Five High-Quality Dividend Growth Stocks That Look Very Appealing After Recent Volatility

lookingBlink and you miss it? 

The broader market is already on its way to recovering after the recent volatility. That’s rather unfortunate. I’m a huge proponent of dollar cost averaging, assuming that one will hit the highs and lows along the way. That DCA strategy is made even more powerful when one has the ability to choose among hundreds of high-quality dividend growth stocks, with some highly likely to be much more attractively valued than others at any given time.

However, it’s tougher to catch the lows when they quickly disappear like we’re seeing now.

Nonetheless, time in matters far more than timing.

Moreover, a number of really incredible dividend growth stocks with excellent fundamentals and huge competitive advantages are still sitting near multi-year lows right now.

I’m going to list five high-quality stocks that appear to be attractively valued right now. Many were already attractively valued before the recent volatility, but have since become even more attractive. There’s nothing saying a cheap stock won’t become cheaper. But value eventually matters over the long run. Let value be your guiding star, not price.

United Technologies Corporation (UTX)

The last time this stock was in the low $90s was back in the summer of 2013 – more than two years ago. But revenue and profit are both up somewhat significantly since then. And the move to sell off low-margin Sikorsky is really smart, in my view. I initiated my position in the company not long ago at right about $99/share, which I thought was already very attractive after a drop of more than 13% on the year. It’s now down 20% year-to-date even though nothing is fundamentally wrong with the business.

22 consecutive years of dividend growth, a 10-year dividend growth rate of 12.9%, a low payout ratio, a yield that’s currently more than 50 basis points over its five-year average, and strong fundamentals across the board make this a very appealing play right now. I’m highly likely to add to my position over the coming weeks. The broader market may be near all-time highs, but UTX is sitting at multi-year lows right now on a P/E ratio of 13.28. I consider this a great example of using short-term volatility as a long-term opportunity.

Union Pacific Corporation (UNP)

I’ve been aggressively building out a position in Union Pacific, which is the country’s largest publicly traded railroad. The company has lost almost 30% of its market cap over the last year. Is the company worth almost 30% less now than it was in January? I just don’t think so. While the stock didn’t appear to be overly cheap from the start, it’s now overshot itself on the other side, in my opinion. For that matter, the other two large, publicly traded domestic railroads appear to be very attractive right now.

UNP’s P/E ratio is 14.68 right now. That’s substantially lower than the five-year average of 17.5. Meanwhile, the current yield of 2.58% compares insanely favorable to the five-year average of 1.7%. Union Pacific has been making money for over 150 years. I don’t see this changing anytime soon. And I expect dividend growth in the upper single digits or low double digits for the foreseeable future.

Johnson & Johnson (JNJ)

Although I’m not buying anymore JNJ after building out my position of 100 shares rather early on, I’d be all over this stock here if the situation were different. We’re talking about one of the greatest businesses in the world, diversified between medical devices, pharmaceuticals, and consumer health products. And the odds are quite strong that the company will be selling more of all of these products in the future as the world grows larger and older, with more access to quality healthcare in poorer economies. Unbelievably consistent over the long run, it’s trading for a somewhat substantial discount to the broader market.

The price of JNJ right now is similar to what it was in August of 2013. But the company is now bigger and better across the board. You have an opportunity here to pick up a more profitable JNJ of August 2015 for the same price a smaller JNJ was going for in August 2013. The P/E ratio of 16.82 is a nice discount to the five-year average of 17.7 for the stock, which itself is a nice discount to the broader market over that stretch. You get a yield above 3%, over 50 consecutive years of dividend raises, and a dividend growth rate near 10% over the last decade. I don’t know what else you could want.

BHP Billiton PLC (BBL)

Although a good portion of the stock’s price reduction has been warranted due to lower prices for major commodities across the board, the steep pullback has created a wonderful long-term investment opportunity, in my opinion. For perspective, we were in the midst of a financial crisis and Great Recession the last time the stock was in the low $30s. Meanwhile, the world’s need for the resources that BHP Billiton mines for isn’t going to disappear anytime soon. Operations are cyclical. If you go into it realizing that, there’s a chance to capitalize there. And this stock has rarely been cheaper over the last decade.

The near term remains challenging for this firm. Recent full-year earnings per ADS came in at only $0.72 after substantial non-cash impairments were included. But free cash flow remains surprisingly robust in part thanks to a sharp reduction in capital expenditures that is expected to continue through at least 2017. This – along with a very solid balance sheet – should allow the firm to continue paying the dividend, absent further weakness in commodities. And what a dividend it is. The stock currently yields 7.34%. I’m not sure how much dividend growth one should expect over the near term, but I’m also not sure how much one needs with a yield that high. This is a long-term value play with a big yield. Not for everyone due to the risk and volatility, but I do think there’s an opportunity here.

T. Rowe Price Group Inc. (TROW)

Another stock that was already cheap, it’s now in the bargain bin. TROW is down more than 15% on the year even while operations continue to improve quarter after quarter, year after year. Absent some very modest net outflow in AUM recently, the company appears to be firing on all cylinders. One issue here, however, is that the company, by the very nature of its business model, has significant exposure to equities. So when stocks fall, the company’s bottom line can suffer. But there’s clearly a disconnect here since the broader market is down just a little over 4% YTD.

The stock’s price-to-earnings, price-to-book, and price-to-sales ratios are all substantially below recent historical norms. Meanwhile, the stock now yields 2.88%, which is almost 90 basis points higher than the five-year average of 2%. 29 consecutive years of dividend raises stretches through multiple periods of stock market volatility, so I don’t see any danger here. Couple that with a very low payout ratio, and strong dividend growth looks set to continue for the foreseeable future.

Conclusion

The five stocks above represent but a fraction of the high-quality dividend growth stocks out there available as discounted merchandise, sitting on the clearance racks in the back of the store. While it’s up to you to decide what’s warranted and what’s not, I think there are some solid long-term opportunities here.

