you at some point. Incredible diversification and great brands. The annual payout is a bummer and so is the withholding, but it is what it is. I wouldn’t let such things stop me from building growing dividend income via a great company.

    Looking forward to what 2015 brings us both.

    Thanks for stopping in. Hope all is well.

    Cheers!

  72. Thomas,

    Thank you. Glad you found the blog! I hope you stick around. Plenty of content yet to come. 🙂

    Germany has a great economy over there in Europe. If I were a German, you can bet that these lists would focus on German companies. However, I fortunately live in another great first world country in the US, which is home to a number of other successful multinational companies. Easier for me to deal with as far as buying/selling, taxes, etc.

    I do occasionally buy foreign stocks, but I stick to low-hanging fruit:

    https://www.dividendmantra.com/2014/11/considering-foreign-domiciled-dividend-growth-stocks/

    Thanks for your readership from Germany!

    Best regards.

  73. Dear Jason,

    thanks for your reply. I did not read that article previously, but it does answer my question. Thanks a lot and I will certainly continue reading your blog. Take care and have a happy new year!

    Cheers.

  74. EWB,

    Yeah, I definitely missed out on LMT. I invested in GD, RTN, and HRS around that time (when I was looking at defense stocks) instead. And they’ve all done incredibly well for me on a total return basis and in regards to dividend growth. No complaints. 🙂

    I can’t wrap my head around BDCs, so I’ve stayed away from them. PSEC was recommended to me quite a bit, but I just couldn’t really figure out what they owned and why. I might be missing out on something there, but I’ll take my chances. Best of luck with MAIN, however!

    Cheers.

  75. Joe,

    I don’t blame Jason for not wanting to continue beating these dead horses, a simple search through his archives would give you the answers to your questions.

    Since I’m basically using the same strategy as DM, I’ll help fill in the blanks here.

    #1) You are ignoring one of the largest drawbacks of retirement accounts, and that is the “retirement age”. Jason would not be able to access his funds at his planned retirement age of 40, which is not very useful for him. I suppose if postponing your retirement a full 25 years in the name of the absolute most optimal returns is your ideal, then go for it. For those of us that strive to live life on our own terms, that is not acceptable.

    #2) I don’t think being fixated on beating a certain benchmark is the best place to be philosophically when making investment decisions. You will be more likely to over-handle the proverbial bar of soap and watch it wash down the drain. DM’s goals of focusing on income are pragmatic and directly relatable to his daily life. In other words, by being benchmark focused, he is more likely to over-trade and fail to beat the benchmark, much like the vast majority of fund managers. By sticking to the much more tangible strategy of Dividend Growth Investing, he is much more likely to be both psychologically and philosophically successful in his decision making. Remember, we are playing the long game here. In the short term, the markets are a voting machine, but in the long term they are a weighing machine. It is difficult for anybody to beat the S&P in a bull market, which is why a long term value approach must be taken. All that being said, I would wager that DM’s portfolio will crush the S&P in the long term (10+ years). This does not really matter however, the only thing that matters is DM achieving his goals that he has set.

    I will add that another advantage to building the dividend income as you go is that you now have that income if you need it. While Jason is still years from his ultimate goal, he already has a respectable source of passive income to provide him some security should “life happen”.

  76. ST,

    I don’t really make recommendations as far as buying or selling. I can only tell you that I’m not a big fan of utilities in general. They’re heavily regulated, so their growth is artificially limited. Love the monopolized business structure, but that’s about it. And I think cheaper alternative energy has a chance to change the dynamics of that industry a lot over the coming decades. I personally couldn’t imagine paying 30 times earnings for a slow-growth utility, and I don’t know why anyone else would either. I’m also not sure I’d feel real comfortable owning something like that, but that’s a personal decision. The other thing you’ll want to look at is if that EPS figure (which is the E in the P/E ratio) is accurate. Sometimes companies have one-time events which can negatively and temporarily skew earnings downward, which can also artificially create a higher P/E ratio. I haven’t taken a look at D, so that would be something to investigate. But a normalized EPS figure and 30 times earnings would be tough for me to swallow. That’s up there with Colgate and Visa, which I would argue have much greater growth prospects.

    I hope that helps.

    Best regards!

  77. Granett,

    Thank you very much. I appreciate that!

    I’m lucky to have such a great readership. And I’m happy to share as much as I can. I’m certainly no expert, and I’m learning along the way myself. But we’re all in this together. 🙂

    Best wishes!

  78. KeithX,

    Thanks for the comment!

    I agree 100% in regards to valuations for many of these companies. The overpriced nature of many of them is exactly why they’re on my watch list and not in my portfolio. But this is certainly no list of stocks to buy now. Rather, these are companies that I’d love to own at some point if the right price happens to come my way at the same exact time I have some available cash. So many stocks, so little capital.

    BDX is indeed a great company. I have a few regrets over the last few years, and not buying BDX is one of them. I looked at it heavily at about $77 per share. I can’t remember why I didn’t buy, but whatever the reason it was obviously wrong.

