Don't Touch These 5 Dividend Stocks!
Has someone near and dear to you responded with a 'I was only trying to help' after royally messing something up? Have you ever tinkered with a computer, smart phone or something else only to learn it no longer works and you are not sure how to fix it? Our dividend stock investments can suffer the same fate if we provide them with too much of the wrong type of attention.
Here are some things to remember to keep your income investments on the straight and narrow...
Avoid Irrelevant InformationI tire of hearing the stock reports that sound like a horse race, 'After early mixed results, the Dow edged up two points today despite a government report indicating unemployment is running at two-tenths of a percent above previous estimates...' Will any of this have meaning in 10 years? 5 years? 1 year? In a month or a week? If you tune in to the same program tomorrow, you will likely hear an equally irrelevant, and possibly contrary, rant. Successful investing is a marathon, not a 40 yard dash.
Avoid Excess TradingThe investment community is geared toward trading. The media with their incessant play-by-play call of the market creates a sense of urgency. If the market is going up, you are made to feel like you are missing out on enormous gains, while market declines leave the investor feeling the need to sell before losing it all. The common thread here is the investor is being pushed to trade. Excessive buying and selling will at best mute a portfolio's return and at worse, will deplete it.
Buy And HoldIts ironic that buy-and-hold (through dividend and value investing) has seen a resurgence, while concurrently being attacked on many fronts as being dead and no longer valid. Some attacks are a result of ignorance on the part of those not fully understanding the concept. Buy-and-hold is not buy-and-forget. All investment strategies should have a well-defined exit plan. Making a quick buck is not part of the exit strategy of long-term buy-and-hold dividend and value investors. Instead, it is our desire to hold the stock forever, assuming the stock continues to meet out investing criteria. When the stock no longer performs as anticipated, such as cutting its dividend, it is immediately sold.
Dividend Stocks Worth Waiting OnIf our investment horizon is forever, we must do our due diligence up front and select only the very best stocks. Below are several stocks that have earned the patience of many dividend growth investors:
Johnson & Johnson (JNJ) is a leader in the pharmaceutical, medical device and consumer products industries. JNJ is a member of the S&P 500, a Dividend Aristocrat, a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company has paid a cash dividend to shareholders every year since 1944 and has increased its dividend payments for 52 consecutive years. Yield: 2.7
McDonald's Corp. (MCD) is the largest fast-food restaurant company in the world, with nearly 35,000 restaurants in 119 countries. MCD is a member of the S&P 500, a Dividend Aristocrat, a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company has paid a cash dividend to shareholders every year since 1976 and has increased its dividend payments for 37 consecutive years. Yield: 3.2%
The Coca-Cola Company (KO) is the world's largest soft drink company, KO also has a sizable fruit juice business. KO is a member of the S&P 500, a Dividend Aristocrat, a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company has paid a cash dividend to shareholders every year since 1893 and has increased its dividend payments for 52 consecutive years. Yield: 3.0%
Procter & Gamble Co. (PG) is a leading consumer products company that markets household and personal care products in more than 180 countries. PG is a member of the S&P 500, a Dividend Aristocrat, a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company has paid a cash dividend to shareholders every year since 1891 and has increased its dividend payments for 56 consecutive years. Yield: 3.1%
Genuine Parts Company (GPC) is a leading wholesale distributor of automotive replacement parts, industrial parts and supplies, and office products. GPC is a member of the S&P 500, a Dividend Aristocrat, a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company has paid a cash dividend to shareholders every year since 1948 and has increased its dividend payments for 58 consecutive years. Yield: 2.6%
ConclusionWe live in an action-oriented world. In a microwave society that provides us instant everything, we look for immediate feedback for our actions. Sometimes it is hard to abide by the old adage 'if it's not broke, don't fix it', but when it comes to our dividend growth stocks, we need to allow time to work its wonders on our portfolio.
Full Disclosure: Long JNJ, MCD, KO, PG, GPC. See a list of all my dividend growth holdings here.
