December 2015 Stock Considerations

The final ‘stock considerations’ of post of 2015 is finally at hand. At the beginning of the year it’s sometimes hard to imagine what the next twelve months will have in store for us as we outline our dividend income goals, future buys and more. What is certain is that no one can accurately predict the future no matter what the credential may state. All you can do with certainty is be consistent with your dividend investments, seek out relative good value and sustainable yield and not panic when the market declines and your portfolio bleeds red. Do that, have patience and everything else will fall into place. It just takes time.

 

As we knock on December’s door, I find it a bit challenging to determine where I’d like to deploy my fresh capital. In the late summer we experienced a total collapse of the industrial sector as Caterpillar Inc. (CAT), Emerson Electric Co. (EMR), Dover Corporation (DOV) and many more names within the sector fell dramatically offering us much better prices, value and very high yield. With their recent comeback in the last couple of months buys in the space seem less attractive. The same has occurred for other solid dividend payers when bad quarters were reported as we saw in the case of V.F. Corporation (VFC), Yum! Brands, Inc. (YUM) and Archer-Daniels-Midland Company (ADM). Of course, when names like these drop dramatically you have no choice but to nibble on those positions at discounted prices.

 

Similarly, in early November the health REITs such as HCP, Inc. (HCP), Welltower Inc. (HCN), Ventas, Inc. (VTR) and more were demolished only to have rebounded quite nicely towards the end of the month. I’m happy that I have been able to add to many of the names listed above and take advantage of ‘sale’ prices but looking into December I’m not really sure where to invest if market conditions pretty much stay the same, though with all the volatility we have been seeing in recent months all it takes is one small catalyst and we’ll witness a 1,000 point drop in the DOW in a snap. With that being said, I’d like to review my potential buys going into the home stretch of 2015.

 

Looking at my current portfolio holdings my first choice for a December buy is Archer-Daniels-Midland Company (ADM). After reporting a pretty bad quarter and guidance the stock got hammered and is my worst performing holding in my taxable account. Currently yielding a historically high 3.07% with a moderate payout ratio of 41.5% I feel compelled to nibble more on this name and 1) average down on a high quality long term dividend raiser and 2) take advantage of a historically high yield while it’s still available. The long term prospects for ADM remain strong but near term commodity price headwinds are a drag on this stock currently. Buy when others are selling? Isn’t that the best time to add to a position when things aren’t rosy.

 

Finally, as with my November stock considerations, I will consider adding to my positions in the health REIT sector with potential buys in HCP, Inc. (HCP), Welltower, Inc. (HCN) and Ventas, Inc. (VTR) in my IRA. I’m less inclined to add to these names as each has rebounded quite a bit since the beginning of November but I realize they still do offer good value and yield at current levels.

 

As always, I qualify these posts with the notion that Mr. Market may present a new buying opportunity not mentioned here. After all, we do play by his rules. I’d love to hear what you are planning to buy in December. Perhaps an investment idea left in the comments may assist me in my decision making process. Please let me know below.

 

Disclosure: Long CAT, EMR, DOV, VFC, YUM, ADM, HCP, HCN, VTR

40 thoughts on “December 2015 Stock Considerations

    • Hi R2R,

      It will be interesting to see how December unfolds. Many are anticipating a Fed raise, Europe and China are on the ropes so that sneeze may very well come before the year is up. If nothing else, I’ll make at least one buy during the month as I always have in the past and remain consistent in that manner. That extra dry powder may come in handy come 2016. Thank you for commenting.

    • Hi FV,

      I know you are very keen on the long term prospects of ADM. So am I. When a dividend stalwart like ADM starts to yield historically high dividends it’s time to nibble on the position. As of today, it’s my go to stock for December. As always, I appreciate your comment.

  1. Seriously, where has this year gone? It’s hard to believe this is the last installment of the 2015 month buy considerations. I missed out on the really good values of some of the industrial names and also the dip in VFC. I really wanted to add VFC to my portfolio because they’re a long term winner. ADM is looking really good here and might find it’s way into my portfolio. BDX offers a pretty good value for a healthcare holding although the starting yield is kind of blah but the growth is solid and the tailwinds are enormous. HSY is still looking good as well. Many of the companies I would like to add to are on the high end of fair value so they aren’t great bargains but just somewhat good prices. Looking forward to seeing what you buy in December.
    JC recently posted…Weekly Roundup – November 28, 2015My Profile

    • Hi JC,

      I’m with you regarding how fast 2015 has come and gone. That’s life. Too often we live it looking in the rear view mirror. Your comment mentioned some really solid dividend payers. VFC, BDX, ADM, HSY and others are good long term plays for different reasons. Health is such a strong theme for the next two or three decades out. Take your pick of buying, pharma, consumer, medical devices, health REITs, etc. For now, it looks like the REITs are offering the best value/yield combo but I do like BDX a lot too just not at current levels. We’ll see how the market likes December or not. There’s always talk this time of the year about a Santa Claus rally. Judging by the Black Friday numbers, it seems that December may finish soft. But then again who really knows. Thank you for stopping by and commenting.