In addition, there are many, many other great stocks out there sitting at multi-year lows even while operations remain strong. Some of the Canadian banks come to mind. A few tech plays as well. Many fantastic stocks in the Industrials sector remain wildly undervalued right now. And select names in the Energy sector also appear very appealing, though not without volatility.

As always, I recommend due diligence before you invest in anything. But from where I’m standing, I think the above five stocks are gifts here. Again, prices could go anywhere. Cheap stocks could become cheaper. But over the long run, value eventually matters. And it’s value (along with quality, of course) that dictates my buying decisions, not price. Meanwhile, the yields here are notably above historical norms, providing excess current income on top of strong prospects for fantastic dividend growth, in aggregate. And that, of course, also provides the recipe for appealing long-term total return.

Full Disclosure: Long all aforementioned stocks.

What do you think? Are these five stocks in the bargain bin? Anything on your radar right now? 

Thanks for reading.

Photo Credit: bplanet/FreeDigitalPhotos.net

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115 Comments

  1. Great choices Jason. Unfortunately I had only limited cash available, but nevertheless I managed to substantially average down on my CVX cost. That makes me very happy. So many opportunities and so little cash. 🙂
    I was wondering, what is your view on BAX? It seems that the dividend on new BAX + BXLT is less than the dividend of old BAX.
    Cheers.

  2. BBL seems like an awesome opportunity!! Do you know how many years they have raised their dividends straight? I was coming across conflicting information in my own research…

  3. I suppose what I am really curious about is if you think there is a chance that they would cut their dividend? The payout ratio seems fine… and it appears that they have been raising for at least 4 years, but it looks like they have tried to raise it solid for at least 10 … again, I am seeing conflicting data depending on the sources I look at…

  4. There are so many appealing US stocks right now, too bad the CAN dollar is so weak compared to US dollar. I’d love to buy more JNJ and initiate a position for BBL.

  5. Jason,

    Absolutly great list, almost similar to my wish/watch list (except BBL).

    BBL looks little risky to me. As you mentioned, we can’t expect a decent dividend growth near future.

    I recently bought TD, TRP and ENB. They were super cheap last monday :D.

    Cheers

  6. Jason,
    I am in total agreement. These are excellent dividend growth companies. All 5 are on my list to buy. I bought some JNJ earlier this week. I am trying to balance my portfolio, so TROW and UNP are slightly lower on my list.
    D4s

  7. Great picks Jason

    I would love to get my hands on some JNJ after the recent price drop.

    There are so many others as well, but no cash. Maybe I should play lottery 😉

    Take care
    Dividend Freedom

  8. Jos,

    I hear you, my friend. We’ll never have enough cash for all the stocks we want. I could be given $20k tomorrow and it probably wouldn’t be enough. It’s just one of those things. Gotta have patience since it’s a journey that takes place over the course of many years. 🙂

    I mentioned BAX/BXLT a bit recently. My views haven’t changed since then:

    https://www.dividendmantra.com/2015/08/dividend-income-update-july-2015/

    Let’s hope we’re back shopping again with some new capital quickly!

    Best regards.

  9. JaC,

    The best place for information on dividend growth streaks (for US-listed stocks) is David Fish’s CCC list. I’ve listed it as a resource here on the blog, but this is the link:

    http://www.dripinvesting.org/Tools/Tools.asp

    You’ll see 12 consecutive years of dividend growth there.

    As far as a dividend cut goes, I view it as unlikely. But the dividend could be in danger if low prices are protracted for many years to come. We’ll see. Either way, it’s a huge dividend payer at this price.

    Cheers!

  10. Tawcan,

    Yeah, I imagine the currency exchange rate adds a degree of difficulty. Fortunately, you guys have many great dividend growth stocks up there trading at pretty attractive valuations. 🙂

    Thanks for dropping by!

    Best regards.

  11. bbl is on my rader big time would addto it if i had more cash, today i added to my small position in sflmy resheatch shows fair value at $22.00 bought 1 share to day $16.03 i have ahabit of adding to my divi stocks when they increase thier dividend. price drop and dividend raise caused me to act right or wrong it is done bbl is next mybt in a week or so hope itstays in loww 30’s oh am auto reinvest all my dividend stocks

    tom d

  12. FJ< Nice. The Canadian banks have been really killed over the last couple years or so. Many are trading at similar prices (or less) to what they were available for years ago. That's consequently pushed the yields up quite a bit. Good opportunities there. Keep it up! Cheers.

  13. D4s,

    Nice! I’d be all over JNJ here if I didn’t already have enough. I don’t know what else you could want out of a company. 🙂

    Glad to be a fellow shareholder with you.

    Best wishes.

  14. DF,

    Ha! This strategy is way better than the lottery, my friend. Odds are just a tad more in your favor. 🙂

    Thanks for dropping by. Let’s keep marching forward!

    Cheers.

  15. Tom,

    I’m with you. I’m pretty much maxed out on BBL, but I may, just may, add one more very small tranche here if it stays low before the next ex-dividend date. A couple more days like today, however, and I’ll probably just hold off on that. It’s really become a larger position than I ever set out for. And so I have to manage that risk appropriately.

    Glad to collect that monster dividend alongside you. 🙂

    Take care.

  16. Jason,

    Just bought JNJ, DEO, and BNS. How woefully short the volatility lasted however .

    Guy

  17. Guy,

    Indeed. Hopefully, we see more volatility next week. You never know. Stocks could drop by 10% tomorrow. I just go into it with a very long-term view.

    Nice job picking up a basket of great stocks there, though! 🙂

    Best regards.

  18. FV,

    Yeah, it’s definitely a long-term call there. I have no idea where things are going over the next year or two. But I’m confident BBL will do very well over the next 10-20 years. We’ll see!

    Cheers.

