December 2016 Stock Considerations

The final ‘stock considerations’ of post of 2016 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 their 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. After all, to look back at 2016 and call the market performance we have seen a roller coaster ride would be a huge understatement.

 

If you recall, 2016 was one of the worst starts of the year, ever, for the markets. The ‘smart’ talking heads and financial headlines all spoke of doom as the impending crash we have all been waiting for was finally at hand. Headlines like, “Stock market’s terrible start to 2016 just got worse,” “Ouch. 93% of investors lost money in January,” and “U.S. stocks post worst 10-day start to a year in history,” among many, many more. Just seeing these headlines is enough to make one panic and sell everything and ‘ride out the storm.’ Of course, looking back we know that after the brutal start to 2016 stocks climbed back up and started to look ‘frothy’ once again. Sure, valuations for many stocks did not make sense, the bull market was ‘long in the tooth’ and the Fed was running out of dry powder to help prop up the market with its bond buying activity and maintenance of low historic rates but the market kept climbing higher bit by bit, nothing too dramatic. Succumbing to the media panic would not have been wise. Then, the dreaded date, June 23, 2016 United Kingdom European Union membership referendum aka Brexit was to take place. Again, the ‘smart’ talking heads and financial headlines all predicted a certain ‘no’ vote to prevail as the U.K. was sure to remain a part of the European Union. The pollsters and markets all anticipated this result as shock and steep market declines eventually prevailed as news that the U.K. did indeed vote ‘yes’ to cede membership in the European Union. Once again, global stocks were in free fall and headlines looked quite scary as we read, “Brexit Roils Wall Street, Stocks Extend Global Selloff.” Over the course of the next few weeks and months those scary Brexit headlines were replaced by “Here’s why the majority of Brexit polls were wrong,” and “Here’s why pollsters and pundits got Brexit wrong,” as the market roared back in the summer and financial experts were left scratching their heads. Not to be outdone by the terrible stock market start of 2016 and the historic Brexit vote which took place, the financial media began to turn their sights on another potentially devastating event which could trigger a financial meltdown, the U.S. presidential elections. Oh my!

 

Here we go again… “Donald Trump Victory Would Send Stocks Plummeting 10 To 15 Percent,” and “Stock Markets Are Starting to Freak Out About a Donald Trump Victory,” among many other equally negative and scary headlines. And again, “How did pollsters get Trump, Clinton election so wrong?

 

Today, we sit at all time record highs in every major market index as financial experts again are scratching their heads and wondering what happened. Media outlets make their money with scary and outlandish headlines. After all, bad/scary news sells, it draws us in and keeps us reading and watching longer and so with one month left in 2016 I am left with deciding which stock(s) I should consider adding to my portfolio while knowing in the back of my head that the DOW may hit 20K or more this year or crash and burn to 15K or less. I don’t know, no one knows. That’s a fact. Accept it, and your investing career will be that much easier to manage.

 

Many seasoned dividend investors already know that the market and even individual stock prices are highly unpredictable and often trade irrationally in the short and mid term. All you can really do it stay diversified, buy stocks, sectors, commodities when they are trading at good value and make sure, if buying dividend paying stocks, that payout ratios are manageable in order to keep that passive income rolling in whether the market is in record territory or deep in correction mode. With that being said let’s take a look my December 2016 stock considerations.

 

Going into the last month of the year my focus will be on the staples, health and REIT sectors.

 

My first consideration in the staples/discretionary space is V.F. Corporation (VFC). A dividend stalwart by every measure, this name has hit several recent headwinds not least of which is a strong U.S. dollar that has brought this stock down in recent months and is now yielding around 3%.

 

In the same staples space I am also considering another dividend stalwart, Kimberly-Clark Corporation (KMB). KMB has come down quite a bit from its recent highs several months ago to offer a juicy yield well north of 3% and better value.

 

Finally, coming out of the U.K. are two names I am considering for December, Unilever PLC (UL) and Diageo plc (DEO). I still like UL stock under $40 as the yield and value being offered is much more enticing when compared to just a few months ago and the same is true for DEO at around $100.

 

In the health sector Johnson & Johnson (JNJ) and AbbVie Inc. (ABBV) are both well off their summertime highs and offering much better value and yield as a result. It’s been a very long time since I added to my JNJ position and I would welcome the chance to add to this long term holding of mine.

 

In the REIT space I’m looking at beaten down health REITs specifically that are all trading way off their summertime highs and sporting some really juicy yields. Stocks I am considering in this sector include HCP, Inc. (HCP) and Welltower Inc. (HCN) both sporting yields well above 5% after their recent sell off. For ‘fun’ I am also considering a new position in a long time watch list favorite, Omega Healthcare Investors Inc. (OHI).