  2. I don’t have specific candidates in mind yet, but your article inspires me to start looking. I do know, though, that I’ll be selling some of my holdings in December (continuing the tax-loss harvesting strategy). Also, I have several stocks yet to transfer from my Scottrade account.

    Best of luck and I’m looking forward to seeing what you decide to buy!
    FerdiS recently posted…Blogroll Page ReorganizedMy Profile

    • Hi FerdiS,

      Hope my post can give you some potential investing ideas for the month. I always like to look ahead at the beginning of the month and make my picks. This way, I don’t over think my buys and just pull the trigger. The thinking and thesis has already been done beforehand. Of course, new opportunities may pop up that I do not mention and sometimes I jump on those as well. Good luck with your tax loss harvesting. Thank you for commenting.

    • Hi SD,

      With all the amazing talk and value that energy companies have given us in the last year, it’s hard to forget that in recent history we have been handed some really great buying opportunities in many other sectors from industrial to consumer to REITs. Thank you for stopping by and commenting.

    • Hi IH,

      Thank you for your suggestion. While QCOM is indeed a solid name and many dividend growth portfolios hold that stock, I am not too fond of anything tech related. I appreciate you sharing your opinion.

    • Hi DC,

      Using a put to enter into a position in ADM is not a bad way to go. Of course, the stock is trading at a pretty attractive value and record high yield at current levels. If it remains depressed I’ll continue to nibble on the stock. Thank you for commenting.

  3. DH,

    Always plenty to consider when putting new capital to work. What you said about 1,000 point drops in the DOW definitely resonates. It seems we’re being offered one-day opportunities to pick up shares at great prices all the more often these days.

    The great thing about our strategy is that as things get worse, we just accumulate more. Nice to be on this side of the investment community and not have to worry every time the market swoons, eh?

    Take care!
    – Ryan
    Get Rich Brothers recently posted…Financial Proverbs 2.0My Profile

    • Hi GRB,

      You said it. We all seem to relish those market swoons and our buys pick up during those days and weeks when drops occur in dramatic fashion. We all seem to have a long term outlook that’s best measured in decades before we tap into our dividend income for month to month usage so why not load up on some very high quality names when they swoon. That’s one of the reasons I’m keen on ADM these days. It’s just facing some near term commodity price pressures but the long term outlook remains strong. It’s sometimes tough to buy when others are selling but that’s when the best pricing is made available. As always, I appreciate your comment.

    • Hi ADD,

      November can best be characterized as a health REIT month for me as I added to my HCP, HCN and VTR. For now, ADM seems to be my number one pick for December but we’ll see how the next week or two unfolds. Looks like you have your eyes on some great names for the month as well. Thank you for stopping by and commenting.

  4. Some great companies there, DivHut! Nothing really new, but dividend growth investing isn’t about reinventing the wheel. Not when we’re too busy riding the wheel to financial freedom.

    BBL recently came back into my radar due to its price and yield. The last thing I want to do, of course, is chase yield, but BBL has always been a great company and I already own a bit. Even if low commodity prices have made it a riskier play than most stocks in a DGI portfolio, it seems like too great of a value to pass up.

    OHI still lurks on my radar, demanding my hard earned money.

    Sincerely,
    ARB–Angry Retail Banker
    ARB recently posted…You Morons Must Love Fees!My Profile

    • Hi ARB,

      I have been reading about quite a few buys in BBL among the dividend bloggers in the last week or so. No doubt, that current yield is the siren song luring many in. While the long term prospects might be OK for a name like BBL I wonder about their dividend should commodity prices remain depressed for a while longer. If yield is what you are after, why not look into the Canadian banks or health REITs. You mention OHI but HCP, HCN and VTR are all pretty safe in terms of dividend reliability and offer a relatively high payout too. Thank you for sharing your potential picks for the month.

  5. Hi Keith,

    I pulled the trigger again on ADM yesterday for the second time this month. I guess that we saw the same opportunity there. I’ve been watching that one for a long time. This one and IBM seemed to be the best quality stocks at the right price right now.