- 6 Healthcare Stocks With Growing Dividends Yielding In Excess of 2%
- Why We Are Dividend Growth Investors
- 6 Dividend Growth Stocks With Very Little Debt
- What Determines A Dividend Stock's Yield
- Warren Buffett's Secret To 50% Returns
Tags: [JNJ] [MCD] [KO] [PG] [GPC]
Illinois Tool Works Inc. (ITW) Dividend Stock Analysis
Linked here is a detailed quantitative analysis of Illinois Tool Works Inc. (ITW). Below are some highlights from the above linked analysis:
Company Description: Illinois Tool Works Inc. is a diversified manufacturer that operates a portfolio of 60 business units that serve industrial and consumer markets globally.
Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these four calculations of fair value, see page 2 of the linked PDF for a detailed description:
1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number
ITW is trading at a premium to all four valuations above. The stock is trading at a 63.8% premium to its calculated fair value of $49.61. ITW did not earn any Stars in this section.
Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:
1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%
ITW earned two Stars in this section for 1.) and 2.) above. A Star was earned since the Free Cash Flow payout ratio was less than 60% and there were no negative Free Cash Flows over the last 10 years. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%. The company has paid a cash dividend to shareholders every year since 1933 and has increased its dividend payments for 51 consecutive years.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA) or Treasury bond? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:
1. NPV MMA Diff.
2. Years to > MMA
The negative NPV MMA Diff. means that on a NPV basis the dividend earnings from an investment in ITW would be less than a similar amount invested in MMA earning a 20-year average rate of 3.31%. If ITW grows its dividend at 5.0% per year, it will never equal a MMA yielding an estimated 20-year average rate of 3.31%.
Memberships and Peers: ITW is a member of the S&P 500, a Dividend Aristocrat, a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company's peer group includes: The The Manitowoc Company, Inc. (MTW) with a 0.3% yield, Timken Co. (TKR) with a 1.7% yield and Highway Holdings Limited (HIHO) with a 5.9% yield.
Conclusion: ITW did not earn any Stars in the Fair Value section, earned two Stars in the Dividend Analytical Data section and did not earn any Stars in the Dividend Income vs. MMA section for a total of two Stars. This quantitatively ranks ITW as a 2-Star Weak stock.
Using my D4L-PreScreen.xls model, I determined the share price would need to decrease to $53.41 before ITW's NPV MMA Differential increased to the $500 minimum that I look for in a stock with 51 years of consecutive dividend increases. At that price the stock would yield 3.2%.
Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $500 NPV MMA Differential, the calculated rate is 9.1%. This dividend growth rate is above below the 5.0% used in this analysis, thus providing no margin of safety. ITW has a risk rating of 1.50 which classifies it as a Low risk stock.
ITW with the precise execution of its 80/20 business model has a history of generating above-average returns from growth in its end markets, along with a growth strategy focused on product innovation and acquisitions. However, the company’s complex and fragmented business structure has become an obstacle to growth. To address the situation, ITW adopted a long-term Enterprise Strategy in 2012. There has been a shift to more centralized operations in a number of operations which should increase efficiencies and lower costs.
The company follows a consistent policy of returning value to its shareholders through dividends and share buybacks. In 2013, approximately $700 million was paid as dividends and $2.2 billion used for share buybacks. In 2014, an estimated $700 million will is expected to be used for dividends and $1.8 billion for share buybacks. The stock is currently expensive relative to my calculated fair value price of $49.61. In addition, its yield is well below the minimum I am willing to accept, so for now, I will wait on a more opportune time to add to my position.
Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
Full Disclosure: At the time of this writing, I was long in ITW (2.9% of my Income Portfolio). See a list of all my dividend growth holdings here.
- Monsanto Co. (MON) Dividend Stock Analysis
- Kimberly-Clark Co. (KMB) Dividend Stock Analysis
- United Technologies Corp. (UTX) Dividend Stock Analysis
- General Dynamics (GD) Dividend Stock Analysis
- Walgreen Co. (WAG) Dividend Stock Analysis
- More Stock Analysis
Tags: [ITW] [MTW] [TKR] [KDN]
Weekly Links: April 20, 2014
Each Sunday I highlight any notable articles that I came across over the past week, along with any Carnivals I participated in. For those readers not familiar with carnivals, it's where personal finance bloggers submit their best articles of the week with one blog serving as the host. The entries are separated into various categories such as Investing, Credit, Debt, Budgeting, Frugality, Wealth Building, Money Management, Financial Planning, Insurance, Taxes, The Economy, Real Estate, et. al.
