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
Keith,
I picked up 35 shares of MCD today. I thought that the Canadian banks looked a bit pricey, but Fast Graphs shows RY and TD trading at their ten year average P/E ratios. MCD and GE are trading below their 10 year average P/Es, but AFL is at a significant discount. You should do well whatever you decide.
Good luck,
KeithX
Hi KeithX,
That’s the question many of us are asking… Add to current positions or initiate new ones. Perhaps I’ll do both. We’ll see how August shapes up. But there is no doubt that the stocks mentioned are trading at much better valuations in these recent days compared to a month ago. I’m not going to sweat the small stuff and fuss over a dollar here or there as all my investments are for the long haul. I guess, as you said, I should do well with any or all from the list. Thanks for commenting.
I’m considering getting some more RY now the price dropped a little bit.
MCD and GE both look interesting, I’d love to add to my position on these 2 stocks as well.
Tawcan recently posted…July Dividend Update
Hi Tawcan,
All three are solid picks especially after the nice discount we have been getting in recent weeks. I’ll just wait and see a few more days to see how the market shapes up or down and decide if I want to add or initiate new positions. In any case, as I mentioned in the post, I’ll start really small with a new position. Thanks for stopping by.
MCD, CLX, KRFT, and AFL look pretty good at these levels. CVX and WAG, like MCD, have lost about $10 a share recently and are probably a decent buy. I am actually starting to like T and SO if they can get to around a 5.5% entry yield. The old standbys PM and GE continually give investors an opportunity to lower their cost basis, while providing solid entry yields. 🙂 This could be an interesting month for investors.
MDP
My Dividend Pipeline recently posted…July 2014 Passive Income
Hi MDP,
An interesting month indeed. This has been the first time in a very long time where some discounts are being created in this high PE market. I have added in previous months to my MCD, KRFT and AFL but as mentioned in the post I am very keen on Canadian banks for the long haul too and have very limited exposure to banks with just WFC. I love SO too. I have owned it since 2007 and have no plans of giving it up. The utilities have been very expensive too but I guess Mr. Market is giving us a little summer sale. Thanks for commenting.
Divhut,
There are a few good buying opportunities in the market right now and I am considering dipping into my Emergency Fund just to get in on the action. I also think DE is fairly valued right now at $85 and hope to add this as a future holding.
DividendMongrel recently posted…I Got Nominated … Be Very Affraid!
Hi DM,
Just be careful about tapping that emergency fund. It’s called an emergency fund for a reason. One lesson I have learned is that no matter how high a market gets there will always be a buying opportunity. Patience and fortitude is a must when investing and the ability to not jump in can be difficult to resist at times. Personally, there are some funds I never want to touch no matter how enticing the market becomes. Call me a conservative investor but it helps me sleep at night knowing I have my cash on the sidelines and a funded emergency fund. I follow the guide that only “risk capital” should be used in the stock market.
DE seems like a good pick too. It has been making the rounds among the many dividend bloggers in recent weeks as value and future growth made it look very appealing. Thanks for stopping by.
Yeah, a lot of financial companies seem like a good bargains at the moment. Great list, I don’t think you can go wrong with AFL. I wonder why it’s priced so cheap. But who knows, I’m sure AFL will be fine 10 years from now.
Cheers!
Henry @ Living At Home recently posted…Recent Buy – Raven Industries (RAVN)
Hi LAH,
AFL has been a great dividend stock in the past and going forward the prospects of company look good as well. For now, AFL is my largest holding and while I’m enjoying that great dividend growth rate I am looking to diversify into other financial names, such as the Canadian banking stocks as I am light in that sector. Thanks for stopping by.
DivHut,
Nice stocks there. I’m long both BNS and TD, and I’m a very happy shareholder thus far. I actually found it amusing that BNS sent me a physical annual report last year. It was a hefty read, but really interesting. Their international exposure is really nice, and TD has the US exposure.
Best wishes!
Dividend Mantra recently posted…Dividend Income Update – July 2014
Hi DM,
The Canadian banks seem to be quite popular among many of the dividend bloggers I have been reading and beyond international exposure and growth they just seem more stable and solidly built that most shaky American banks. I have owned WFC for many, many years and have been very happy as a shareholder but I must say from a dividend perspective the Canadian banks seem like a better buy. We’ll see what August brings as I’m still on the fence about adding to my current holdings, now that Mr. market has given us a summer sale, or initiate new positions in those Canadian banks. I guess for the long haul I shouldn’t worry too much as I plan to start very small, so even if the market dives I’ll be able to average down. Thanks for stopping by.
Interesting list of stocks. And it is always a debate on whether to add to existing positions or initiate new ones. Couple of stocks that I am looking to add to my existing positions include COP and PG. These are smaller positions and I am always looking to add more. But at the same time looking to initiate positions and I am looking at KO/PEP/GSK in August. Hopefully the market has few more dips in order to get these at attractive levels.
DGJ
Dividend Growth Journey recently posted…Portfolio update for July 2014
Hi DGJ,
I’m waiting for the next several days or week before I make my decision. Mr. Market got us all thinking a little harder in recent weeks as to what we should do with our cash. Like you are looking to add to your smaller positions I am looking for a bit of sector diversification as I only own one bank, WFC and it is my smallest investment sector in my portfolio. I’m not going to break my head over this decision too much as I am in this game for the long haul and the matter of a few dollars higher or lower will not make a difference 20 or 30 years down the line and like every stock I own I nibble and never gorge. This way, if the market drops like crazy I’d still have cash on the side to average down. Thanks for commenting.
Cant go wrong with the Canadian banks, DivHut. I DRIP BNS and own the others thru an ETF, but am also considering opening a new position in TD. All three provide great current yield and dividend growth year after year.
