January 2017 Stock Considerations

The start of the new year is finally at hand. With a very wild financial 2016 in the rear view mirror it is time once again to look forward to my potential stock picks for new month. If you recall, the market got off on a very bad foot at the start of 2016. In fact, it was the worst start for the markets ever, as all the financial headlines were declaring, ‘this is it!,’ the start of the long awaited correction and bear market had begun. Of course, we all know how wrong those calls were as 2016 turned out to be a very good year for many stocks and sectors overall.

 

With the start of the new year, once again, I’ll be able to invest in my ROTH which is nice since I wasn’t able to touch that account for a few months after fully funding it for the year with no cash left for trading. New year equals another fresh $5,500 to invest. With that being said I’d like to highlight several of my January 2017 stock considerations.

 

Looking to the month ahead I feel compelled to highlight two potential sectors I’d like to invest my fresh capital. The first, consumer staples and second REITs.

 

Looking at the consumer staples I am considering quite a few names that I have not “touched” in a long time and would potentially like to increase and/or initiate positions. First I’d like to mention Unilever PLC (UL) which has been my only go to consumer staple over the last few months. With a yield that’s north of 3% and a stock price that is around $40 or below, UL will be a name that will remain on my potential buy list. Now, on to the other consumer staples I like that I have not added to in a while. These stocks include, The Coca-Cola Company (KO), Kimberly-Clark Corporation (KMB), The Procter & Gamble Company (PG), General Mills, Inc. (GIS) and Diageo plc (DEO). I am fully aware that these stocks are still considered expensive by traditional valuation metrics but they are trading at much better levels than just a few months ago as the sector as a whole fell out of favor with financial, industrial and other sectors getting the spotlight. With each name yielding 3% and up I feel compelled to at least consider one or several of the names mentioned.

 

Of course, the REITs have not fared well either over the last few months as the sector as a whole took a serious pounding giving us much better buying opportunities today. Several names I am considering in the space include 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.

 

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

 

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

 

Disclosure: Long UL, KO, KMB, PG, GIS, DEO, HCP, HCN, CCP

48 thoughts on “January 2017 Stock Considerations

  1. Hi,

    “The start of the new year is finally at hand.” do you have any expectations as it comes to market in general for 2017? I think we should expect some declines at the beginning of the year, we are around all time highs, Dow/Nasdaq are skyrocketing… then after correction good time to buy will come, as fundamentals are still solid!

    Best regards and happy 2017!

    DividendTIME

    • Hi DT,

      While I never make any near term future predictions about the market, I do expect 2017 to pick up where 2016 left off. General hiccups aside, I think we’ll continue to march higher or at the very least ‘melt up.’ The key to remember is not to try and figure out the best time to buy rather to continually buy as prices, values and yields make sense. Happy new year!

  2. Thanks for the list DivHut! I agree that January is always great when the Roth limit reopens again, :). Little highlight always to start the year.

    I plan to fund my mutual funds first and then look into some individual purchases in several months, but thanks for the list. I think I am a little hesitant to do anything until the Presidential transition happens successfully. I don’t know, weird trepidation there I suppose. Thanks for sharing,
    Passive Income Dude recently posted…Passive Income Report: December 2016 ($2,658!)My Profile

    • Hi PID,

      I’m happy when I can touch my ROTH again. While it’s nice to be able to maximize contributions it can be frustrating when you have to wait a few months to start buying again in the account. Curious to know which individual names you are considering alongside your mutual funds. In any case, keep buying when values and yields make sense otherwise you might be waiting and waiting for that perfect time to make a buy. Thank you for stopping by and commenting.

  3. What a crazy year it has been for sure! 2016 really turned around for the market despite all the doom and gloom headlines. I had some great buy in opportunities when I started my portfolio and your watch list is full of solid companies.
    Keep it up!

    • Hi DD,

      I think crazy is an understatement. If January 2016 was any guide as to how the market pros got it all wrong I think we’ll be just fine going into 2017 no matter what the headlines read. To start the year I think I just want to stick with the boring, solid names and later in the year build up some other positions. Nothing wrong with starting out with a solid base. As always, I appreciate your comment.

  4. I concur with your thought process. In staples I’m watching KMB and CLX with UL as the Euro slides closer to parity. I’m hesitant on health care REITs not because of rising interest rates but potential negative impacts by a new government so in the REIT space I’m liking exposure to logistics (AMZN) through PLD as an example. KO is interesting as they implement their 21st Century Beverage Partnership Model. As a contrarian play KCDMY might have some legs vs. KMB. Otherwise more cautious than normal.