  19. Thanks for the analysis, Jason. Kinda surprise you haven’t mentioned any oil stocks yet, aren’t CVX, XOM, COP, etc are looking much valuable than ever or do you think they will go down much more?

  20. I love these kind of articles because they directly persuade the reader to take action! All the knowledge and research in the world won’t do you any good if you don’t actually go out and buy the stocks! Buy one share, buy 1000 shares, whatever your income will allow. BBL is my biggest losing position, down 35.6%, and that’s after today’s 7.5% gain, but I’m sticking with it, and went overweight as the price continued to plummet. What a great deal. I also went overweight on JNJ and UTX by about 10% after this recent dip. (They were previously already at full positions.) I’ve been watching you purchase UNP recently, and yesterday decided to purchase a full position all at once, (a rarity for me) so I bought 727 shares at $82.57. The only one of the list I haven’t been following is TROW, I’ve got my eye on BEN instead, it seems massively undervalued. That will be my next conquest. How could you not LOVE buying your freedom a dollar (or a share) at a time. Your inspiration make a bid difference. Thanks for all you do!

  21. Alcwj,

    Yeah, I’ve been hearing about CVX since $90 and XOM since $80. The thing is that oil prices dictate a good chunk of their possible profit. And with oil down here where it is, I’m not sure these are great values. I picked up XOM at $84 when oil was about $100 barrel. Is it a better deal here at $75 with oil less than half? I guess you’ll have to be the judge of that.

    Cheers!

  22. dividenddad,

    Indeed. I get a lot of emails from readers that seem to suffer from analysis paralysis. All the research in the world means diddly if you aren’t willing to put capital to work.

    And it sounds like you’ve been doing plenty of that. I don’t have that kind of firepower (727 shares of UNP??), but I admire those that do. Keep it up!!

    Best wishes.

  23. One company I’m looking at is 3M. I haven’t done the heavy duty analysis yet (including my going to their website and looking at their products), but I love the sort of industrials/consumer staples that makes up what I know of their product line. My job has Nexcare hand sanitizer in the kitchen and I would love to have that feeling of ownership whenever someone uses it (I love seeing my business’ products out there being used). Plus there’s Scotch tape, which I consider a “universal brand” (a term I made up that I define as a brand that people will use when referring to any product of that type even if not made by that company. Band-Aid and Vaseline are two examples, since people will always refer to all adhesive bandages as Band-Aids and all petroleum jelly as Vaseline even if they aren’t manufactured by Johnson & Johnson and Unilever respectively). I love it when companies have those. How could money not just flow in? And right down to us shareholders as well.

    UNP I watched go down to $80/share and is now at $86. I won’t have the money to invest until next Friday, so this was painful to watch. Opportunity comes and goes. That said, it’s current price is still great and I would buy UNP right now if I could.

    The Conservative Income Investor did a great write-up on BBL. At first glance I would have passed it up. It’s P/E ratio is comically high right now, but that’s because earnings are so depressed. Why? Commodity prices. And if that’s why, then even at such a high P/E this company is a steal between $30-40. Like Tim McAleean (I hope I spelled that right) said on his blog, it’s better to get it at that price range than at between $50-60.

    I hope the RECOVERY was a blink and you missed it event. I know timing the market doesn’t get you that far, but I’d like as much value for my investment dollar as possible. So let’s hope the volatility continues for a little while longer (meaning 6-12 months. Too much to ask for?).

    Sincerely,
    ARB–Angry Retail Banker

  24. Hi,

    JNJ is the STOCK. My favorite one with KO and UN. Hope to see around 90$ and average down a little bit. I think we could see good price in the coming weeks.

    cheers from Spain.

  25. It’s a shame to see the markets recover as quickly as they have, of course that doesn’t mean they can’t move back down! I didn’t get to participate in this volatility and scoop up some wonderful companies but that’s only because capital is almost nonexistent right now. There were so many great companies that have seen ridiculous amounts of share price decline for absolutely no reason.

    The industrial sector is looking really good here with both UTX and ETN offering solid long term value. All 5 of the companies you listed are on my radar and I hope the share prices continue to decline or at least stay steady until I’m ready to start pumping capital back into the markets.

  26. DM,

    I suspect there’s well more than five floating around but great list nonetheless. You have to start somewhere 🙂 Personally I own four of your five picks and the fifth (UTX) is on my watch list.

    I wasn’t as able to be in front of the computer as I would have liked during the recent big dips and as a result missed Monday entirely. But I did manage to finally initiate a first position in WFC at $52. I’ll take it 🙂

    As for those of you feeling like you missed out, be patient. Friday could easily see the market dive right back down several percentage points. There’s always more market days ahead.

    Best,

    DWC

  27. ARB,

    Good stuff there. Love MMM. It’s a stock I definitely regret not buying many years ago, but it’s dividend growth wasn’t as impressive, say, three or four years ago. But they’ve been absolutely killing it over the last few years. And that’s sometimes why you have to take past numbers with a big grain of salt. We invest in where something is going, not where it’s been.

    BBL’s EPS is depressed due to low commodity prices for sure, but you’ll see a lot of impairments there if you look through the press release. EBITDA wasn’t that far off, though, and FCF actually surprised me a bit. They’re in good shape for now and reduced capital expenditures will help relieve some pressure. These periods where commodity prices are weak just strengthens a big player like BBL. Excited to see where they stand a few years from now.

    Have fun shopping over there. I’ll keep my fingers and toes crossed in hopes that greater volatility lies ahead. 🙂

    Cheers!

  28. Javier,

    Johnson & Johnson is a fantastic company. They had some tough times there a few years back with some recalls and I was glad to pick some up when I did. But I’d be on it here if I didn’t already have so much.

    Let’s hope you’re right there about the coming weeks. 🙂

    Thanks for dropping by from Spain!

    Best regards.

