August 2016 Stock Considerations

With a new month upon us, it is time once again, to chart a road map of potential stock buys for August. While these posts are informal suggestions I make for myself, I tend to follow my stock considerations quite closely. The way I see it, I have already done my homework when deciding where to deploy my fresh capital so why not follow this road map? Of course, the one big caveat is Mr. Market’s temperament, as new buying opportunities can present themselves at any time.

 

As I sit here writing this post while on the road (currently in Seattle) I am reminded of how fortunate I am to be able to spend this quality time with my family and share new experiences together. After all, life is a lot more than just collecting dividends, right? Getting back to the matter at hand, let’s take a look at my August stock considerations.

 

Once again, the market is at all time highs and the familiar gripe of every dividend investor is the same, lack of attractively valued companies. While I concur wholeheartedly with this assessment, I still find it important to continually invest in the stock market at least once a month. Consistency with ones investment is as important as what one decides to buy. By being consistent with your buys you essentially cease becoming a market timer and are an investor. That being said, as before, I am considering The Bank of Nova Scotia (BNS), The Toronto-Dominion Bank (TD) and Royal Bank of Canada (RY). All three of these banks are offering up yields around 4%. In today’s low rate environment those payouts are huge. In the same financial vein, I am also considering an American bank that has been quite popular among the DGI community as of late, Wells Fargo & Company (WFC). Finally, in the financial space I am considering initiating a new position in The Travelers Companies, Inc. (TRV). It’s been a long time since I added a new stock to any of my portfolios and with TRV’s yield of around 2.8%, low payout ratio of 28.4% and a PE of 11.2 which is in line with its five year average, this insurer suddenly looks like a decent buy. Other names I’m considering include, W.W. Grainger, Inc. (GWW) and V.F. Corporation (VFC) as well. Both names were on my July considerations list too.

 

What do you think about my potential stock picks for August? Are any of the above names on your monthly watch list? Please let me know below and I welcome any suggestions too.

 

Disclosure: Long BNS, TD, RY, WFC, GWW, VFC

42 thoughts on “August 2016 Stock Considerations

    • Hi DfS,

      Thanks for sharing your potential picks going into August. I see they are offering some pretty good yields too. My Canadian banks (BNS and TD) are getting a bit large for my portfolio at this time so I may hold off on those two even though they still present a really great yield and value. We’ll see how August unfolds. With oil going down I have a feeling we might see the general market follow suit. It happened earlier this year. We’ll see. Thank you for commenting.

  1. Those are some great names in the financial sector and gotta love the Canadian Banks right now. TRV has been on my watch list for sometime now and their dividend growth rate is so consistently near 10% over the last 4-5 years I can see why you would add it as a holding.

    • Hi KK,

      I have been a fan of the Canadian banks for some time and they have not disappointed, especially after being dragged down by low oil prices and a weaker Canadian dollar for the last year and half. RY would be my first choice among the Canadian banks then TD for a potential buy. Like you, I have had TRV on my watch list for a while now but never pulled the trigger. These days, with fewer options out there for my fresh capital I may initiate a new position. Thank you for stopping by and commenting.

  2. Hi DH,

    TRV is my pick. As an old investor once told me people need 1) food, 2) water, 3) shelter, 4) electricity, 5) iphone, and 6) insurance. Can’t own a home, rent an apartment, buy a car, or live in general without some sort of insurance.

    • Hi TBDI,

      Well said. Some things are just essential for survival and insurance in the modern world is one such necessity. I really like the business of insurance, in general, and already own AFL and CB. TRV looks decent at current levels and would be a new position in my portfolio. It’s been on my watch list forever it seems and if the market continues the way it has been I may just make a TRV buy. Thank you for sharing your thoughts.

  3. Hey Keith,

    I agree about the family part of your post – we’re collecting all these dividends so that we can spend time with our family. Not just dividends for dividends sake.

    I like your choices of banks, any of them I’m sure will be a good choice. I’m not impressed with insurance companies as they seem to becoming more and more commodity based – and those end up being price wars.

    Tristan
    Dividends Down Under recently posted…Dividend update: July 2016My Profile

    • Hi DDU,

      I think most of us have a grip on the reality of why we invest and collect our dividends. You don’t really read our fellow bloggers saying they’ll be buying new rims for their cars with their dividends or some other nonsense. It’s about self time, family time, free time, etc. The keyword, of course, time. The banks are still looking attractive these days and WFC has been a popular stock in recent weeks among our online peers. I still like the insurance sector too and if I initiate a position with TRV it would be small to start. As always, I appreciate your comment.

  4. Nice names DH, what are your thoughts on JPM vs. WFC? I like the Chase credit card side of the JPM business. Both their fundamentals are almost in line and actually I think JPM’s payout % and P/E may be a little lower. Also JPM had a nice size divvy raise this year vs. not so much for WFC.

    Curious to see if you’ve compared the two.