Best wishes
R2R
Roadmap2Retire recently posted…Recent Buy – AT&T Inc (T)
Hi R2R,
My thinking exactly. I appreciate all the comments received about the Canadian banks as I was lacking exposure to the banking sector in general and am wary of the American banks. Thanks for your input.
“Is this the best time to initiate a new position or simply add to my existing portfolio at more attractive prices?”
To answer a question with another question, do you think you are adequately diversified? If so, add to your current holdings. If not, initiate new positions.
Jake recently posted…July 2014 Update
Hi Jake,
Very clear and understood. Thanks for your suggestion.
Divhut
RY and BNS are definitely on my watch list as well. When it comes to Canadian banks, if you can’t beat them, join them!
Cheers
Ace
Hi Ace,
Thanks for your input regarding my August stock considerations. Many of the dividend bloggers have spoken highly of the large Canadian banks and their robust character in general. I am on the lookout for those as Mr. Market has been cutting the price a little from each of the banks.
I just pick up MCD last month, AFL & GE has been on my watch list also. I just pick up some CVX & RIG recently. I might consider picking up KO, AGU,PM, & TGT. The price seem to look good since we had a recent dip.
J @ the expat investor recently posted…July 2014 Net worth
Hi J,
Thanks for sharing your recent buy. Happy to be a fellow MCD shareholder with you too. As you mentioned, there are a lot of stocks that have gone on sale recently and like many of the dividend bloggers we’re looking to potentially add to our current positions at these reduced prices. I’m still waiting a few days to decide what to do.
Nice post!
Super Simple recently posted…The Best Coins to Buy on Ebay
Hi SS,
Thanks! Every month it’s the same thing. Where to invest next. Now that the market has created some more favorable prices for many stocks I’m deciding on whether to invest in my current holdings or purchase new stocks. Thanks for commenting.
I added to my own position in AFL earlier this week on its dip into the $58’s. Been looking to add to that one for a while now and it’s good to finally get a good value price to do so. I’m trying to focus more on adding to existing positions right now rather than start new ones but there’s still a few spots left for some select companies once they give better values. Thanks for the update.
JC @ Passive-Income-Pursuit.com recently posted…Net Worth Update – July 2014
Hi PIP,
AFL began to look really good to a lot of dividend investors once the price dropped below $60. I have been adding to that position for a few months a little at time. As I was mentioning, I am looking to start new positions in some Canadian banks as I only own WFC and am light in the banking sector. I’m curious to see what Mr. Market does in the next few days as many of the large Canadian banks have gone on sale. Thanks for stopping by and commenting.
McDonalds is getting interesting again. I remember when they were undervalued in $40’s and $50’s and glad I got some shares then and some more higher. I think it’s short term overreaction at this point.
Those were the times when should have loaded up on the safer DGI stocks. It depends on income, risks, and time horizon I guess with picks.
If it’s mostly for the dividend income then over a long period paying a small premium is not a huge issue.
The Dividend SWAN recently posted…July 2014 Dividend Update
Hi DS,
MCD has an awesome yield and very decent PE at current prices. MCD and AFL have become interesting in the last couple of weeks as both slid considerably from their respective highs. Like you, I agree that when buying high quality dividend stocks for the long haul buying a stock a few dollars higher or lower really won’t matter. From what I have seen in your portfolio I was surprised to see some fairly aggressive yield less of the “safer” stocks. Still, your picks seem to have done well and are generating some nice passive income. Look forward to your progress too.
Hi Keith
Hope you can get your banks when the time is right.
I sent you an email. My apologies for missing your earlier message.
Cheers
Debs
debt debs recently posted…Sticky Business: A busy bee ‘s work is never done
Hi DD,
No worries. We all have lives beyond the virtual blogging world. The Canadian banks seem to have fallen a bit in recent days from their all time highs. I’m not too worried about a dollar or two higher or lower when investing for the long haul and I always nibble on stocks and never gorge. This way I can always have cash on the side and average down if need be. Have a great weekend!
Nice summary of your August buys. Looks like Canadian Banks are taking a hit in the last few days from their 52 wk highs! It can be a good sign for you to nibble just a little bit and see how they go. The market is a bit shaky these last couple of weeks… I would thread carefully. I might add a small position in MCD myself… I am a fan of theirs for sure.
PC recently posted…New Tangerine Debit Card
Hi PC,
My thoughts exactly. After watching those banks reach higher and higher milestones I’d happy for a little break in price. As I always say, I never gorge on stocks only nibble. A few hundred dollars invested will not make or break a long term portfolio. MCD is one of my long time favorites too. I have owned it since 2007 and recently added to my existing position. Ever since they fell below $100 a lot of the dividend bloggers have been interested in it. It has a great yield and relatively low PE too. Thanks for commenting.
DivHut – I have to admit I don’t know much about Canadian banks but definitely need to spend some time to get to know them better because they sure appear to be highly favored by Canadians themselves. 🙂
As for your three stocks you mentioned as part of your favorites, I actually picked up a few shares in each of the three recently. Glad to have joined you as a fellow shareholder in AFL, MCD, and GE.
Thanks for sharing your August considerations…Wishing you continued success in your journey! AFFJ
A Frugal Family’s Journey recently posted…Retirement Accounts (Update) – August 2014
Hi AFFJ,
My issue for August is that cracks seemed to appear in the market giving all of us some better buying opportunities. I question whether I should add to my current holdings or start new small positions in those Canadian banks. I think many of the American bloggers favor these Canadian banks for their very friendly dividend policy too.
Happy to be a fellow shareholder with you too in AFL, MCD and GE. All three are highly popular these days. Thanks for stopping by.