  29. JC,

    I’m with you, bud. I certainly wasn’t try to time things or sit on the sidelines in hopes of greater volatility. I just dollar cost averaged my way into August a bit too soon. Not much one can do about that, though.

    We’ll see how it goes. I do hope things get even more exciting from here. And I hope all is well with the family over there.

    Best wishes.

  30. Alexg,

    WMT is another great example. You’re getting WMT of 2015 for WMT of 2012 prices. Talk about a rollback! 🙂

    I’m not a huge fan of retailing, but WMT is tough to pass up here. One of those things where I have to decide if I want any more exposure there. If I didn’t already have a pretty full position there, I’d be looking at WMT strongly. And I might just go ahead and add one more tranche anyway. We’ll see. Some pretty attractive opportunities out there. It’s good to be a dividend growth investor, as always.

    Cheers!

  31. DWC,

    Ha! No doubt about that. I could have just as easily titled this article: “Twenty High-Quality…” But you have to draw the line somewhere. 🙂

    Couldn’t agree more with your sentiment there. The market could drop huge tomorrow. Or Monday. Or Tuesday. Or not. Nobody knows. The best you can do is find great stocks that fit your objectives/portfolio/allocation/income needs and buy when the value is there. Worrying about the rest is just a big waste of time. Stocks aren’t going anywhere. And neither is volatility, fortunately.

    Thanks for stopping in!

    Best regards.

  32. Jason,
    Good choices. I bought UTX, UNP, and TROW after the pullback. Would have added to JNJ but it’s our largest holding at over 4% of the portfolio. BBL is interesting if you want/need materials exposure.

    Enjoy the sunshine. We had a high around 64 degrees today. HA
    Keith

  33. I ended up grabbing some BBL yesterday at 31.47. very happy about that 7.9% yield on a strong company. So many good choices…hard to pick.

  34. Excellent choices! I had the good fortune to top off positions in JNJ and TROW during the slide. Here’s hoping that BBL stays on the discount shelf for long enough to follow suit!

    And thank you as always for the great content!

  35. Keith,

    64 degrees? In August? Never know what you’re going to get up there. Gotta love it! 🙂

    You made some solid moves over there. I’m thinking about the same stocks for next month. Won’t have enough capital for all of my ideas, but I should have enough for another big step in the right direction.

    Hopefully it warms up a tad for you guys for the weekend.

    Cheers!

  36. Ch1p,

    That’s a really great price there. That’s an incredible grab on a company like BHP Billiton.

    If they were going to cut the dividend, I’d think they would have done it with the recent results. Relief should be on its way for cash flow and there’s always a good chance for some upside to commodities, so I like the odds that they keep paying that dividend for the foreseeable future. We’ll see.

    Best wishes!

  37. Rome Builder,

    No problem. Happy to share. 🙂

    Nice moves over there. I probably still would have added to my UNP position if I knew what was coming, but UTX would have been another one I would have strongly looked at. Might double my position there over the coming week or two.

    Let’s hope for better prices!

    Cheers.

  38. Wow, talk about great minds think alike! I bought UTX and TROW for my spouse during the down turn ealier this week. I also bought her ETN, WFC, PG and KO. She was only one of us w dry powder.

  39. Mantra,

    Great list, I recently initiated a position in JNJ and it is getting awfully hard to continue sitting on the sidelines. Lowering my cost basis is too tempting. Lanny has been trying to convince me about BBL for the last few weeks as well. IT is one of the few stocks that I still do not own compared to the rest of the community. Is it time to correct this haha Man, there are just so many great discounts now…where do we even start!

    Thanks for compiling this list for us! Now it is time to ACT and take one giant leap closer towards financial freedom.

    Bert

  40. Good Day Jason
    This is a good list of stocks, and like you said their is a hole bunch of others stocks that can make this list too. While corrections do happen, I look at it as a time to add to the stocks I have, or to add new stocks at much lower prices . Its a win for long term investors to add on pull backs. These stock on your list should help the stock holders prosper over time. This was a well thought out article Jason well done.

    Cheers

  41. Your comment on the COP, CVX, XOM is intriguing. XOM, RDS.B, BP are integrated oil companies in which the earning offset from low crude prices are partially quenched by the increased profitability from their downstream and chemical sector’s earnings. XOM’s recent earnings is an classic example of how integration helped this oil major over CVX and COP. BP is going through turbulent time since the gulf spill, RDS.B’s acquisition of BG seemed expensive to me at a time when the cash flow is dwindling. XOM stands out as clear winner. Currently I own 980 of XOM and wouldn’t mind adding more via DRIP.

    I wouldn’t go near PBR right now. CEO, PTR, SNP, SSL, TOT, STO, EC, E, PZE might be worth considering if one wants to diversify within this sector.
    Other green patches in the energy sector with some upsides are ED, EMR, AEP, DVN, CHK, DUK, CCJ, and NGG.
    I will be curious to hear your views on my analysis.

  42. In the healthcare and related area, I am fully aligned with your views on JNJ. I do see more upside with GILD, BMY, DGX, RDY. The sector that has beaten most others in this difficult time seems to be health insurance and REITs. My picks in this area are BMR, UNH, MET, AET, HCN, UHT

    I am not seeing why you think selling of Sikorsky was a smart idea. Where do you think UTX is going to invest its sell proceeds. In my opinion BA, LMT, NOC, HON are better run than UTX and hence they ll have more upside.

  43. DD,

    We’re definitely on the same page there. 🙂

    Dry powder is dry powder, regardless of the account, right? Have fun over there!!

    Best regards.

  44. Bert,

    Sounds like you’re staying busy over there. That’s the name of the game. Continuously and consistently adding to the dividend income pile, slowly inching your way toward financial freedom, and slowly moving that snowball down hill. It’s fun to see it all come together in real-time. 🙂

    Let’s hope we get some solid deals in September!

    Thanks for dropping by.

    Cheers.