    • Hi DS,

      I never really looked into JPM too deeply so it would be unfair to offer an educated opinion. I can tell you that I would only consider two American banks for my long term dividend portfolio, WFC and USB. Going forward it will be interesting to see how WFC manages its dividend distribution but as far as I’m concerned I’ll stick with it. Thank you for commenting.

  5. Divhut,

    Just talking to Lanny about some Canadian bank stocks a few minutes ago. The sector seems to have some great discounts right now. I have a position in CM; however it is only about $800 and I would love to add to it. Maybe now is the time to strike. Also, I’m keeping a close eye on WFC too. WOuld love to initiate a position. Best of luck hunting in this market. Hopefully your trip to Seattle is going well!

    BErt
    Dividend Diplomats recently posted…Lanny’s July Dividend Income SummaryMy Profile

    • Hi DD,

      The Canadian banks are still sporting some attractive values and yields though with oil dropping lower the past month I have a feeling that the Canadian banks will follow suit with better buying opportunities ahead. WFC has been popular among our fellow DGI bloggers as well. I guess now is a good a time as any to add to any of those positions as other stocks and sectors still remain relatively expensive. Having a good and cool time in Seattle. The weather here in the summer is quite pleasant compared to the rest of the country. Thank you for sharing your thoughts.

    • Hi FV,

      I have seen TRV in several of our fellow DGI portfolios and it has been on my watch list for a long, long time. Like you, I really like the insurance space and if I don’t find better values with my current holdings I may just consider nibbling on TRV and initiating a new position. Thank you for stopping by and commenting.

    • Hi ODOT,

      It’s hard to argue with GWW’s past dividend performance and their business model overall. Despite an onslaught of brick and mortar retailers having a tough time these days, GWW continues to plod along delivering steady gains and increased dividends. They operate in a space that is necessary for any business to operate, facilities management. The Canadian banks are worth a look in my opinion. They have been beaten down a bit from their highs in 2014 as oil and the Canadian dollar both took a spill. Despite the high market, there still exists decent to good value out there. Thank you for commenting.

  6. Some nice non stock consideration remarks! Spending time with the family is indeed priceless and is the actual goal of our investing. Enjoy it.

    I like your reason to buy every month. This way you avoid to be a market timer. For now, my investing is on hold due to increased job uncertainty. That being said, I am happy with the timing…
    ambertree recently posted…Passive Income – Jul 2016My Profile

    • Hi ambertree,

      Glad you enjoyed the first part of the post. Dividends are just part of what we are really trying to achieve which is greater control over our time. So far, our road trip along the west coast has been great. I can’t believe that in a few days we’ll already be starting our journey back south through Washington, Oregon and all the way to southern California. This time we’ll be heading south along a different road and I look forward to the new things we’ll see. I always felt that consistency with investing is just as important as what you are buying. By being methodical with your buys you eliminate a lot of the market noise knowing that you will be putting money to work during the best economic times as well as the worst. In the end, it all averages out. Thank you for sharing your thoughts.

    • Hi DFG,

      I think low yields are keeping some great companies out of our fellow DGI portfolios. I’m not too excited about any of the yields, except for the Canadian banks, but you have to put your money somewhere. We’ll see if oil continues to drag down the rest of the market. We may be getting better buys in the coming days and weeks. Thank you for sharing your thoughts.

  7. All of those options look solid DH. Of course almost any yield is attractive compared to most other investments. I only own AFL in the insurance space and would really like to get into a US based one and TRV looks solid. The financial companies look solid too. WFC has stated that their target payout ratio is somewhere around 60% so as the dividend still has room to run in terms of payout ratio expansion on top of the underlying earnings growth. Looking forward to seeing what you buy and enjoy your time in Seattle. I’ve never made it up to the PNW but it’s high on my list of places to visit.
    JC recently posted…No Deals At Costco Wholesale CorporationMy Profile

    • Hi JC,

      I just commented above that you have to put your money somewhere and even though a lot of the companies I mention do not offer a super juicy yield it’s still better than having cash sit on the sideline doing nothing. Ideally, I’d like to add to some of my smaller positions in my portfolio to “even out” my dividend income. As it is, my Canadian banks are getting to be large positions relative to others in my portfolio. Of course, sometimes when sales are offered up it can be tough to resist. The PNW is a great place to visit. Very green, lots of trees as you can imagine and snow up on Mt. Ranier. Today it’s only 69F in Seattle. Quite refreshing. In a few days we’ll be heading back south taking about a week towards southern California. How’s the sleep coming along with your new baby?