 

There you have it. My December stock considerations. As you already know, I usually end these “considerations” posts with the caveat that Mr. Market makes all the rules and names that are not mentioned above may suddenly become attractive to accumulate.

 

What are some of the stocks you are considering for your December purchases? Are any of the above names on your monthly watch list? Please let me know below.

 

Disclosure: Long VFC, KMB, UL, DEO, JNJ, ABBV, HCP, HCN

34 thoughts on “December 2016 Stock Considerations

  1. DHut,

    I totally agree with sentiment. The media is just the most obviously guilty of predicting the wrong outcome almost to a hilarious degree. “How did we get ____ wrong?” You mentioned Brexit, Trump (because the UK will not outdo the USA in terms of ridiculousness), but there were still a few others out there too like the new Philippines president.

    Any way, I am looking at those same companies. I am already long UL with a nice sized position, but I am looking to add to my VFC in the coming year at these prices and would love to add DEO. Funny thing about DEO and its kin, the market is bad every drinks to forget – when the market is good everyone drinks to celebrate. Win-win.

    Have a good December,
    Gremlin
    Dividend Gremlin recently posted…Recent Buys, November 2016My Profile

    • Hi DG,

      I don’t know how many more examples we need to see before we truly ‘tune out the noise’ and just focus on our own investing paths. I guess it’s fun for the media to instill a little panic and urgency. After all, it gives us something to talk about. Nice to see you are considering the same companies as well. It’s tough to be wrong when investing in staples for the long run. Let’s toast to DEO! Thank you for stopping by and commenting.

  2. All the sentiment causing volatile market movements also provides good value for some companies. As you say: you can’t time the market. It’s still nice to be able to pick up some shares for lower prices 🙂

    We also stepped into Unilever recently and might be adding more if the outlook stays the same. The others are also some pretty solid ones! Not all are on my radar though.

    • Hi Divnomics,

      Volatility does indeed create investing opportunities. While some stocks and sectors took off, several got left behind which is where I’m deploying my fresh capital. UL is the popular name of the day and as I stated, under $40 still looks attractive long term. Thank you for commenting.

    • Hi IH,

      It seems like many of us are gravitating to the REITs and/or consumer staples. It’s been such a long time since we have seen better value in those sectors and it seems like there’s a lot of pent up demand to buy more. Sure, many staples are still trading at rich levels relative to other stocks in other sectors but they are more attractive today than just last summer. As always, I appreciate your comment.

  3. Keeping a level head is the greatest “skill” if you’re going to invest. There’s always a reason to be concerned, but the problem is that most of the time it’s not really anything to worry about like many of the ones you highlighted from just this year alone. That’s why it’s important to keep your focus on the long term; however, I’ve also seen many people keeping their focus on the long term at the expense of investing with a value mindset. That’s fine as long as they recognize the tradeoff their having to make.

    Lots of great names here. I just wrote a put option on VFC this morning and secretly hope it’s executed in January. Although cycling through a few put options and then having one executed wouldn’t be too bad either. I need to research the alcohol space specifically BF and DEO. In the discretionary space LOW is also looking tempting if it happens to head a bit lower from here. Regarding KMB I would love to add this one to my portfolio, but my analysis points to likely lackluster dividend growth for at least the next 5 years. That’s fine is the yield compensates you a bit more, but 3% isn’t quite enough for me since I expect dividend growth to probably continue in the 3-5% range for the time being.

    All the best and looking forward to seeing what you buy.

    • Hi JC,

      I already know that I can keep a level head regarding my portfolio as I was invested during 2008/09 and saw all my holdings go deep in the red. No panic, no selling, just more of the same making monthly buys as usual. During the best of times and the worst of times there will always be negative headlines. It just doesn’t matter. I admit I read CNBC and other financial sites more so for entertainment rather than trying to figure out what will happen to the market or specific stocks. Everyday we can read three opinions about the market. One says higher, one says lower and one says flat. Given the appropriate time line they are all correct.

      Looks like we are both considering similar names going forward. I don’t expect KMB to be a stellar performer but I do expect it to provide a relatively juicy yield for the foreseeable future. For me, anything over 3% I consider ‘high yield.’ Thank you for sharing your thoughts.

  4. Last one already, time flies eh?
    We got our hands on some UL, and Ahold as well. Even RDSA triggered today, albeit at not that great of a price (still, not too bad either).
    Good luck hunting in December.