    I hear you on energy. I’m actually at about a 15% weighting. Not sure where you want to be, but I’d prefer to be closer to 10% over the long haul. So I could avoid energy for all of 2015 and still be fine. I’m happy to pick up opportunities here and there, but I’m going to remain selective.

    Hoping I can join you as a shareholder in some of those great companies. In due time. 🙂

    Thanks for stopping by!

    Best wishes.

  79. Alex,

    “On the other hand, if you think that one of the new companies you mentioned like UPS will outperform other holdings in your portfolio, wouldn’t it make sense to sell an existing company to invest in UPS?”

    Good question. The problem is that I, like everyone else, lack a crystal ball. I have no idea if UPS or any other company will perform better than one another or provide greater dividend income and growth over the next 10 or 20 years. Every stock purchase is a bet. And I’m basically hedging my bets across as much quality as possible. UPS will probably do well over a long period of time. Pepsi probably will as well. And I imagine Johnson & Johnson will too. To sell one for the other because I *think* one might do better than the other would be taking a risk that I don’t think is necessary.

    And I’m not really after outperformance (Who am I comparing myself to?) anyhow. I’m after a growing dividend income stream that will one day fund my lifestyle. This article explains that a bit more:

    https://www.dividendmantra.com/2014/04/why-i-eventually-want-to-be-invested-in-50-companies-income-diversification/

    I hope that helps. 🙂

    Take care.

  80. Daniel,

    Thanks for dropping by!

    Wishing you the best of luck as you gain the knowledge necessary to make the correct decisions regarding your money and your future. 🙂

    As far as ETFs go, I have no interest in them personally. I think they’re great products for those that lack the interest and/or time necessary to invest in individual stocks. Otherwise, they’re a poor substitute for what you can do yourself. Funds charge you a fee (which adds up quite a bit over time) to buy the same stocks you can buy, and they generally do so regardless of valuations.

    I explained why I avoid funds here:

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

    I hope that helps.

    Thanks for stopping by from Germany. Keep reading and learning. I’m still learning to this day.

    Cheers.

  81. Nice list. Interesting to see UTX on the list. The reason I find it interesting is because I am scratching my head trying to figure out why you didn’t pick up shares under 100 a few weeks ago? Once I saw that double digit handle I backed up the truck and grabbed 100 shares. Unfortunately the stock is straight up 16% ever since, but still appears somewhat undervalued compared to peers. I am heavily allocated to energy at the moment, and this was one of the few companies offering obvious value in my opinion.

    Awesome job on a great 2014, Good luck in 2015. 2014 was also a nice year for me where I saw my portfolio swell from ~60k to ~130k. I don’t know if you remember but late last year I was mentioning an opportunity I took that would cut my income dramatically but provide potentially huge upside..well things have been working out and my income is now 30% higher than it was before it got cut in half, what a ride in just over a year! It seems like your income swing was similar, I hope the writing continues to provide you and your future family all you may need.

    Best

  82. This is really nice post, a DGIs version of new year’s resolutions =).

    Spoongirl keeps asking me if we own UPS, which I regret not buying years ago. NSC has been very kind to me as well, so has CL.

    I hope you and Claudia have a nice New Year’s celebration!

  83. Hey DM – love the blog. Always some great ideas. Have you considered Canadian National Rail (CNI) for the transportation portion of your portfolio? It’s been a very successful investment for me and (not coincidentally) is my longest held stock.

  84. took2summit,

    A few weeks ago? More like over two months ago. UTX fell like most of the market around the middle of October. Morningstar has them fairly valued around $115. That seems pretty appropriate to me. So they’re probably fairly valued here. Not a bad buy certainly, but I don’t know if I’d call the stock undervalued.

    Congratulations on that move there. Sounds like things worked out great for you. That’s always good news. 🙂

    My income is still down in comparison to what I was able to make in the auto industry, but that’s a trade I’d make all over again. To own most of my time now while still making enough to continue investing is just a dream come true. I’m incredibly blessed.

    Keep up the great work over there. Your trajectory means you’ll likely be passing $200k in late 2015 or early 2016, assuming a somewhat flat market.

    Best regards.

  85. Spoonman,

    So many stocks, so little capital. Tough to own them all. Like you, my ownership stakes have been very kind to me. Hard to regret being successful, even when you know you could have been slightly more so.

    Appreciate the kind words. Same to you and Spoongirl. Enjoy your New Year there in PNW! 🙂

    Cheers.

  86. GordonsGecko,

    Thank you. Glad you enjoy the blog! 🙂

    CNI is a great railroad. Huge holding for Gates. I’d love to own a few railroads before I’m all done. Perhaps like Monopoly – own them all. 🙂

    I personally think it’s hard to go wrong with any of them. Similar economics across the board. And the barriers to entry are obviously extremely high. NSC has done well for me, but buying any of the rails back when they were being punished over coal would have been a great idea.