  45. Michael,

    Absolutely. This kind of volatility is exactly what we want to see. Short-term volatility is a long-term opportunity. Cheaper stocks means higher yields, which means we’re that much closer to accomplishing our goals. 🙂

    In addition, it makes those buybacks even more accretive. Hoping it gets way crazier!

    Thanks for dropping by and sharing your thoughts.

    Best wishes.

  46. George,

    Definitely. I like the integrated plays because of the downstream’s ability to stabilize things during times of volatility in energy prices.

    However, your statement: “XOM’s recent earnings is an classic example of how integration helped this oil major over CVX and COP.” makes no sense to me. Exxon’s Q2 2015 EPS was 50% lower than Q2 2014, which is in line with the drop in oil. Again, the price of oil has a major impact on their ability to turn a profit. Q1 was the same story. And I would expect much the same for Q3. As these low oil prices work their way through earnings, I’ll look for more volatility. I’m heavy on some of these energy plays, so I’m in no hurry.

    Like I mentioned, I bought XOM at $84 when oil was $100/bbl. Oil is less than half that (as is XOM’s earnings) and XOM’s stock price hasn’t budged much. I’d hope to snag it quite a bit lower from here. We’ll see.

    Take care!

  47. George,

    I hear you there on GILD. Probably more upside due to the strong growth from the HCV pharmaceuticals, but it’s a speculative play for me due to the new dividend policy. Looking forward to seeing how it plays out over the next decade or so.

    “I am not seeing why you think selling of Sikorsky was a smart idea. Where do you think UTX is going to invest its sell proceeds.”

    I discussed all of that when I analyzed UTX:

    https://www.dividendmantra.com/2015/08/recent-buy-82/

    Hope that helps!

    Cheers.

  48. Ravi,

    I like Richard Kinder’s view on it. If someone is selling high-quality dividend growth stocks, I’m likely buying. We’ll see who comes out ahead in the next decade or so. 🙂

    Cheers!

  49. Hi Jason, I’m a fan of ATT (T) and VZ (Verizon) – dividends are amazing. Not much in terms of growth, but for a long-term dividend play, I’m really happy with them. Your thoughts?

  50. Carol,

    Yeah, those are great examples of what I call “Stage 1” stocks. So you get that big yield there, but probably little growth. I like them, but I wouldn’t want a ton of exposure there. Fierce competition, plenty of debt, and low switching costs are some concerns. In addition, there’s plenty of saturation now in wireless, which is why you see VZ and T branching out so much now. Growth over the last decade wasn’t that impressive for either firm, and that happens to coincide with an unprecedented move into wireless.

    Certainly nice to collect those big dividends, though, which can be reinvested as you see fit. 🙂

    Best regards!

  51. I like all of your five choices and next month I have my final buy in BBL for a long time. After this I have 250 shares and I´m confident with it. JNJ ist still very interesting and may be in winter I will open a first position in UNP. My first buy in a train share, but it seems to be a very good idea. Next to BBL I´m thinking I will add KMI, but may be EMR is interesting as well. There are simply too much choices at the moment.

    Let´s see, what the market will do. Probably we are not at the end of the falling prices. There are surely some reasons that we have this situation. Not only China is one point that we have these troubles. But I like it like it is. Another good point for people from Europe is the exchange rate, which makes the American shares cheaper for us. OK, American people had this situation in Q1 for European shares. So there is always the possibility to get new good deals :).

  52. I did buy som stock in BHP BILLITON before the “crash” last money. They have nearly recovered since then.

    I have also bought some stock in JnJ last january. But they have lost around 10% in value since then. But I still keep them around.

  53. GILD and TROW are the top of my watchlist, with NSRGY hanging around in third. I’m all tapped out for August, so hopefully the volatility sticks around until September.

  54. I’m a bit hesitant on BHP but others you mentioned don’t look too bad. I’m expecting more volatility. What happened over the past week wasn’t normal, in my opinion. As always, good overview Jason. – Sam

  55. Black Monday turned me into a shopper on Black Friday. I didn’t want to stop. Deals everywhere! I picked up some JNJ and P&G. I’ve been averaging down on the latter this year. While it’s P/E is a little high, so is the yield. I believe PG is having a rough time that will get better eventually. I’m in it for the long haul.

  56. In addition to UNP, I believe CNI is looking awfully tempting right now. GILD, AAPL, DIS and PM look like solid right now as well.

  57. It has been a great week, and I completely agree with your choices. I also really, really like KMI at these levels. Do you have any thoughts on 2x S&P500 leveraged ETF’s like UPRO? This remains one of my favorites for the next time we see a 20-30% market correction, although it doesn’t fit nicely into a DGI growth investment style.

  58. Similar to many here I was fortunate enough to boost my annual dividends through increased purchases in JNJ and MON this week. Many others on the watch list which have already been named here.
    Cheers!

  59. I took the opportunity to contribute to our Roth and my i401k this week. We’re low on cash now so we’ll have to sit out for a while. If we see a bigger correction, I’d probably trade in some bond funds for stocks. I like JNJ and CVX.

  60. Jason,

    Sorry if this was mentioned already, I haven’t had time to read through the comments yet. But have you looked into BEN? Seems like they are way more overextended than TROW and have very similar high quality characteristics. Net of debt, their cash on hand is roughly equal to 1/3rd of their market cap. Seems like a better buy here than TROW?

  61. I bought some more BBL myself.While others panic i do a little dance.Fantastic company and the best in the industry by far.Im not interested in where it is in a year,two years,or more.I will probably die owning this stock.In my old age im sure a big fat dividend will land in my account twice a year.Free cashflow could be huge 10 years out with increased dividends.
    I wanted to add a few others like AMEC-Foster Wheeler,but didnt have any capital at hand.

  62. My weekly “best stocks” picks include UNP, BBL and TROW as well Jason. I had averaged down on XOM and BBL earlier this month, so I didn’t get a chance to add to UNP or TROW. They will come to me at some point. I also think the dip provided a wonderful opportunity for picking up AAPL and GILD.