Articles you might find interesting:
- Purchase of BASF
- When to sell your dividend stocks?
- The Top 20 Most Powerful Dividend Stocks to Buy Now
- Dow Dogs Are Front Of The Pack
- Giving up on Financial Goals?
The DIV-Net Featured Articles:
- Who Owns The Top Dividend Stocks?
- 5 Long-Term Dividend Growth Stocks To Stay Hedged In A Market Correction
- Dividend Income Update: March 2014
- Break In Case Of Emergency
- Stock Analysis of Altria Group
Articles from D4L-News:
5 Utility Stocks Paying A Dividend Of 5% Or Higher
Measuring the value of utility stock involves more than just looking at its dividend yield. Operating margins tell investors how flexible the company is to pricing changes - the higher margin, the better. Utilities though, are debt-laden companies, which makes them very sensitive to interest rate changes. A good way of analyzing a company's ability to finance debt is through the Weighted Average Cost of Capital [WACC]. This figure will tell you what kind of return the company needs to make on capital expenditures to make up for the borrowing cost. The following are 5 utility stocks with high dividends, operating margin, its associated debt load, and WACC...
3 Dividend Stocks You Can Hold Forever
There are some products that people just can't live without. Most think of these as food and household goods but I would also add things like cigarettes and real estate to the list. Growth may not be as fast in these mature markets, but buying the best-of-breed companies will help ensure that your investment grows consistently over time...
3 Great Canadian Dividend Stocks Even Americans Should Own
I’m an American, but I can’t help but be drawn to some of Canada’s best dividend-paying stocks. It’s not that we don’t have our share of great dividend payers on my side of the border. However, what we don’t have in America is the vast wealth of natural resources that Canada possesses, which makes it easier for Canadian companies to transfer that natural wealth from the earth to investors. With that in mind, here are the top Canadian dividend stocks that I think investors on both sides of the border should consider putting in their portfolio...
European Dividend Stocks to Buy
European stocks are also much cheaper than American equities, based on the most recent cyclically adjusted P/E ratio figures. According to data just released by Meb Faber’s Idea Farm, Ireland, Austria, Italy, Spain, the U.K. and France all trade at CAPEs of 8.4 to 14.4. The U.S. market trades hands at a CAPE of 25.4. The combination of cheaper valuations and a more favorable monetary regime should make European stocks the better bet over the next several years. So with that said, today I’m going to recommend three solid European dividend stocks that I expect will generate significantly better total returns than the S&P 500. European Dividend Stocks to Buy...
5 Cheap Dividend Stocks to Buy
There’s an even stronger case to made for cheap stocks that pay competitive dividends. Not only do they possess the attributes cited above, but they offer a steady stream of better-than-average income at a time when yields is awfully hard to come by. With that in mind, here are five of the best cheap dividend stocks you can buy — four of which trade for less than $10, and one that’s just some pocket change more...
The Biggest Dividends Aren’t Necessarily the Best
But in September, the mood of investors apparently changed: The fund flows reversed, according to Jeff Tjornehoj, head of Americas research at Lipper, and cash flowed out of these funds late last year and early this year. But low-growth, high-dividend stocks can become overvalued. “The biggest concern with dividend investing is when people...
Click Here For More Dividend News
There are some really good articles here, please take time and read a few of them.
D4L-Premium Services Updated:
The D4L-Dashboard, Analytical Reports, D4L-Data, and The D4L-Newsletter (April edition) have been updated and are available at the D4L-Premium Services web site at: [Click Here] Not a subscriber? [Click Here] for for more information on the benefits of these services, sample reports, pricing and subscription information.
(Photo: Sachin Ghodke)
March 2014 Pocket Change Portfolio Performance
The Pocket Change Portfolio (PCP) was first introduced on September 13, 2008 as a real money dividend income portfolio funded by the "pocket change" earned from my various online endeavors. Each month I report on the portfolio's progress and dividends earned.