    Don’t sell that thing!

    Cheers.

  87. Very good points. One of the reasons why I like BlackRock is because they are the company behind iShare. With the index fund craze I think BlackRock will benefit from that.

  88. Personally I would like to get into Canadian banks. While I was on business there, one of our local hosts made a comment about how American banks collapses but Canadian banks were rock solid in the great recession. TD and BNS, Bank of Montreal.

    I agree with your comments on Praxair (PX). I’m in the chemical industry and the only real competitor is Air Liquide. I interviewed with PX and like the company from a qualitative standpoint, also.

    I have a similar experience with MMM. I grew up in Minnesota (Minnesota Mining & Manufacturing) and have extended family working for MMM. They have great engineering training programs and I feel they’re going to be a good player in the long term. Innovation is very important and I would invest in them.

    I’ve never heard ROSS passed around in DGI circles before. Keeping me on my toes.

    I plan to be back on the investing horse in April – that’s when the 6 months from my home purchase concludes. I’ve given myself that grace period to accumulate junk for the house, make repairs, etc. I can’t wait — I miss being the feeling of being closer to retirement every day, every paycheck, every stock buy.

    Thanks,
    WE

  89. Pingback: My Final 2014 Purchases: | My Dividend GrowthMy Dividend Growth
  90. From your list I own UPS, TRV, NSRGY, WPC, MMM. Same as you, UNP and CL have been on my watch for a long time but never jumped in – BA and ADM are a couple of the others like that for me.

    My focus for 2015 and beyond is going to be getting portfolio balance where I want it to end up, which primarily means adding to the consumer non-cyclical and healthcare. Hopefully some better values come available in those sectors soon.

  91. Probably one of the hardest aspects of dividend growth investing is deciding which stock to buy next. As someone else noted a couple of hours ago: so many great companies, so little capital 🙂

  92. Correction, I didn’t sell COST. Even though it’s overpriced, it’s too great of a company to sell. 🙂

  93. WE,

    Good point there about the Canadian banks. As a collective, they have an outstanding track record through multiple economic cycles. I’m a happy shareholder of both BNS and TD right now. The only thing I will say, however, is that while they held up well during the financial crisis, Canada was in much better condition back then. The tables have turned a bit now, with consumer debt being quite high up there due to astronomical house prices. Not sure if that will be an issue or not. The good news is that the regulation up there is much better than down here. And the big Canadian banks operate in an oligopoly.

    Ross has done incredibly well. The fundamentals for those off-price retailers is surprising. You wouldn’t think they’d grow so fast, but they did.

    I can imagine you’re excited to get back in the game. It’ll take time to rebuild the portfolio and all that, but you’ve got prior experience with puts you in an excellent position.

    Cheers!

  94. pacer45,

    I hear you there. I’m going to also have to focus on certain sectors that I feel are lagging. Right now, I’d like more exposure to healthcare and real estate. Just tough to find those deals out there!

    Best of luck throughout 2015 and beyond. 🙂

    Thanks for dropping by.

    Cheers!

  95. ThomasDV,

    Indeed! First world problems. 🙂

    The other problem is that sometimes the stocks that currently seem like decent values are those you already have too much of. I’m in somewhat of a situation like that since there appears to be some decent value in energy, though I’m already overweight there. But I was lucky enough to buy almost all of those stocks at much lower prices. So it’s a win-win.

    Best of luck with sourcing capital!

    Take care.

  96. My next goal is to get more healthcare and an REIT to replace ARCP. I’m looking into a couple of pharmaceuticals, PFE and GSK, to cover the healthcare, and probably WPC to cover the REIT hole. I’ll fully cop to being blinded by their beautiful yields, but hey, since I’m just starting out I can afford to! 🙂

  97. LO just sent out the merger agreement for voting. I haven’t gone though the whole thing just yet (it’s long), but it looks like LO will keep paying dividends all the way up to and through the merger.

    I didn’t want RAI at first, but it’s hard to evaluate the finances with a merger of this size. I’ll keep an eye on it and get deeper into the tax implications. Press release is here: http://www.sec.gov/Archives/edgar/data/1424847/000119312514449963/d805736ddefm14a.htm

  98. Hi Jason, thanks for all the good ideas in 2014, and more for 2015!!! Have a super new years.

    I’ve been a Costco member for 20+ years and always loved their business model. Nothing makes you more confident in a stock than going to the store every month and seeing a well managed and (very) busy operation. They are a local company and have a great reputation here in Seattle. I loaded up on the stock back mostly in 2006, it has been a great run. I was tempted to finally lighten up my position a bit when it breached $140 but decided to hold — simply too great a company to sell! I’ll buy more if it ever dips back down to the $120-$125 range (I might be waiting a while). I think they still have plenty of growth opportunities.