  63. olli,

    Yeah, I certainly hope we haven’t seen the end of volatility over the very near term. Long term, it’ll always be there. But I’m keeping my fingers crossed that the boat becomes pretty rocky again here over the next few weeks. It’s so unfortunate that things mostly recovered pretty quickly, but there are still some pretty incredible bargains out there.

    Happy shopping over there. More stocks than cash is always a problem, but it’s all part of the fun. 🙂

    Cheers!

  64. beers119,

    Nice going there. I loaded up on BBL at higher prices than what we have here, but I’m not particularly unhappy with my cost basis. It’s a world-class business we’re talking about. And over the course of my lifetime, the business performance will matter much more than whether I paid $49 or $32 per share. The longer your time horizon, the more room for error you have there in price paid. But business performance always matters.

    But let’s hope these bargains keep on coming!

    Best regards.

  65. Justin,

    I hear you there. I put something like $4k or so to work in August. My capital does have its limits, unfortunately. But, either way, it’s a dream just to be able to do this. Just to be able to regularly save and invest is putting you in rare global company. So that’s always something I try to be mindful of. Many people aren’t in a position to invest at all. So catching prices just right is really just icing on what’s already a pretty delicious cake.

    But, yes, I’m hoping for even more volatility in September. I don’t think many people were anticipating that things would rebound so quickly. But that’s exactly why you can’t time the market. Never know what’s going to happen.

    Cheers!

  66. AD,

    I certainly hope you’re right there, bud. Would love to see it. Should have some more capital here over the next week or so, so bring it on! 🙂

    Take care!

  67. Sam,

    Yeah, I don’t know if anything in the stock market is “normal”, per se. If there were something that could be expected and anticipated, everyone would be able to do that and time things out. But it can’t be done. As such, I just stick to my plan. It’s completely unnecessary to worry about the day-to-day movements of the market as it pertains to achieving financial independence. And the key to the whole thing is really your savings rate. Become a prodigal saver and you’ll get there pretty quickly even if you’re a mediocre investor.

    But I am indeed hoping for more volatility. I guess we’ll see how it goes! 🙂

    Best regards.

  68. Phil,

    Yeah, PG is interesting. I certainly hope the recent moves to shed breadth hopes spur a more focused company. Not sure how that’ll work out, but I’ve got a nice position there. It’s certainly a pretty big gamble. Growth has been disappointing over the last few years or so, both in terms of underlying operations and the dividend. So I’m anxiously anticipating how that turns out for them. Glad to be along for the ride with you. 🙂

    Best wishes!

  69. GG,

    Definitely. I’m with you on those names. More stocks than capital, as always. I might have enough for three purchases next month. Maybe four if I really stretch things out. Tough to narrow it down, but what a wonderful job to have. 🙂

    Have fun over there!

    Cheers.

  70. soggy,

    I honestly don’t track that ETF or any other ETFs. And I’d be particularly cautious when it comes to leveraged plays like that. Just not my cup of tea, but I wish you luck if you invest there! 🙂

    Take care.

  71. Derrick,

    Nice move there. TROW has been cheap for some time now, but it’s notably cheap at this point in time, in my view. Of course, it could be volatile along with the stock market due to the very business model. But they’ve done well over a long period of time, even right through the Great Recession. Would like to see them pick up the pace when it comes to passive offerings, however.

    Thanks for stopping by!

    Best wishes.

  72. Karl,

    Awesome. Nothing quite like being able to snag a great deal on an excellent business or two. JNJ isn’t substantially cheaper than its recent historical average, but its recent historical average is already pretty attractive, in my view, when considering the quality here. Paying 16 or 17 times TTM EPS on a business like this – especially in this market – is really just a no-brainer for a long-term investor looking to generate growing dividend income. If it weren’t my largest position, I’d be on it here.

    Have a great weekend!

    Best regards.

  73. Joe,

    Hey, you’re in a great spot there with how much cash you’ve been putting to work lately. And you’re already living the life you want. So nailing stocks at just the right time or whatever is just noise for you, my friend. It’s noise for everyone, really – the difference over the long run makes little difference. But it’s especially true for someone already “there”.

    It’ll be interesting to see how it feels in a decade or so to no longer be actively accumulating stocks. Will it feel strange to not pounce on an outstanding deal? I honestly think I’ll be busy doing other things, but I guess we’ll see. 🙂

    Have a great weekend!

    Cheers.

  74. Spencer,

    Yeah, BEN’s another great asset manager. I’ve mentioned them a few times on the blog and I’ve also written about Franklin a couple times as one of my undervalued picks of the week over at Daily Trade Alert.

    But I do think TROW is a superior company. Better underlying growth over the last decade, higher dividend growth over that period, and more impressive profitability. The balance sheet could go either way since BEN has more cash, but TROW has no debt. In addition, TROW sports a substantially higher yield (although, BEN typically pays a nice special dividend). Moreover, last I knew, TROW’s organic AUM growth was better over the last five or so years. But it’s been a while since I’ve delved that deep.

    Is TROW worth the premium? That’s really up to you to judge, but I think so when looking at everything.

    In the end, both great companies. I don’t think you’d go wrong with either one. I prefer TROW, but BEN is solid as well. There are a number of really great asset managers out there, though. Eaton Vance and Blackrock come to mind pretty quickly, with the latter having significant exposure to passive offerings. I hope to diversify out the asset managers, so I suspect I’ll own 2-3 before I’m done.

    Cheers!

  75. John,

    Ha! I hear you there on the happy dance. To me, red is green. 🙂

    Keep on sticking to the plan over there. The passive cash flow will just continue to grow and grow.

    Take care!

  76. Ear Money,

    I’m with you there. AAPL and GILD are both in really solid value range. The valuations when considering the growth rates doesn’t really make sense there, but I’m happy to own a small slice of both.