Dividends ReceivedTotal dividends received during the month were $1,008.48. This is an increase of $160.91 from the $847.57 received in March 2013. Below are the PCP dividends received over the last 13 months:
- Mar 2014 $1,008.48
- Feb 2014 $981.12
- Jan 2014 $819.63
- Dec 2013 $1,099.16
- Nov 2013 $588.24
- Oct 2013 $901.87
- Sep 2013 $1,170.44
- Aug 2013 $671.87
- Jul 2013 $727.29
- Jun 2013 $1,305.15
- May 2013 $606.97
- Apr 2013 $1,022.68
- Mar 2013 $847.57
Annualized Dividend IncomeIncluding new purchases and dividend increases, my annual PCP dividend income is now $13,013.58 at the current dividend rates. This is up $69.64 from last month's $12,943.94 amount. The PCP has never experienced a monthly decline in annualized dividend income.
Portfolio Returns- Year-to-date: -0.18%
- Life-to-date: 16.78% (annualized)
That's it for this month. The next PCP report will be mid-to-late May. Thanks for for reading!
Full Disclosure: See a list of all my dividend growth income holdings here.
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6 Dividend Stocks Raising Their Payouts And Yields
In a down-market when many people are rushing to buy gold, I take comfort that I already have mine. No, not that kind, but something much better! A growing stream of dividend income from solid companies. While everyone else is panicked about their portfolio’s decline, I see a downturn as an incredible buying opportunity. Lower prices, rising yields and growing dividends, its hard to beat that combination.
Below are several select companies that recently announced dividend increases:
Peoples United Financial, Inc. (PBCT) operates as the bank holding company for Peoples United Bank that provides commercial banking, retail and business banking, and wealth management services to individual, corporate, and municipal customers. April 16th the company increased its quarterly dividend 1.5% to $0.165 per share. The dividend is payable May 15, 2014 to stockholders of record on May 1, 2014. The yield based on the new payout is 4.5%.
Sonoco Products Company (SON) manufactures and sells industrial and consumer packaging products in the United States, Europe, and Canada. April 16th the company increased its quarterly dividend 3.2% to $0.32 per share. The dividend is payable June 10, 2014 to stockholders of record on May 16, 2014. The yield based on the new payout is 3.0%.
CSX Corporation (CSX) provides rail-based transportation services in the United States and Canada. April 15th the company increased its quarterly dividend 6.7% to $0.16 per share. The dividend is payable June 13, 2014 to stockholders of record on May 28, 2014. The yield based on the new payout is 2.3%.
Targa Resources Corp. (TRGP), through its general and limited partner interests in Targa Resources Partners LP, provides midstream natural gas and natural gas liquid (NGL) services in the United States. April 15th the company increased its quarterly dividend 6.9% to $0.64750 per share. The dividend is payable May 16, 2014 to stockholders of record on April 28, 2014. The yield based on the new payout is 2.4%.
Whirlpool Corporation (WHR) manufactures and markets home appliances and related products worldwide. April 14th the company increased its quarterly dividend 20% to $0.75 per share. The dividend is payable June 15, 2014 to stockholders of record on May 16, 2014. The yield based on the new payout is 2.0%.
TransMontaigne Partners L.P. (TLP) operates as a terminaling and transportation company. April 14th the company increased its quarterly dividend 1.5% to $0.66 per share. The dividend is payable May 8, 2014 to stockholders of record on April 30, 2014. The yield based on the new payout is 5.9%.
Selecting stocks with increasing dividends is critical for an income growth strategy. The above list contains stocks that recently raised their dividends; it is not a list of recommend buys. As always, due diligence should be performed before buying or selling any stock. For a list of stocks with a long string of consecutive cash dividend increases, see this list.
Full Disclosure: Long PBCT in my Dividend Growth Portfolio. See a list of all my dividend growth holdings here.
- 10 Dividend Stocks For The Ultimate In Deferred Gratification
- 6 Healthcare Stocks With Growing Dividends Yielding In Excess of 2%
- Why We Are Dividend Growth Investors
- 6 Dividend Growth Stocks With Very Little Debt
- What Determines A Dividend Stock's Yield
Tags: [CSX] [PBCT] [WHR] [SON] [TRGP] [TLP]