    You inspired me to buy both BBL and BNS in fall of 2014. I am working on reallocating my portfolio from being very concentrated in a couple stocks, to a more broadly diversified group of dividend paying stocks. I am envious of many of your holdings… so many great companies are just too expensive for me right now. I felt BBL and BNS were fairly valued… I think I am going to add some CHV or XOM next (I already own some BP) and maybe CAT. I would love to own MMM and am keeping my eye on HCP.

    I’ve also been tempted to buy PSEC but anything with that high a yield makes me ultra cautious, and frankly I’m not sure I really understand the business or company. I think I am going to continue to hold off.

    TJX and ROST were interesting reccos to me. My mom frequents both those stores, but for what it’s worth my wife absolutely threw-up on the ROST idea!! She called our local (Redmond, Washington) store “horrible”! She said the store is poorly stocked and the service is terrible. She gives thumbs up to DSW… probably not enough of a dividend track record for you, but perhaps worth keeping an eye on for the future!!!

    Tim

  99. Nice list of stocks. Some of these are on my watchlist too and planning to initiate positions in 2015 if prices work out. 50+ companies already and there are still more stocks out there… I am currently invested in around 30+ stocks and I am wondering if that itself is too high. Let’s see how 2015 plays out.

  100. IrishBrian,

    GSK is an interesting pick. They’ve had a miserable 2014 for sure. I like aspects of the business. A little concerned about the high payout ratio and their seemingly inability to grow, however.

    I’ll also likely cover the hole left from ARCP with WPC. I like WPC’s international diversification as well as their property diversification. O still gives me great exposure to the domestic triple net space and I hope to increase my position at the right price.

    Best of luck throughout 2015 getting the stocks you want! 🙂

    Cheers.

  101. Justin,

    Yeah, I’m also not sure about RAI. I am glad, however, that this move will result in a net reduction to my overall exposure to tobacco. I certainly love my investments there, and they’ve been kind to me. But at one point I was way too overexposed via LO, MO, and PM.

    My biggest beef with this whole move is that RAI will not be taking over the blu brand. I think that’s a huge miscalculation/mistake. I understand there were some regulatory moves there, but I do wonder if selling blu was an absolute must. In the end, it’ll probably be rather inconsequential for me. After the cash payout, my RAI position will be very small. We’ll see how it works out.

    Wish you the best with deciding which way to go. 🙂

    Best regards.

  102. DM,

    It turns out I actually finished off at $345.00!

    In 2012 I had put $5,000 into VASGX, and in 2013 I had put $5,500 into VGSIX since I had no idea how to start things off. Both mutual funds have performed rather well since 2012, their dividends and fees just bother me a bit when I think long term. I’m looking to sell off some shares since the transactions are free for Vanguard mutual funds, and allocate them into some single stocks as I learn more about the nature of single stocks. Keeping some of that cash in my brokerage account and looking for some good value as the year starts will be my plan for now. I plan to place some funds into UL, IBM, and perhaps T…

    I always look forward to your posts because it helps me understand the thought process behind your purchases. The fact that you can ingest all the information you do and make it comprehendible to your readers is an invaluable skill. As a 24 year old middle school math teacher myself, it’s important for me to take information/concepts I’ve learned from professors, teachers, textbooks, and resources, and to find a way to present it to my students in which they can grasp it in their own minds. I don’t find what you do to be all that different! Keep it up!

    -DLee

  103. Tim,

    It’s funny you mention your wife’s experience there with ROST. I’ve only been in those stores (TJX and ROST) a few times throughout my life. And every single time, I’ve found the stores rather “unkempt”. I had a reader absolutely pound the table on ROST a few years back. But I couldn’t see how these companies could continue growing when their stores seemed so unattractive to me. Not only that, but I found the service to be lacking. I get the treasure hunt experience, but I guess I just didn’t see the real value. Anyway, much to my surprise and chagrin, these stocks have been huge performers over the last few years. And I say that not just from the price action, but from the underlying fundamentals of both companies. I guess sometimes these things have a way of surprising you.

    Not sure about PSEC or any other BDCs. I’ve been avoiding them because I just don’t really know what I own with those things. That takes an unparalleled amount of trust in management. Just not sure I can do it. The recent dividend cut doesn’t exactly bolster my confidence either. Probably just not my cup of tea there.

    I hear you on COST. One I’ve obviously missed out on. I’ve invested in more than 50 stocks now, and yet there are still so many I’ve missed. Funny how that works. You obviously can see now how I fail to understand those that run smaller portfolios. 🙂

    Thanks for dropping by and sharing!!

    Best wishes.

  104. DGJ,

    It all depends on valuations. Many of these stocks are nowhere near my buy levels. A few are, specifically in the financial sector. But I’d be loathe to pay the asking price for CL or COST here. We’ll see how 2015 goes!! 🙂

    Take care.