    You’re right in that the other stocks will come at some point. Stocks aren’t going anywhere. One stock purchase at a time. 🙂

    Have a great weekend!

    Cheers.

  77. eddie,

    I think five is a pretty solid start. And, of course, I’ve been discussing quite a few other stocks here on the blog lately. Adding more and more becomes a slippery slope of discussion. 🙂

    Take care!

  78. Great list here Jason, thanks for sharing. I own 4 of the 5 which puts me in great company. TROW is looking super attractive here with how fast they’re growing. I want to add more, but I’m way over exposed to asset managers currently at 11% of the portfolio when I want them at 5% or less. I want to limit risk, but don’t want to limit opportunity. Did you ever run into any allocation uncertainties like that when starting out?

  79. Ryan,

    I hear you there. I know you have a pretty big position there in BEN, which is another great asset manager.

    As far as allocation goes, I never worried about it much until the portfolio crossed over six figures. It was something I kept an eye on and I would try to seek out values that rounded the portfolio out as I went, but I knew in the back of my mind that a portfolio value of, say, $50k or something was 10% of the ultimate figure I was chasing. So I figured that as time went along, those allocations would change dramatically.

    That said, if you go way off course, it’ll be very hard to right that ship if things don’t go according to plan. But I think the allocation will work itself out over the long run if you buy value where value presents itself. It might be in the Energy sector now. Later it might be in Healthcare. So you just buy where it makes sense and keep an eye on things. Now that my portfolio is where it is, though, I’m keeping a much tighter lid on allocation because it’ll be that much more difficult for me to right the ship with new capital. The closer you get to your target the number, the less capital and time you have to get things where you want them.

    I mentioned that a while back when going over sector allocation, but the same thing applies to individual companies. All depends on what kind of risk you’re willing to take on and which companies you feel more comfortable with. Just keep in mind, though, that your portfolio would have to more than double before you get asset mangers down below 5%, and that’s assuming no more capital added to them and also assuming that they don’t grow in size organically. In reality, it’ll probably be a good long while before that’s below 5%. Again, it’s a moving target. But I know you’ll figure it out. 🙂

    Hope that helps!

    Best regards.

  80. I really appreciate you taking the time to write such a detailed response, it was very helpful. I’ve got some long term thinking and calculating to do my friend 😉 I hope all is well in Florida and have a great weekend!

  81. You have mentioned ADM in the past, any continued interest in it? I know it has come down nicely.

    P.S. I love these kind of posts, please keep them up. It is always nice comparing my watch list to others’ and many times seeing the same stocks!

    Thanks

    – Joe

  82. Joe,

    Definitely. ADM is roughly the same price and sitting at roughly the same valuation the last time I looked at it. It went up some, but has now come back down to what it was before. So it’s the same as it was before, which is to say still pretty attractive. The yield’s quite a bit higher than its recent historical average. And the long-term dividend growth track record there looks set to continue. I’m still trying to limit my exposure to commodity plays, which is essentially what that is. But ADM has done very, very well over a long period of time.

    Glad you enjoyed the article. Always fun to take a peek at what’s out there and what we’re all looking at. It’s all in the name of achieving our dreams. 🙂

    Best regards!

  83. Hi Jason,

    I have been reading your blog now for some time and found it very interesting!
    Concerning stocks that are for sale now I would suggest to consider Potash Corporation of Saskatchewan Inc. This company yields at 6% now and has been beaten down over the past weeks. The business of Potash is interesting for the long run as the world needs to feed more people every day.
    Potash is now down as they are trying to acquire German K+S but not making very much progress here. I guess they might choose to drop their take over bid which would make us see a stock price go up simular to what we have seen at Monsanto over the pas week when they dropped their bid on Syngenta.

    Keep on the good work!

    Regards, Marco

  84. Marco,

    Thanks for following along. The readership and support is very much appreciated. 🙂

    And thanks as well for sharing your ideas. POT is interesting. Not sure I really like their long-term dividend growth track record, and I do wonder how their recent decisions regarding ramping up their payout so much will play out over the long term.

    But MON regularly produces prodigious cash flow. It’ll be interesting to see where genetically modified seeds will be in ten years or so, but there’s no doubt there will be an increasing need for food over the long term. That should bode well for them.

    Happy shopping over there!

    Take care.

  85. That’s nice list of companies. I kind of miss my high flying days of plowing thousands of dollars into the portfolio. Right now I would have been buying companies like a maniac! Small price to pay for reaching our final goal =). I just have to be happy with investing smaller amounts here and there, not a bad problem to have.

  86. Jason,

    Such a great article yet again, I even have been telling everyone I know that the market is having a great sale. People come in looking for clearance items into retail stores and they think its great, yet when the market goes down people start freaking out and thinking it’s time to get out of the market where in reality its the time to get in to the market.

    Tyler

  87. I love this choppy market. I just picked up some JNJ, UNP, TROW, EMR and AFL. I only can afford 1 -3 shares each, but I am happy with my purchases. The worst part is I use Robin Hood for alot of stuff since I can only afford small purchases. On the Monday with the big drop I was unable to get into the account due to so many people selling I missed out on some great prices on alot of stocks. When I was able to finally log on I did pick up the above stocks over the next few days. As soon as I get paid again I am looking at some KMI, UTX and BBL. I hope the prices stay low until sometime next week.

  88. Spoonman,

    Small price to pay, indeed! 🙂

    I’ve said it before, but I’d GLADLY trade a $500k portfolio chock-full of high-quality dividend growth stocks RIGHT NOW in exchange for no longer being able to accumulate stocks. I don’t plan on buying many stocks, if any at all, after I’m living off of dividend income. The whole point of buying these slivers of businesses is to provide me the growing passive cash flow I need to go on about my life without worrying about how bills are going to get paid. It’s definitely a lot of fun and it’s a huge passion of mine, but it’s not something I’d be all that upset to give up if it meant I was finally where I wanted to be.

