February 2017 Stock Considerations

Without trying to sound too cliché about how fast time goes by, I cannot believe that a whole month of 2017 is already in the books. Of course, with a new month upon us it is time, once again, for me to lay out some of my stock considerations for the next several weeks. The point of these posts is to help take some of the guesswork out of where I plan to allocate my fresh capital going forward. By making my selections ahead of time I find it easier to commit to buys as all the homework and investment theses have already been completed on my end. All that’s left to do is pull the ‘buy’ trigger. Of course, I always qualify these posts with the notion that Mr. Market may present new buying opportunities not mentioned here, and with all the volatility we have been witnessing recently it’s a definite possibility that some new stock buying opportunity will pop up. With that being said, let’s take a look at my February stock considerations.

 

After highlighting two specific sectors in my January considerations post I feel that not much has changed going into February. I basically considered consumer oriented stocks and the health REITs last month and feel ready to continue making buys in one or both of those sectors. Names that I am considering in the consumer space include Unilever PLC (UL), The Coca-Cola Company (KO), Kimberly-Clark Corporation (KMB), The Procter & Gamble Company (PG), General Mills, Inc. (GIS), Diageo plc (DEO) and V.F. Corporation (VFC). Each of these dividend stalwarts currently have safe dividend yields well north of 3% and would continue to make great long term holdings.

 

Looking at the health REITs I continue to consider HCP, Inc. (HCP), Welltower Inc. (HCN), Care Capital Properties, Inc. (CCP) and a potential new pick from my watch list, LTC Properties, Inc. (LTC). These stocks come with slightly higher risk than the “standard” dividend growth stocks mentioned earlier but do offer much higher yield all around for that added risk. We all know that a rising interest rate environment can create challenges for REITs but I would imagine the additional financing costs would be passed along to the end consumer and while the sector (health REIT) may face near and mid term headwinds over the long haul they are operating with a huge aging population tailwind.

 

Besides the many names I listed above I want to mention some new names that I have not considered last month and are also increasingly looking more attractive. First, in the financial sector T. Rowe Price Group, Inc. (TROW) is offering us a much better price value and yield compared to just a couple weeks ago. While a very small position in my portfolio, I wouldn’t mind adding a bit more to this stock.

 

Finally, I am considering the utilities in the month of February. In order of preference, I am looking to add to my holdings in Dominion Resources, Inc. (D), The Southern Company (SO) and Consolidated Edison, Inc. (ED).

 

So there you have it. My February 2017 stock considerations. What stocks are you considering this month? Are any of the above names I’m considering making your top picks? Please let me know below.

 

Disclosure: Long UL, KO, KMB, PG, GIS, DEO, VFC, HCP, HCN, CCP, TROW, D, SO, ED

44 thoughts on “February 2017 Stock Considerations

  1. Great picks. Getting ready to put the stock armor on with all these defensive stocks 🙂

    I don’t like HCP because they recently cut the dividend, I have a small position that I won’t add any more. OHI and HCN are better positioned in my opinion.
    Dividends 4 Future recently posted…January 2017 UpdateMy Profile

    • Hi D4F,

      You noticed these picks were on the defensive side 🙂 I’m still watching the health REITs and would like to add to some of my positions but the consumer and utility stocks have most of my attention. I think HCP will be fine down the road. It’s exactly the sentiment that you share which makes HCP an unloved stock and poised, potentially, to make a nice comeback. I held my GE and WFC when they cut their dividends. For me a dividend cut does not equal an automatic sell. Thank you for sharing your thoughts.

    • Hi DC,

      I wouldn’t say I’m going out on a limb with any of my February potential buys. I’m sticking with the boring, stodgy, known long term dividend performers this month. It’s good to hear that I’m not alone in liking some of the utilities these days. In general, they aren’t the most popular sector among dividend investors because of their low growth but what they lack in growth they more than make up with stability. Thank you for commenting.

    • Hi Jay,

      It’s a little longer shopping list this month than I usually put together but I still see better value and yield in many companies despite the market treading on such high ground. Thank you for stopping by and commenting.