    I know that you’re not a big fan of retail stocks but I can’t avoid mentionning that WMT seems to be interesting at this price for the long run too and I recently added 13 shares to my current position.

    But It’s true that compared to the recent september drop everything (or almost) seems expensive. Still, I think that our strategy of nibbling in slowly into stocks each month is a better approach than waiting for the next potential drop that may or may not happen soon. And to prove it, I made the following simulation : 100,000$ invested the day before the 1987 crash in the S&P500 and held there until today and 100,000$ invested in the S&P500 the day after the 1987 crash. Would there be any other better timing than buying just after a big crash?

    The first simulation had a compounded return of 7,23% and the latter a compounded return of 7,91% so for sure, a difference will subsist but that difference wont be that big on a period of 20-30 years. I also did the same with the Dow and the Nasdaq and the figures remained essentialy the same.

    Time in the market is more important than timing the market.
    Allan recently posted…Achat récent : Archer Daniels Midland (ADM) à 36,25$ USMy Profile

    • Hi Allan,

      Congrats on picking up some ADM recently. As I stated in other comments, nothing is guaranteed but the risk/reward ratio for ADM is looking a lot more appealing at these lower levels. Any time a dividend stalwart like ADM offers such great value, has a sustainable yield that can still grow and is yielding a record high amount, one has to take notice. If things pretty much stay the same with my portfolio and the market, ADM will be my go to choice for December.

      WMT has been a very popular name among the DGI community. I have been reading a lot buy posts in recent weeks and I can see why. That’s another dividend/growth stock that has stumbled as of late and is offering some pretty compelling yield and value. But, as you already know, I just can’t get behind retail for my long term portfolio. GWW is my only “retail” name if you want to call it a retail stock.

      As you also know, I don’t gorge on any stock no matter the price, value or yield that’s offered. I nibble, bit by bit every month. So, while a dramatic drop in the market may be welcome I certainly do not wait for one to happen as I invest slowly over the long haul. I have read about that simulation you mention about the “world’s worst investor” who invests his money at all the worst possible dates in history and that over time, despite entering the market at the worst possible times still does just fine in terms of growth. As you stated, which I fully believe, time in the market is better than timing the market. No question there. As always, I appreciate your comment.

    • Hi DG,

      I like the industrial sector as well, just not as much as a couple months ago when CAT, EMR, DOV and the like were trading at much, much lower prices and higher yield. Though still attractive, I find the sector just a little less attractive at current levels. ETN looks like an interesting play as well. I have seen the name circulate among a few other blogs but for December I think I’ll just stick to my current holdings. Looking to see where you deploy your dollars. Thank you for commenting.

    • Hi DD,

      I think the case for ADM is easy to make these days. We all wish for great buying opportunities in solid dividend paying companies yet when prices fall many get cold feet. The fundamental business of ADM did not change. It is facing current headwinds in the form of lower commodity prices coupled with a strong dollar which is taking a toll on this dividend stalwart. While nothing is guaranteed, ADM trading at a historic high yield and great value is enough to get me to nibble on the stock. Thank you for stopping by and commenting.

    • Hi R2R,

      All the names you mention have been on sale in recent weeks/months and gave us all great opportunities to buy into or average down our positions. ADM is in the forefront at present but I know that Mr. Market can turn on a dime and present us with many other buying opportunities. Thank you for commenting.

  6. Greetings!
    Potash Corporation of Saskatchewan ( POT ) is very hard to resist at these levels.
    Your thoughts would be welcome…
    Thanks!
    Yield
    7.37%

    • Hi DWP,

      I have not really followed or looked into POT in earnest and it’s not on my current watch list though I have been reading about a lot of POT buys in recent days among the dividend bloggers. Yes, that yield looks incredibly tempting and by most measures appears to be safe based on current cash flow. That being said, if depressed commodity prices remain for a while longer I seriously doubt any dividend increases will occur and the question of a dividend cut always comes up. While I don’t give out formal recommendations my thought on POT is to tread lightly. Any time you see a yield well over 5% it should raise red flags. That may be my personal aversion towards risk as I really enjoy my SWAN (Sleep Well At Night) stocks. Thank you for your comment.

      • DH,
        Thank you for your time! More than a recommendation, I was looking for your insight (which is worth far more), and you did not disappoint. I was just wondering if this type of stock hit your “radar” or if it was just too risky. They “seem” to have good financials, and when the world starts growing again “should” they may be primed to take off… My question is… if you could?
        How do YOU determine if a stock is beat up unnecessarily and at what point would you say “this is the time”.
        P.S. I just thought POT would be a good example.
        Hope you can keep this going, great site!