  8. Hey DH,

    Glad you are getting some family time. I like your picks as I think financials is still very attractive. I am a big fan of Canadian banks and added some to WFC last month when it dipped below $45. The yields are attractive and their prices are very reasonable. Unless the Fed somehow decreases the interest rate I think it is a waiting game for US banks to rally.
    Stefan @ Mllnnlbudget recently posted…Yakezie Challenge AcceptedMy Profile

    • Hi Stefan,

      It seems like everyone is waiting for the Fed to raise rates and watch the American banks really take off. Put it this way, I’m not holding my breath. In the meantime, as you stated, they still offer pretty good values and yields especially when other stocks seem just way too expensive or offer very low yield. The last week or so it looks like oil has taken a hold of the market as it dropped in July and started to drag the market along with it. Better buying opportunities in August? Could be??? Thank you for stopping by and commenting.

  9. Some great picks you have there. As you know I really like the Canadian Banks from these picks. But I have the same feeling as you. I think that before the year ends we see a drop in current share prices. I’m saving some money now through not buying much and see if I can take advantage. It’s a small gamble, but it can’t hurt much!

    • Hi P2F,

      The last two months or so have been difficult in identifying good places to deploy fresh capital. Most stocks were getting quite expensive and many yields have been falling. What’s a dividend growth investor to do? I have been buying small but still buying. Without trying to time the market and find the “best” time to invest I choose to nibble on positions at this time. While I like the Canadian banks too, I would prefer to invest in some of my smaller positions first. We’ll see how August unfolds. It looks like oil has taken a grip on the market once again and where oil goes the market seems to follow. As always, I appreciate your comment.

  10. Hi DivHut,

    I really can’t understand why are you so positive on VF Corp, it is so expensive…

    Have you considered Gilead Sciences? It seems to be cheap on multiples (although results can be under pressure) and strong cash flow generating business (cash flow operating $4B in last quarter), probable Dividend Aristocrat in a very long term perspective 🙂

    Best regards,
    DividendTIME

    • Hi DT,

      VFC under $60 starts to look attractive to me. It’s a company that rarely goes on sale and these days it’s valuation is getting close to its five year average. Sure, it’s not a cheap stock but it isn’t crazily overvalued at under $60. It’s been with me for many years and has performed very well in terms of dividend growth as well as capital appreciation. It’s just a quality company that I’d like to increase in allocation.

      I have looked at GILD as well as AMGN. Both are on my watch list but not in my portfolio yet. There’s no arguing the cheap multiple of GILD at current levels. I’m just continuing to follow those names. Thank you for stopping by and commenting.

  11. Hey Div hut nice list of buys you mentioned. I like OHI, VZ, and KSS. All of these with high yields and pretty stable business models. Keep up the good work and I’m looking forward to getting 7K this year in dividends. Wish me luck.
    EL @ Moneywatch101 recently posted…What is Debt?My Profile

    • Hi EL,

      Thanks for sharing your potential picks for August. Funny, I own none of those names mentioned. I like your OHI pick the most followed by VZ then KSS last. Just my two cents. It’s tough for me to get excited about retail. Good luck with your $7K goal this year. That’s a very healthy number for passive income earned. Thank you for commenting.

    • Hi BSR,

      It’s funny you mention the Canadian real estate market as I just saw a report on CBC about how expensive housing is getting in Vancouver and that a planned tax for foreign investors will be going into effect to try and curb “outside” buying. I’m in Seattle these days and was just flipping around the TV and decided to watch some Canadian TV for a change. While the Canadian banks still appear to be in good shape I guess you are right that things may come to a head when real estate does pop. Of course, who can predict the future with any accuracy? Thanks for sharing your thoughts.

    • Hi DG,

      Valuations are, at best, decent for these companies. Not crazy expensive but not cheap either. The bottom line these days seems to be that if you want to put fresh capital to work you’ll have to pay fair value or slightly more for a quality company. Either way, the plan is to put some money to work. Good luck with the job change coming up. In no time, you’ll be back into the swing of things. Thank you for stopping by and commenting.

  12. Hey DivHut,
    I have been researching my stock pick for Sept. GWW was on my very short list. Looking around at ratings I saw some holds and some neutrals and Charlie Schwab gave it an F. I also read a comment from Sure Dividend that it may go up as oil improves. So I wondering about the ratings or it could be a wee bit of a sale? I am only a 1.5 year into dividend investing so I’m new and don’t have much in my portfolio yet so another contender for Sept is PG even though it’s at its 52 week high. Not much else out there..

    • Hi Kelly,

      I continue to like GWW even though it’s not priced exactly at bargain levels. I actually added to my GWW last month for the first time in a long, long time. I never really utilize stock ratings from any agency when determining a potential buy. A stock may be rated ‘F’ or a ‘sell’ by the various rating agencies but I still might buy it. I look for value, current and average over several years, along with yield and dividend sustainability (payout ratios). If I find a sock I like long term trading at a decent to good value with a dividend that can continue to be paid and raised year in and year out, I’ll make the buy regardless of what the various rating agencies state. As you already know, there really isn’t that much out there these days as valuations remain relatively high and yields relatively depressed for many high quality payers. Thank you for commenting.

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