    • Hi BHL,

      If you look at my portfolio you can see that I’m fairly risk averse when it comes to my stock picks. I like the boring, solid companies because it’s those companies that tend to do well over time and reward their shareholders accordingly with higher and higher annual dividends and that’s why we invest! As always, I appreciate your comment.

    • Hi IH,

      For a few months the consumer stocks have been looking weaker which just translates to better prices, value and yield for current buyers. Sure, they are not considered “cheap” but I’d say they look a lot more attractive today than just one quarter ago. Thank you for sharing your potential picks.

  2. There’s not too much deviation from the companies that I’m looking at. JNJ is another one that I’m considering and MKC if it can get back down to $90. Another one that could be interesting after the 10%+ decline after earnings is UPS. I think it’s definitely one that needs to be examined a bit closer especially since a dividend increase should be announced in a week or two.
    JC recently posted…Dividend Update Preview – January 2017 InfographicMy Profile

    • Hi JC,

      I’m with you in considering JNJ. It’s not my focus but if prices come down a bit more it will definitely move to the forefront of my considerations. For now, it’s all about consumer stocks, utilities and maybe the health REITs. While February is still fresh, it has been kind of direction-less in the first couple days of trading. Thank you for commenting.

    • Hi R2R,

      Oh yeah! I think we are all waiting for that magical sale in the consumer staples. I only think we’ll see it when a major event happens like we saw in 2008/09. In the meantime, it’s all about relative good value and yield which many names are sporting these days as the sector has been generally weak for a few months. Let’s see how February unfolds. Thank you for stopping by and commenting.

    • Hi Harry,

      The consumer staples will always be the largest sector in my portfolio and any time I can buy into the space at decent value and yield I’ll go for it. Sure, these stocks aren’t the cheapest out there but they do sport better numbers these days when compared to just a few months ago. Happy to see another utility hunter in the mix. Thank you for sharing your thoughts.

    • Hi DG,

      Well said. The market rise definitely did not carry with it every stock nor sector. The staples, which rarely give us “sale” prices are sporting some better prices, values, and yields these days which is why I continue to consider stocks in that sector among others. As always, I appreciate your comment.

    • Hi ARB,

      Both KMB and DEO have risen quite a bit in just the last few weeks. I would not call them undervalued, rather still reasonably priced for what you are buying long term. Regarding the utilities, I like all three and could see myself buying a little in each in February. I just put D first because of its recent drop in price which has given it a very attractive current yield for that stock from about 3.6% to well over 4% today. Thank you for commenting.

    • Hi DD,

      The utilities caught my eye going into February. Of course, I’m a fan of the staples but seeing some of those current yields in D, SO and ED got me thinking. I realize they aren’t fast dividend growers but do offer consistency and relatively high yields. As for HCP, it’s an unloved company for good reason these days but I think they should be just fine looking years down the road. I’m only considering HCP because it is so unloved these days which usually translates to a good time to nibble. Thank you for stopping by and commenting.

    • Hi FM,

      This month I’m really looking at the more solid long term plays. I’m always a fan of consumer oriented stocks for their proven longevity with the products they offer. I like UL but will wait till I see it at $40 or below and while you started a position in KMB to soothe our runny noses I’m on a PG (NyQuil™) kick the last three nights. As always, I appreciate your comment.

    • Hi DD,

      I agree, TROW has come down a lot in just the last week or so. It’s a very small position in my portfolio but I wouldn’t mind adding a bit more to it. On that note, VFC is also continuing its slide south. Some real gems out there indeed. Thank you for sharing your thoughts.

  3. DH, fantastic watchlist you have here. I actually purchased with my last January paycheck and am very pleased with the purchase. They forecast 8% div growth to 2020, that is huge!! UL has been on my radar along with PEP, I much prefer them to KO as they have much better growth catalyst. I am also in the market for an industrial stock as I have virtually none in my portfolio other than one GE share.
    Stefan – The Millennial Budget recently posted…Top 5 2017 GoalsMy Profile

    • Hi TMB,

      You mention some great names in your comment. Like you I also think UL and PEP are good long term buys. There was talk that BUD might buy KO so we’ll see how that plays out down the road. I don’t think it will happen any time soon but I could see it being bought out one day just as BUD was bought by InBev. There are many great industrial companies I’d like to buy but not at current levels. Some names include, MMM, ITW, CAT and BMS. Thank you for commenting.