    • Hi TCF,

      Time really flies. Such a cliché but so true. All that signifies to me is that I must be invested every month and continue to be consistent with my buys. It’s all about ‘time in the market’ when you see how fast time goes by. No use sitting on the sidelines. Thanks for sharing some of your recent pick ups. You got a very juicy RDS.A yield, that’s for sure.

  5. Like many, I like Unilever here.
    I picked up some Flowers Foods (FLO) under $15 about 3 months ago, but less than a full postition, so would like to add to that as well.
    I have to purchase both with CDN dollars, and the recent surge in the US dollar has tempered my enthusiasm to some degree. Patience is a virtue…

    • Hi DOD,

      It seems that for the last two weeks or so every dividend investor has been picking up or at least considering UL at $40 and below. I remember not that long ago when FLO was the flavor of the day. I guess we follow the better value and yield automatically. Nothing wrong with that. I can understand your hesitation in terms of picking up USD denominated stocks as the CAD slid quite a bit against the USD. As you stated, patience is a virtue and better buying opportunities always come along eventually. Thank you for stopping by and commenting.

  6. DEO (the only sin stock I own on my portolio) is underperforming. Maybe it’s a sign … to buy more LOL 🙂 But I’m definitely pay very close attention to REITs. I’m toying with the idea of getting another rental with my $200K cash, or buy REITs when they get beaten down bad. I’m still 50/50.
    vivianne recently posted…Another Rental Property in the Work?My Profile

    • Hi vivianne,

      When it comes to a quality sin stock DEO definitely fits the bill. Maybe it’s not a bad time to nibble on that name. British stocks seem to be offering better values these days. I think all the Brexit talk is keeping a lid on some great U.K. dividend payers. Considering another rental property is great if you think you can handle the extra work associated with double the management. REITs as you know are a great way to get real estate exposure with much less effort. Good luck with your decision and thank you for commenting.

    • Hi FV,

      I used to invest in CEFs before I became a dividend growth investor. I remember holding, PHK, USA, JSN and a few others. All were great for providing an income stream and were profitable trades but I decided to go the ‘traditional’ dividend route instead long term. Some of those CEFs have scary leverage employed which can really bite when things turn south. I’m not familiar with any of the CEFs you mention. Thank you for sharing your potential picks.

  7. You know, I should invest in DEO if only because I drink enough Guiness to fuel Ireland’s economy.

    KMB is a big one I want to buy. I love the idea of investing in toilet paper and other such products that we use daily without thinking. Scott’s is pretty much THE brand of toilet paper out there. And every time I use the restroom in the mall, the dispensers always have the “Kimberly-Clarke Professional” logo on it. Just makes me want the company even more. I’m really hoping to get it at 17x earnings, but I may just bite the bullet and get it at its current price. Once I have the funds to do so.

    VFC I like due to its current valuation, even though I tend to shy away from apparel. Fashion changes over time, forcing companies to update in order to keep up with fierce competition. But at least it’s still something we always need to buy. My boss hates it when I show up to work without pants.

    Sincerely,
    ARB–Angry Retail Banker
    ARB recently posted…Debit Card Safety And You: Read This To Avoid Jail!My Profile

    • Hi ARB,

      Thank you for your DEO contributions via your Guinness consumption 🙂 It’s much appreciated. If DEO dividends could keep a constant flow of Guinness coming your way it might be a warranted position in your portfolio. KMB is another great staple that seems to be in almost every home. There’s just a certain kind of quiet dignity knowing you are invested in some of the top toilet paper brands that exists. Yes, it’s not the cheapest stock out there. None of the staples really are these days. They just are trading at more acceptable levels than we have seen in a long, long time. Regarding VFC, it’s really a long term solid play and what I would consider a ‘fashion staple’ type of company rather than a trendy fashion company like ANF, AROPQ, AEO and URBN to name a few which is more sensitive to the fickle nature of the trendy fashion market. As always, I appreciate your comment.

  8. It has been one helluva year hasn’t it? Lots of crazy groundwork laid down regarding the Brexit and Trump presidency which will dictate how things will unfold over the next 4-5 years.

    Thanks for sharing your watchlist — some usual suspects and some surprises there… I was surprised to see HCP there…are you still considering after the major botched job they did recently which finally led to a dividend cut? I haven’t followed up past that but post dividend cuts may be a very good time to inititate if you believe the company will do well.