        • Hi DWP,

          I appreciate your kind words regarding my blog. I intend to maintain this site and update regularly for the foreseeable future.

          Regarding POT, it never really made my radar. In general, I shy away from very high yield because more often than not it’s a red flag. If you look at my portfolio, my holdings skew much more towards the conservative lower yielding dividend growers rather than just current high yield. The only exception you will see might be my REIT holdings in my IRA and those positions are very, very new relative to the rest of my stocks and by most measures could be considered conservative REITs in a conservative and growing sector, health. Another reason POT never really made my radar is my personal preference to stay away from commodity related stocks because of their inherent volatility. This is why you do not see any energy names in my portfolio, nor gold, nor steel, etc. Again, perhaps one exception to this is ADM but that’s more of a consumer staple rather than a pure commodity play. I want to stress that there’s nothing inherently wrong with energy or commodities or REITs, MLPs and the like. It just doesn’t suit my long term portfolio taste. I do agree with you that, as you stated, “when the world starts growing again,” POT, energy names and more may climb back quite nicely but in the meantime, I’m sure you have noticed many other dividend bloggers got burned jumping into energy too eagerly and materials as solid names like CVX, XOM, BP, RDS, BBL, NOV and more dropped significantly and many are selling these losers before 2015 is up to harvest tax losses.

          To answer your question more direct when I see a stock yielding a historically high yield compared to its average I take notice. ADM is a current example. Not long ago, CAT and EMR were great examples too as they were yielding well over 4%, a historically high yield for those names. Once I find those stocks, I ask if anything has fundamentally changed with their business or is it simply a beaten down stock. When I see that I’m dealing with a broken stock rather than a broken company I tend to buy. Near term headwinds, slowing economy, lower oil/commodity prices, stronger dollar, etc. all contributed to some newly high yielding stocks. To me that signals a broken stock and not company as those businesses, ADM, CAT, EMR and other are still fundamentally the same. Hope this gives you a bit more insight into some of the reasons why I make certain buys.

  7. Great list Keith.

    I saw Lanny commented earlier and he is right, I am down quite a bit on ADM at the moment. Hopefully this window stays open for the next couple of months and I am able to lower my cost basis while the prices are so low. You were right, there is a very easy case to be made, especially when they are close to yielding 3%. It depends how much capital you have and how many stocks you want to buy, because I bet there will be some great opportunities in the REIT industry now that the Fed seems committed to increasing interest rates.

    Regardless of what stock you select, you can’t go wrong with the names on your list. Those are some great companies. Hopefully you will enjoy your Holiday “stock” shopping!

    Bert
    Dividend Diplomats recently posted…Thoughts on Investing into Starbucks (SBUX)My Profile

    • Hi DD,

      It’s all about finding that right balance of great value and “high” yield. For ADM, that means a yield north of 3%. Judging by these early days of December I think we’ll have plenty of chances to buy into ADM and/or the REITs. Both seem primed for a tough month ahead for various reasons. Not long ago we were given great opportunities to buy into CAT, EMR and even MMM as their prices faltered and they began to offer unusually high yield. Glad you like my considerations. As always, I appreciate your comment.

  8. What can I say…
    Thank you for you insight and time!
    I’m new to individual stock investing, your perspective is very helpful.
    I’m sold on the take it slow and steady dividend investing. Just trying to get my head around the whole thing.
    I will be watching and reading all the insightful posts.
    Thanks again,
    DWP

    • Hi DWP,

      You are more than welcome. Feel free to comment, ask, email anything you want and I’ll try my best to answer. I am open with my dividend buys, income as well as portfolio performance. You can see all my holdings as well as their gains/losses on my blog. While I am focused much more so on my growing dividend income stream rather than capital appreciation, I feel it’s still important to show how my holdings have been performing as well.

  9. Nice list of stocks. I am looking to initiate a position in EMR as well, but it does look a bit expensive at current levels. Looking for the stock to drop less than $45 or so and I would consider initiating a position. I am also looking to add to my position in stocks like PEP, KO and V, but all these are higher than my target prices by a bit.
    Thanks for sharing.
    DGJ
    Dividend Growth Journey recently posted…Sharebuilder Purchase – 12/1/2015My Profile

    • Hi DGJ,

      For now, it looks like ADM is still my go to choice in December. I added to my EMR and CAT when the industrial sector was hammered a couple months ago. With the incredible price swings we have been seeing in the market recently I have a feeling better buying opportunities for the names you mention might be closer than you think. Keep finding those dividend bargains. Thank you for commenting.

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