  105. DLee,

    Thanks for the kind words there! 🙂

    I do my best to make this strategy/concept as approachable as possible. I think the lingo that is pervasive throughout the investment community is often unnecessarily complicated. But this whole thing has the power to really change people’s lives. I’m obviously not selling anything. And other than the blog income I receive (which could probably be replicated/duplicated in any number of ways on any other number of investment topics), I’m not profiting from this. But I believe in it 100%. And I’m out to prove that you don’t need a lot of money or a high IQ to save, invest intelligently, build passive cash flow, and become financially independent. It’s just a wonderful system!

    Glad this is working for you thus far. You have an incredible advantage being 24 years old and already starting. Truth be told, you could see very mediocre/subpar returns and still probably achieve massive success by the time you’re 40. Time is extremely powerful in that way. Keep at it.

    Best regards.

  106. Less of a industry theme than a style theme for me. I started investing with high yield and have gradually gone for higher growth and lower yields. I still get into the juicy yield names when I think they are priced right and they fit a need that helps the portfolio overall, but otherwise I’m fine with much lower current yield if I believe the industry makes sense.

    WFM and SBUX were two notable positions this year that I probably would not have gotten a year ago, but I’m probably moving more toward a value orientation rather than an arbitrary yield or other limit. Even a zero yield stock is fine if I believe it’s reasonably valued and has a decent margin of safety… although some yield is helpful to establish a floor of sorts.

    Looking forward to growing any way the market lets me! After all, we buy what makes sense today and hope for the best. More often than not things should work in our favor.

    Happy 2015! Looking forward to seeing 200k in your account and my own

  107. I agree with a lot of DM’s reply regarding the utilities. That being said, I still own ED, SO, and D in my portfolio but overall are smaller positions relative to my consumer staples, industrial and financial stocks. I think utilities can be a great addition to any DGI portfolio just not as a core holding.

  108. I also believe he should be in a Roth IRA, but to each his own. Item #1 is a fallacy though. You can always take out contributions at anytime without penalty from a Roth IRA. So if DM (or you) were to put in an average of $6k year for the next 9 years you’d have $54k you could easily take out till you hit 59 1/2 to take out the rest without penalty.
    You might argue that $54k is not enough to get to age 59 1/2 but you still have your after tax account that was getting funded with the remaining investing money. That is running at $18k+/year plus DM will still have some income since he’s not going to stop writing when he hits FI or ER (at least I hope he doesn’t) so he’d easily be able to live off the measly $3k/yr he would only be able to pull out of the ROTH assuming the taxable and writing income didn’t already cover his expenses.

  109. CHD is indeed a little bit expensive. The valuation of the stock rose the last few months to an all time high of $ 80. Perhaps you could consider buying Reckitt Benckiser. Although RB lowerd its dividend by GBP 0,01, it’s still a great business with enourmous durable competitive advantages and plenty of room for growth. The dividend increases in 2008-2012 were huge for a consumer goods company.

    CHD and RB are a little bit the same sort of company. CHD is 1/3 of the market value of RB. CHD has Trojan condoms, RB has Durex condoms and Durex play (dildo’s pleasure gels etc) CHD has KABOOM, RB has Cillit Bang. I can give you much more examples.

    I bought RB in May 2011 when Mister Market only considered the patent expiration of Suboxone (a drug that helps heroin addicts stop using heroin.) and RB was trading 13 times earnings while Suboxone only slightly contributes to the sales and profits of the company. Suboxone is now part of the spin-off company Indivior PLC.

    Of all the stocks you mentioned you should by RB or CHD, because of their enourmous moat, which is like an inpenetrateble castle with big concrete walls, wide casle moat and drawbride. You’ve got Coca cola, Pepsi cola, other cola’s. You’ve got Sprite or 7Up. You’ve got a Wells Fargo bank account or an US Bank Corp accout. You’ve got BIG MAC (MC Donalds) or a Whopper (Burger King), You’ve got Shell, Texaco, Exxon or BP tank stations to fill up your Ford, Chrysler or Volkswagen. You can wash you’re clothes with Ariel, Dash, Omo, Persil and brush your teeth with Sensodyne Oral B, Elmex, Prodent or Colgate. But you can only have safe seks with Durex (Europe) or Trojan (US). I can’t mention any other brand like Durex (Trojan isn’t widely available in Europe and Durex in the US). You can’t mention any other product like Durex, imagine if you can buy it in the stores!

  110. Just finished the year by adding 20 more shares of PM. I started with dividend investing earlier this year and I’m on track to hit a portfolio value of over $25,000 by early January. Next year will probably be a bit slower though as purchases will have to come from new rather than old savings.

    I hope RDSB drops again in January, it’s pretty strange how oil stocks have rebounded while oil keeps crashing.

  111. Well, I ended up making my final purchase of the year and took advantage of the dip in BP to average down my cost there. I’m a little iffy having that as my single biggest investment right now, but after my wedding in April I’ll be able to do significant monthly purchases and spread the risk a bit more evenly across more than my 6 current companies. Thanks Jason for all the great advice this year, and I’m really looking forward to what’s to come for you in 2015!