    Best wishes and Happy hunting!
    R2R
    Roadmap2Retire recently posted…2 Recent BuysMy Profile

    • Hi R2R,

      It wasn’t a boring year for the markets in 2016, that’s for sure. Even if nothing happens in December, 2016 will go down as a year of many missed calls. I’m still considering the health REITs just because they have been beaten down so much in recent weeks. My main focus will remain on the staples first but going forward I think HCP will be fine post QCP spin off. As you know, the best time to buy a stock is when it’s least popular and HCP is a name in the health sector with little love. Long term I still like the big three health REITs and some of the smaller players like OHI, LTC and NHI which are on my watch list. Thank you for stopping by and commenting.

  9. Every time I think the dust has settled and the madness has ended, something else crazy rocks the boat. The only question I have is “What is going to be next?” because these things seem to come out of left field. KMB was on my last watch list along with UL. However, I’m still holding off as I learn more about the situation. Just want to make sure nothing crazy happens with the dividend and currency rates don’t take a massive chunk out of my dividend check. Time will tell though, right??

    Bert
    Dividend Diplomats recently posted…Pay Down the Mortgage or Invest: Part II – Rising Interest RatesMy Profile

    • Hi DD,

      The dust will never settle. As I mentioned, even in the best of times, when everything economically and socially is firing on all cylinders there will always be a critic sounding the alarm about how bad things are. It can be a real life event that triggers some dramatic sell off or on quiet news days various frightening headlines stating doom. Been there, done that. Nice to see that we are both considering similar names going forward. I think the dividend is still safe for both companies but you already know that ‘left field’ can throw some serious, serious curve balls. As always, I appreciate your comment.

  10. Some of these are also on my watch list. Unilever is always good at these levels. Also HCP can be a nice buy again after getting rid of QCP. Shell has recently affirmed its dividend policy; it has great yield…
    JNJ is a great company, I also want to add it to my portfolio, but personally I still find a bit expensive.
    I was recently buying LMT, made a bit addition to NEE and bought into VFH ETF. In December I’m planning to add some more PSEC to my portfolio.
    Roadrunner recently posted…How to be a Good Farmer of Your Investments?My Profile

    • Hi Roadrunner,

      Some are surprised to see HCP on the list but I think it will be OK going forward. Usually the best times to buy a stock is when everyone is crapping on it. HCP definitely fits that bill and long term I think the company can regain its former glory in the health REIT space. Nice pick up with LMT. That stock along with other defensive names are on my watch list. Look forward to seeing what you ultimately buy in December. I have seen PSEC in quite a few portfolios over the years. Thank you for sharing your thoughts.

    • Hi DC,

      The ‘smart talking heads’ are there to entertain mostly and raise fear among investors. Fear and entertainment makes for good ratings. As I stated, I do watch those shows on occasion but never traded anything based on their suggestions or predictions about the future. Thanks for sharing your favorite stock of the bunch. Bottom line, there’s a lot more opportunities today when compared to just a few months ago. Thank you for stopping by and commenting.

  11. We have a very similar mindset DH. I’ve recently strengthened my position in JNJ and started a new one in KMB. I already have positions in DEO, UL,VFC and OHI.
    A lot of opportunities out there!

    • Hi DK,

      Looks like we have a very similar portfolio based on the stocks you have mentioned. I guess it’s for good reason as each of those names are solid dividend payers by most measures. No doubt the consumer staples and other sectors are looking more attractive these days. Thank you for commenting.

  12. Good stuff. It’s always great to look back and remember how wrong the entire planet was. It definitely helps keep the focus on the goals and ignore the noise. I panicked a bit last January and made a couple of moves that I still regret. I almost never do that but I did in this instance. That is the last time I let emotion rule the day. Thanks for sharing !

    -Brian
    Brian recently posted…Market volatility is your friend !My Profile

    • Hi Brian,

      It can be very tough to stay the course when it appears the world is falling apart around you. I am sure you were not alone in panicking during the start of this year. After all, the headlines and talking heads really pushed for the start of a correction and every indicator was pointing to a large drop for the year. January and February were very negative months but it just goes to show that no one could predict what would eventually happen. Thank you for sharing your thoughts.

    • Hi FS,

      I love boring, predictable and consistent companies and the consumer staples you mentioned all possess those qualities. I have a pretty good feeling that in ten years we’ll still be using toilet paper and tissues, drinking Lipton tea or washing with Dove soap and imbibing on Captain Morgan or Johnnie Walker. What tech will hold in store for us in ten years is a crap shoot. The consumer staples are much easier to imagine being used in our future. As always, I appreciate your comment.

Leave a Comment

CommentLuv badge