    You’re living the life over there.

    Best regards.

  89. Tyler,

    I hear you, my friend. Everyone loves a good sale except when it’s time to buy stocks. It’s so counterintuitive to me, which is why this strategy made sense to me right away. I identified with the principles really quickly. And then I’d listen to Buffett speak about these things (being happy when share prices drop so that one is able to accumulate for less money), and it would just resonate with me. Not really sure why that doesn’t work the same for the masses, but such is life. Happy to take advantage when and where possible while also spreading the good word in my own little way. 🙂

    Best wishes!

  90. Jamieson,

    Hey, a share here and a share there adds up over time. Keep it up!

    I’m also hoping that volatility comes back with a vengeance. The broader market has recovered quite a bit, but there are still quite a few stocks in the bargain bin right now. Let’s hope the discounts become even more aggressive. 🙂

    Cheers!

  91. Hi DM,

    I did add BBL to my portfolio. I’m also looking to J&J but the warchest is almost empty. So I will probably wait a little and refill the warchest before I buy more stocks.

    Cheers,
    G

  92. Ah! Our loved bargains hunting days!
    If I could buy US assets (hammered loonie I look at you…) UNP and BBL would certainly be two of my targets.
    Good choices. Cheers!

  93. I have both JNJ and BBL in my portfolio, although I wish I could add more. Often, I find that I have excess cash when the market is high and not much cash when the market goes into a correction or small downturn. Unfortunately, I don’t have enough cash to be adding to my holdings or purchasing new ones, as more quality dividend stocks look attractive.

    Another main deterrent is depreciation of the Canadian dollar against the US greenback, so the foreign exchange rates are not favourable. In the meantime, I will just accumulate US cash dividends until there is enough to make a new purchase. Hopefully, stock prices continue to be depressed in the Fall.

  94. Geblin,

    I hear you, my friend. A few grand a month is all I have to dedicate to stocks, which is really more than enough for where I want to be. We always want more, though. 🙂

    Nice move there on BBL. I continue to go back and forth on it. The value investor in me wants to buy more, but the pragmatic side of me that’s interested in holistic portfolio construction and management knows that I’m already too heavy there as it stands. We’ll see. Maybe, just maybe, there’s one more buy left in me before the ex-dividend date.

    Have fun over there!

    Cheers.

  95. farcodev,

    Gotta love being able to buy on sale. No matter the merchandise, I like quality when it’s marked down. 🙂

    Have fun over there!

    Best wishes.

  96. Winston,

    I hear you there. The thing for me is that I invest regularly through all market conditions. So that means you’ll just buy more shares when stocks are cheaper and less when they’re more expensive. I was certainly able to buy more years ago, but you just never know what you’re going to get out there. My cash flow has improved lately, so I’ve invested more absolute cash in an expensive market. But that’s not timing anything. Just a function of income and my savings rate. And it’s that savings rate that will have the biggest impact on your ability to retire young.

    But I’m also hoping that stocks drop even more from here. Would love to have a good three or four months (or longer) at it. Never know, though. Either way, I’ll be investing just like usual. Always a bargain somewhere. 🙂

    Cheers!

  97. You have highlighted five quality stocks for investors like myself! It just goes to show even in volatile times there are still some good stocks to own.

  98. As usual, good companies you have listed there Jason! I recently bought DOW during the slide. I was averaging down on a position that I already had, in what I feel is a great company long term. They cut their dividend during the Great Recession, but it has been increasing every year since 2010. I am a little light in the Tech sector, so for my next purchase I am looking at GLW. Not an awesome dividend track record as far as growth goes, but I like the company. Seems like dividend investors are somewhat limited in the Tech sector. MSFT, INTL, and AAPL are nice, but so is diversification. I already have big stake in MSFT.

  99. BCS,

    Sounds like you’ve been busy over there. That’s what it’s all about. 🙂

    I can’t speak for anyone else, but I’ve long been light on tech. But that’s purposeful. I see my exposure to tech plays as somewhere around 2.5% of the portfolio over the long run. I’ve seen some portfolios out there that are pretty heavy there. All comes down to the individual investor and their comfort level/circle of competence. But I do agree there’s some value there right now.

    Keep it up!

    Best wishes.

  100. Speaking of Kinder, what’s your take on KMI now? It looks like you purchased it awhile ago. It’s 31.22 today!

  101. DG,

    I keep looking at BBL because of how cheap it is here but I also have to keep my eye on the entire portfolio. I’ve really taken on a larger position there than I ever planned on or would even like. So I’m probably just going to hold my 115 shares. The extent of any moves there might be a tax-loss harvesting situation, but with the goal in mind to keep the position the same size. I don’t think I want my annual dividend income to rest any more on BHP Billiton’s shoulders than it already is. I love value. And I love yield. But one has to be mindful of risks.

    If I had, say, 50 shares, I’d be all over it. But I’m maxed out.

    Good luck if you invest there, though! 🙂

    Cheers.

  102. —– my prev. comment became a strange one (probably due to greater and less than sign infront of numbers), so posting again ——
    With this recent market downfall, I was thinking of buying some steel stocks. They look very down now and I think it will not be like this (mid caps with PEG less than 1 and div. yld greater than 2%). I would be interested what you think about steel and iron industry.

  103. Joydeep,

    I’m not really aware of any high-quality companies in the steel industry that have increased dividends to shareholders for a lengthy period of time. If you’re aware of any that sport excellent fundamentals and have a penchant for rewarding shareholders with those bigger dividends, let me know. But I’m not aware of any, to be honest. So I’m just not invested in that industry. Moreover, I’m never as interested in commodity plays as I am in other companies that are able to more easily build competitive advantages.

    My exposure to BHP Billiton is the extent of my interests as it relates to metals. Not the same industry, but that’s really it.

    Cheers!

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