  112. Happy New Year, Jason! My main theme for 2015 is getting back into the ring and continuing to build my portfolio. I starting a full time job again this week and keeping my part-time job as a side hustle! It’s been four months since I’ve been able to add any fresh cash into my investments, and I’m incredibly eager to begin again. Thanks for the encouragement this year! I’ve enjoyed reading about your journey and wish you the best for 2015.

  113. DD,

    Agreed. CHD is a bit expensive here, even for a stock that is typically a bit pricey.

    Reckitt Benckiser is an interesting alternative. I’ll definitely have to take a good look at it.

    I also love the consumer products companies. They tend to build wide economic moats through the power and recognition of their brands, which leads to economies of scale, market share, and pricing power. This is where the majority of my portfolio is concentrated right now and I hope to keep it going that way for a long time. I certainly love other sectors, but many of the consumer defensive and discretionary stocks tend to do really well through all economic cycles due to the ubiquitous and oftentimes required nature of their products.

    Thanks for the suggestion!! 🙂

    Best regards.

  114. Martin,

    Thanks for dropping in from Germany!

    I agree. HP seems particularly cheap here. However, I’m concerned over the economics of the drilling industry. Seems to be pretty brutal and fragmented. If I were to buy a driller, however, it would be HP. 🙂

    Best wishes!

  115. ThomasDV,

    Nice buy there. I think PM is one of the greatest opportunities available on the market right now. I’d be buying myself if I didn’t already have 115 shares. Glad to be a fellow shareholder. 🙂

    Congrats on all the success. $25k is a great start. It only gets bigger and better if you keep at it.

    Take care!

  116. IrishBrian,

    Best of luck with BP. I’m a shareholder as well, though it’s a somewhat small position. I think it’s a rather aggressive play in regards to its risk/reward profile, but it’s not like the company is going bankrupt. It looks increasingly likely that they’ll owe the full $18 billion, but they can afford it. And I’m sure they’ll spread that bill out over as long a period as possible.

    Appreciate all the support. Looking forward to an even better 2015 for all of us!

    Best wishes.

  117. Kate,

    Thanks for dropping by!

    Congrats on grabbing a full-time job again. I hope it’s just want you wanted. Always a trade-off between time and money, but the latter can buy the former if we’re intelligent about it.

    Wishing you the best throughout 2015 as well. Excited to see you start putting some capital away again and marching closer to financial independence. 🙂

    Best regards.

  118. That is a nice template on stocks for us to watch and get ideas. Thanks for putting it together!

    Earlier in the month, I did some resesrch on the healthcare REITs you talked about. Ultimately, I purchased LTC. I liked LTC slightly better then VTR or HCP due to its Return on Equity. The monthly dividends are a bonus too! However, it looks like VTR definitely outperformed the group as a whole the last few years. I think the healthcare REITs is a good way to play both the healthcare and REIT space with aging baby boomer population.

    Thanks again for putting these watch stocks together.

  119. I’ve got a close eye on the railroad companies. I own planes and automobiles in my portfolio, but it doesn’t have quite the same ring without “trains” in it! 🙂

    Great list of stocks. With the exception of EV (which I’m going to take a closer look at now), every single company above is either in my portfolio or on my watchlist.

    Happy New Year!

  120. You’ve been eying a lot of the same companies I have. I’ve spent the last few months eying SWK and BDX like a homophobic 15 year old eying the latest Call of Duty (what?), and I’ve also been looking to get my hands on 3M. But these companies are always so damn expensive, and I’m trying to not be THAT overweight in energy, which is where all the value seems to be. I’ve been taking a look at Parker Hannifin (PH) and while I haven’t done a full analysis, I like what I see there.

    Good luck to you in 2015!

  121. Paperboy,

    LTC seems like a solid pick as well in this sector. Hope it works out for you! I currently own OHI, which has served me pretty well. But I’d like to add one more. Agreed that there are some pretty solid demographic tailwinds going on here. 🙂

    Thanks for dropping by.

    Happy New Year!

    Take care.

  122. Seraph,

    Ha! Definitely gotta own planes, trains, and automobiles. 🙂

    The list here is pretty comprehensive, though there are still quite a few other stocks on my watch list that I didn’t go over here. This article would have been twice as long had I gone into everything. But I’m sure I’ll bring up some of those other stocks at some point or another.

    Happy New Year to you as well. Let’s have a great 2015!

    Best wishes.

  123. Joey,

    I tell ya, I missed out on BDX big time. It’s a shame. Great company. So many stocks, so little capital.

    Parker Hannifin is a great company as well. Last I looked, it appeared a bit expensive, however. Excellent track record, though.

    Happy New Year. Excited for what 2015 brings us!

    Cheers.

  124. Great post Jason.

    PX, UTX, BDX, UNP, and TRV are all in my portfolio, and I am a happy owner. When UTX dipped to the low 100’s this year, I loaded up on them. I also recently bought BA after they announced the large divy increase.