    • Hi Charlie,

      The way I figure, I’d like to start the year with the beaten down staples, solid and boring for sure and later in the year move on to other sectors and specific stocks. I like your CLX choice too and it may also make my consideration if the yield gets closer to 3%. No doubt, the health REITs are still operating with a big near term question mark in front but over the long haul I think the sector will be just fine. Of course, it’s during these uncertain times in the sector that offers us the best potential buying opportunities. Thanks for the KCDMY suggestion. I have to look at that more closely to see how that operates as a Mexican subsidiary. Thank you for sharing your thoughts.

  5. Hi Keith,

    I like your list of stocks. Especially KMB and GIS are still missing in my portfolio. Both stocks are looking way more attractive than a couple of months ago.

    Have good Start in 2017!!

    Cheers
    Div.Income recently posted…Goals for 2017My Profile

    • Hi DI,

      Many of the consumer staples are looking a lot more attractive when compared to the last few months. I realize they aren’t trading at super bargain prices these days but it is a sector that has many stocks that rarely go on deep sale and when yields start to go above 3% they catch my eye. Good luck in 2017. Thank you for commenting.

  6. I’m slowly building up UL and KO through a taxable account via Loyal3. I’m pooling dividends until they reach at least $10 to buy the UL and making regular purchases in KO until I hit the $10 a quarter mark. Then I plan to just roll over the dividends back into KO as the minimum purchase is $10.
    Chris recently posted…Top 5 Travel Credit Cards To Get In 2017My Profile

    • Hi Chris,

      Sounds like a good plan to me. I like both KO and UL long term and when both get near $40 or below a lot of our fellow dividend investors seem to jump on board. Like you, I reinvest all my dividends as it’s a great way to get the compounding machine rolling along. Keep up the good work. Thank you for stopping by and commenting.

    • Hi DL,

      Starting off the year I decided to look at just the solid, boring, dividend stalwarts to build up my positions. Nothing too wild or ‘out there’ in terms of my picks. As long as relative weakness in the staples continues I’ll consider adding to my positions. Of course, the REITs might offer better returns as they have been seriously hammered in recent weeks but come with a higher risk than a UL, PG, GIS and the like. Thank you for commenting.

  7. I’m really interested to see what 2017 brings for us. The new president is coming in and that’ll be an interesting time as well as all the data around holiday sales coming through via earnings. I wonder if we’ll have a small dip early in the year like we did last year – could create some value.
    timeinthemarketblog recently posted…December dividend updateMy Profile

    • Hi timeinthemarketblog,

      There will definitely be a lot of changes in the government in the coming weeks, that’s for sure. After many, many years of more of the same, for better or worse, things will be very different which can indeed give us some interesting buying opportunities. Of course, I plan to keep investing every month as I always have no matter who is president, what levels interest rates are, in an inflationary or deflationary environment, etc. etc. Staying the course is my mantra when investing for the long term. Thank you for sharing your thoughts.

  8. There’s plenty of companies that are looking better, but like you said about many of the consumer staples they are still expensive by most valuation metrics. Although fair value is very much a range in real time and it’s only in hindsight when you can find out what the actual value was. I hope to add to some consumer staples and DEO is looking tempting. I’ve been debating whether I should play it via options to try and get a lower cost basis or just make smaller systematic purchases. Whatever 2017 brings I’m sure it’ll be interesting. Happy New Year!
    JC recently posted…Net Worth Update – November 2016My Profile

    • Hi JC,

      Why is it that the consumer staples never seem to go on sale? I think we’ll need a major correction to see better buys in the sector. In the meantime, I’ll take relatively good value and yield instead. While many of the names I mentioned are still considered expensive they are definitely on sale when compared to prices and values of just a few months ago. I recently added to my DEO before the year ended. Seems like many U.K. stocks are on sale these days. Happy new year to you as well. Good luck in 2017!

  9. Yeah there are a couple companies that are looking interesting right now!

    I know that I have started adding to my KO position so that I can lower my cost basis and would happily add new a new position if the price was right!

