It’s the start of another month which means August stock picks must be made. With the market in a seeming tailspin the last couple weeks or so many “old” stocks are presenting new and attractive buying opportunities. Some of my favorites such as McDonald’s Corp. (MCD) has dropped considerably from about $103 to around $93, AFLAC Inc. (AFL) from about $63 to $58 and General Electric Company (GE) from about $27 to $25. The question then begs, do I add to my current positions at reduced prices or initiate new positions in other dividend paying stocks.
It’s no surprise that I have been fond of the financial sector for several months as I have added to my positions in AFL, CB, and WFC as each presented good dividend yield with great dividend growth. Sticking with the financial theme I have been seriously considering adding several of the large Canadian banks to my ROTH account. To be sure, with the market on edge I do not plan to initiate large positions in these banks rather “nibble” and simply start with about $500 invested in each. This way, should the market drop precipitously I’ll still have cash on the sidelines to dollar cost average lower.
As many of you know I recently wrote an article titled, “Canadian Century Club Dividend Stocks,” that highlighted Canadian stocks that have paid dividends for over 100 years and I was surprised to learn that every one of those companies that have paid dividends for that period of time were all Canadian banks. Hardly a coincidence in my opinion. There is good reason for this stellar record and it speaks volumes as to how resilient the Canadian banking sector is especially in the current state of the financial world.
My first consideration is The Bank of Nova Scotia (BNS). Based in Toronto, Canada, BNS provides banking services in Canada and internationally that include personal, commercial and corporate lending. Currently yielding a generous 3.60% with a moderate payout ratio of 51.2% this stock has paid a dividend every year since 1832. Another low valuation financial stock with a current PE of 13.44, BNS is a relatively cheap stock in todays mixed priced market.
Another Canadian century club dividend stock is The Toronto-Dominion Bank (TD). TD has paid a dividend every year since 1857 and currently yields a favorable 3.40% with a payout ratio of 47.5%. Having a slightly higher PE than BNS, TD is still far less than its peers and the S&P at only 14.98.
Finally, rounding out my August stock considerations list is Royal Bank of Canada (RY). Headquartered in Toronto, Canada, as most large Canadian banks are, RY currently offers a 3.80% yield with a payout ratio of 51.4%. Paying out dividends since 1870, RY has a current PE of 13.67 also putting it below many of its peers and the S&P.
We’ll see what the month of August has in store. I may end up adding to my current holdings if prices continue to drop or as mentioned above initiate new positions in the three Canadian banks mentioned. What do you think about my August stock considerations? Is this the best time to initiate a new position or simply add to my existing portfolio at more attractive prices? Please let me know below.
Disclosure: Long MCD, AFL, GE, CB, WFC