    This year I have my eye on BLK, CB, and more UNP on the next correction/dip. When I fund my Roth IRA for 2015 in a few days, I think I will add to my TD, and UL positions. Solid yields, and a decent value in my opinion.

    I don’t like selling but have toyed with the idea of taking some profits on APD, and moving it over to PX. I think APD is overvalued from all the Ackerman hype, but the share price just keeps rising….

    I bit the bullet and bought a very small stake in CL last year. My wife brought home some Colgate tooth paste, instead of the normal Crest (long time PG holder), and I wanted to make sure I wasn’t brushing my teeth with a product from a company I didn’t own! haha- have a great new year.

  125. presone,

    Great companies there in your portfolio. I surely hope to join you at some point here.

    I agree that APD looks pricey. I’m surprised that it has risen so much and continues to rise. I’m not quite sure Ackerman deserves all the hype, but it is what it is. I think APD is a fantastic company, but the valuation appears awfully stretched here.

    Nice move there with CL. It would bother me like crazy to brush my teeth with toothpaste from a competitor! I faithfully brush with Crest, but I’d love to own a chunk of Colgate. The stock is chronically expensive. Of course, it may remain that so for decades to come. Hard to say.

    Thanks for sharing. Best of luck with your investments over the next yer and beyond. 🙂

    Cheers!

  126. DM,

    Have you ever looked at EQR (Equity Residential) to fill in your REIT section? It is multi-family which may well be at its peak right now but the stock has paid off for me since I invested back in the spring. Just curious! Great post.

  127. talk2otto,

    I’ve never looked at EQR. Looks like it’s not a dividend growth stock, which is probably why it’s never been on my radar.

    REITs in general had a spectacular 2014, much to the chagrin of all those that were predicting they’d do horribly due to supposed rising rates. Never can predict things like that, which is why I don’t bother.

    Thanks for the support! 🙂

    Best regards.

  128. DM,

    As my name implies I am new to DGI and investing in general. I decided to take the plunge while energy/oil prices are low and initiated a position in XOM (my first big purchase hooray!). I see you mentioned NOV and was wondering what your opinion is on strictly offshore drilling companies such as RIG and NE? Their prices look so enticing at the moment and seriously considering making a purchase next week. Also, love the blog, always looking forward to new posts and updates!

  129. Noob,

    Welcome to the world of dividend growth investing and seeking out financial independence. 🙂

    I’m not a huge fan of drillers in general. It’s really hard to build any competitive advantages. The industry is pretty brutal, as it’s heavily competitive and fragmented. And the economics don’t seem to really be all that favorable. Looking at the cash flow that many of the drillers generate, and it’s not very pretty. And that’s probably why there are very few drillers out there with lengthy dividend growth streaks. HP would be the one of the exceptions, but it just recently started paying a rather large portion of earnings out in the form of a dividend.

    Be careful not to be blinded by high and unsustainable yields early on in your journey, or really at any part of your journey. Stick to quality. Seadrill was extremely popular not all that long ago. But it lost a lot of people a lot of money. I wouldn’t be surprised to see RIG follow a similar story due to their cash flow situation.

    RIG isn’t really anywhere close to XOM in the universe of dividend growth stocks. That’s because it’s not one. It has no history of rising dividend payouts. So I would probably take some time to really figure out what kind of investor you are and then try to stick to those tenants. RIG would be more of a deep value play/speculation, in my view. It’s not a long-term dividend growth investment by any stretch of the imagination.

    Cheers!

  130. Hi Noob,

    As DM said, don’t get burned by high yield. For the long term it’s much better to invest in dividend growth rather than current yield especially if that yield is not sustainable.

  131. Hi

    You mentioned an increase in Shipping in the next ten years, I think that is right. -What about the shipping container companies like Textainer (TGH) and TAL Int. (TAL)? These offer a good dividend and seem to go hand in hand with a railway play. Any drawbacks?

  132. Thanks for the great article on your thoughts.
    Noticed you didn’t mention OXY?
    Just a case of you already having to much in energy?
    Otherwise I’m ready to jump in with both feet

  133. James,

    Those shipping container companies don’t seem like very solid investments to me. They basically provide a commodity of sorts. But the bigger problem is their fundamentals. Poor cash flow and increasing indebtedness reminds me of the economics of some other companies out there, like Seadrill. I’m honestly not sure how these firms continue to pay out these dividends, other than perhaps tapping debt and equity markets. If that is the case, that will eventually catch up to them.

    I try to stick to high-quality companies, but these types of firms are really the complete opposite. Just my view on it.

    Cheers!

  134. Bill,

    Right. These themes are really some areas that I think the portfolio needs exposure to. My personal exposure to energy is already too high, which is why I refrained from including any specific stocks there. OXY seems like a solid E&P play, though I generally prefer the more integrated majors. I actually just wrote about OXY as a quick check on the fundamentals/valuation:

    http://dailytradealert.com/2015/01/04/undervalued-dividend-growth-stock-of-the-week-15/

    Best regards!