  4. Gis and kmb are always a good buy as the price ralativeky stable and people who’d buy them don’t sell.

    I personally Iike deo, the euro is weak, looking ahead, deo might pull back at least 10% if brexit becom a reality. I’ll jump in it as my cost of renovation is almost done.

    • Hi Vivianne,

      Your comment highlights why I like the consumer staples a lot. They are stable and necessary for day to day living around the world. I like DEO too but it has climbed quite a bit in recent days. If there is more Brexit news it’s sure to drop off a bit. I added to my DEO not long ago and it’s still on my mind. Thank you for commenting.

  5. I’m liking VFC quite a bit at the current price. Apparel has been getting hit in general and I’m eager to see the VFC earnings to see if they’re also having trouble or if they’re wading through it well. I might pick some up depending on what I hear during earnings.
    timeinthemarketblog recently posted…January dividend updateMy Profile

    • Hi timeinthemarketblog,

      VFC is the one stock that seems to be spiraling downward for months on end. Not sure why exactly other than a very strong USD hurting sales numbers. Still, it’s a great long term hold especially if you can pick it up yielding well over 3%. Thank you for stopping by and commenting.

    • Hi DD,

      No matter how you look at my list, I think it’s fair to say that they are all potentially good long term picks though some question seeing HCP there. I think that’s an unloved REIT that can return to its better former self. Of course, I’ll post my buys when they happen. As always, I appreciate your comment.

  6. I like a lot of your companies. I’m also looking at the same companies in the consumer staples except for DEO. The only two REITs I’m considering right now are HCP and OHI, but I’m still on the fence about those two. I’ve considered TROW too, but with limited capital and my hesitation about financial sector companies, I’m also on the fence about this one. I like your utility stock considerations – can you explain the reason for that order of preference (D, SO, ED)? Is it based on the order of dividend growth rate?
    A Christian Investor recently posted…2016 Passive Income CoverageMy Profile

    • Hi ACI,

      You are one of the few who are even considering HCP. Many people have turned their backs on that name but I think that it can perform well over the long run and is much better suited to do so after their QCP spin off and getting their distributions more in line. TROW just jumped on the radar very recently after their steep drop the last couple of weeks. Regarding the utilities, I like all three and could see myself buying a little in each in February. I just put D first because of its recent drop in price which has given it a very attractive current yield for that stock from about 3.6% to well over 4% today. Thank you for commenting.

  7. Great list! I’ll have to look at a few of these more closely when I get some cash in the account again. How does everyone approach investing in REITs? From a tax perspective it makes sense to keep them in tax advantaged accounts, but that really limits how much and often one can invest in them (max $5500 per year). There was a Seeking Alpha article (http://seekingalpha.com/article/3995316-taxman-cometh-look-tax-efficiency-reits) that looked at tax efficiency of REITs kept in taxable accounts and it actually didn’t look all that bad…

    Scott
    Two Investing recently posted…Latest purchases: BMY, CY, DEO, GILD, KKR, VTRMy Profile

    • Hi TI,

      I keep all my REITs in an IRA. While it’s true there is a maximum annual contribution towards retirement accounts, for me it’s enough potential exposure I’d like in the sector. My main focus will always be my taxable account first with any “left over” cash going towards a retirement account. Thank you for stopping by and commenting.

    • Hi DS,

      I can understand your hesitation with owning utilities. It’s true, they are not, nor will the ever be, fast dividend growers. What you are buying is a ‘foundation’ of dividend distributions that should continue to be paid out for the foreseeable future. While I like the utilities, my portfolio only holds three names in the sector among the many dozens of stocks I hold and overall represent a low single digit portion of my total holdings. The utilities will never be my largest or among the larger sector holdings in my portfolio but do deserve a small piece of the pie. As always, I appreciate your comment.

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