  135. Thank you so very much for your good investment ideas.

    Of all those stocks, I am now very interested in TROW, BEN, CB, HCC
    The ones which I think are stkll too expensive for me are : NSC, EV, UTX, PX, NOV

    Great list anyway

    My gratitude,

    Aspenhawk

  136. Aspenhawk,

    Glad you enjoyed the list. Hope you found some value in it!

    There are few stocks up there that are particularly attractive right now, but I hope to own a good chunk of them by the end of 2016. We’ll see what values come our way. 🙂

    Best regards.

  137. Allan,

    Well, the whole index fund argument is put forth because of diversification and low fees. And that’s basically what dividend growth investing is, except it really improves on it. The fees will likely taper off just as index fees increase, you can own what you want and not own what you don’t want, improve on the quality, and increase your income. It’s taking what’s an already pretty solid system and improves on it, in my view.

    As far as returns go, I think any dividend growth investor who has a pretty decent handle on all of this will outperform the broader market over a long period of time. Of course, that’s really of no concern to me. But I have a pretty good idea of what the S&P 500 has done over the last few years. And I know exactly what I’ve done. And I’ve definitely exceeded that benchmark.

    But there are definitely drawbacks to this strategy. Primarily, there is the time/interest aspect. If you lack the time and/or inclination to invest in individual stocks, then you’re better off just owning an index fund.

    Cheers!

  138. Hello Jason,

    another comment by me today… Just as a further suggestion for some diversification towards Europe, I recommand to have a closer look at Munich Re, the german reinsurance company. They are very good at buybacks and have a nice dividend yield and a good dividend history. Even Buffett holds a quite large position of them in his portfolio, although he is normally not so inclined to buy shares of foreign companies. I know there is the tax problem, which I do regularly face (approx. 25% tax for any annual dividend income over 1602 Euros for married couples), but nonetheless it is a very attractive investment from my point of view, especially if the price comes down to 150 Euros or below again.

    Best regards,
    Ralf

  139. Ralf,

    I appreciate the suggestion!

    Unfortunately, it just doesn’t seem to make a lot of sense to me to go after a lot of German stocks. I stick with stocks that are listed on a US exchange for ease and I generally go after those stocks that are advantageous when it comes to foreign dividend tax withholding. I basically go after the low-hanging fruit.

    You can read about my foreign stock strategy here, if you’re interested:

    https://www.dividendmantra.com/2014/11/considering-foreign-domiciled-dividend-growth-stocks/

    But if I were living in Germany, I’m sure I’d be invested in Munich Re, or consider it. But I’m lucky in that the universe of stocks available to me as a US investor is already so large to where it doesn’t necessarily behoove me to go searching across the globe for substitutes. There are a lot of high-quality insurance and reinsurance companies right here in the US.

    Best wishes!

  140. I am working out the companies to make a Motif of various financial companies across a wide area of services, to cover the range of examples like TROW,BAC,VOYA,RJF, etc. there are several regional banks that I think can strongly support their location niches better than the big boys can.

    I am thinking of getting around 15 for now in the initial purchase of the motif and adding more after about 6 months or so. They all will have at least a positive dividend yield, and I will try to mix up about half towards future growth more that current yield.

  141. DG,

    I’ve looked at the Motif platform a few times now. Not sure I really see the value in it. Seems gimmicky to me. I think if I were looking for instant diversification with low costs like that, I’d probably just buy an index fund. I think it’s probably a good tool for those that lack regular, sizable capital to work with for stock purchases. But index funds or ETFs could probably work well in that case as well. In the end, I say go with what works. 🙂

    Cheers!

  142. Of the stocks you mentioned, the ones I am most interested in are UPS and NSRGY. I also really like MMM and UTX as companies, but they are so far away from the price where I want to purchase them that it’s very unlikely I will be purchasing them any time soon. There are many, many excellent companies in the world, but not always excellent valuations. But I am happy to be patient and wait for the entry price I want.

  143. S.B.,

    I’m with you there. Excellent businesses up there. Unfortunately, the prices aren’t excellent for most of them. UPS has surprisingly grown somewhat slowly over the last decade, but I’m still very excited for what still is yet to come for them.

    Here’s hoping we get some better valuations over the next 12-24 months with these and other stocks. 🙂

    Thanks for sharing your thoughts!

    Best regards.

  144. I really like the retailers here but unfortunately they are all too expensive at the current prices. Because of this I look at GPS. What do you think of Gap Inc, espacially at these price?

  145. mephisto1104,

    Yeah, I took a quick look at Gap for an outside article maybe a month or so ago. I was surprised by the strength of the business. Revenue is essentially flat, but a strong buyback policy has propelled the increasing EPS and dividend. The fundamentals across the board are actually not bad at all. I think the big question there is whether you want to be in the clothing/fashion business or not. I’m still not sure about that personally.

    Cheers!

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