    • Hi MD,

      Even with the market in record territory there are still many names out there that are sporting better values and yields. The run up has not lifted everyone, that’s for sure. Instead of chasing the financial and industrial names I feel compelled to buy depressed stocks/sectors. Like you, I look to lower my cost basis whenever I can. Keep up the good work and thanks for commenting.

  10. One that I am looking at is Anheuser Bush. It quotes on multiple exchanges and as ADR in NY.
    Unilever is quite interesting as well. I need to figure out the best tax and options strategy on this one: tax efficient means no options, options means a really low dividend yield.
    ambertree recently posted…2016 – thumbs up or down?My Profile

    • Hi ambertree,

      I liked BUD a lot when it was an American company. I used to hold it in my long term portfolio till it was bought out. Perhaps it may make an appearance again in my portfolio but with tax concerns it becomes a less efficient investment. Something you already know and have to deal with. If I see UL dip below $40 again I’ll consider adding to it. As always, I appreciate your comment.

  11. I was not considering a US based stock purchase but recently with the Pound tanking it made sense to consider UL and so I dipped in. Always wanted to, glad it finally came around to a reasonable level.

    • Hi Ashley,

      The British stocks are on sale. Many of our fellow dividend investors have bought into DEO and UL to name a couple, myself included in recent weeks. Both are great, solid, long term plays that can afford their dividends based on current cash flow. What’s not to like especially when they are on “sale.” Thank you for stopping by and commenting.

  12. Thanks for laying out your plans so clearly. It’s great to learn how you are planning to take advantage of market opportunities in 2017. I’m a little nervous (recency bias) given the pain of last year. Nonetheless at present I’m fully invested and just hoping to continue putting money to work as it comes in 🙂

    • Hi Jay,

      One key aspect of my investing methodology is to be consistent with my buying. It takes some of the guesswork out of investing as I know that I will be making at least one buy each month no matter where the market is or I think it’s headed. We all experienced investing ‘pain’ at some point in our careers but the key is to focus on the present with a wide angle view of the future. I started dividend investing in late 2007 right before Bear Stearns went belly up and the rest of the 2008/09 turmoil. I could have curled up into a ball, sold everything and wait it out. Instead, seeing my entire portfolio in the red just strengthened my resolve to keep investing and average down in some very solid dividend paying stocks. It’s nice to see that you are fully invested in the market. Some of our fellow dividend investors have completely or partially sold out of their positions several months ago. Thank you for sharing your thoughts.

  13. Thanks for sharing. I’m also looking into a few staples stocks. Last month I added a few shares to my KO position. While it was not on sale like my first buy, it seemed to be trading at reasonable levels. I’ll be watching UL, PG, and NSRGY.

    • Hi DN,

      The consumer staples is probably one of the most stable and reliable sectors that exists which is why we rarely see names in the sector go on sale. For me, as long as relative good value persists and the yield looks attractive (north of 3%) I’ll consider those names. Thank you for stopping by and sharing some of your considerations.

    • Hi desidividend,

      Both are solid long term investments that are in my portfolio with plans to keep them for the foreseeable future. Thanks for sharing your considerations going forward.

    • Hi MDP,

      Nice to see we have at least a couple names in common that we’re considering. Of course, I’d like to see the staples really go on sale but I’ll take buying at current levels as values and yields are more attractive than in recent months. Let’s see how ’17 starts! Thank you for commenting.

    • Hi MGUK,

      Towards the end of 2016 I made several small buys in UL as the price went below $40. Your comment certainly rings true about many of the consumer staples mentioned. Great companies do deserve exceptional valuations or as I like to say, sometimes you have to pay up for quality which is why we rarely see those names go on sale. In any case, as long as relative value and yield look good enough to me I’ll continue to nibble on those positions. Thank you for commenting.

    • Hi TDM,

      Sounds like a plan to me. UL is a solid consumer staple that should be paying out dividends for the foreseeable future. I’d like to see UL below $40 before I add to it but your monthly buying routine sounds like a good plan too. Thank you for stopping by and commenting.

    • Hi IH,

      For the start of the year I wanted to focus on the “strong” companies first. Perhaps make a buy or two with the boring yet dependable consumer staples and then move on to other stocks and sectors. Building a base for 2017 with any of the names I mentioned can’t hurt in the long run. As always, I appreciate your comment.

  14. I would also like to get into REITs, as I have no RE exposure. Obviously concerned with interest rates and will feel like a fool if they take a hit. may bite the bullet and average in slowly anyway. Looking at VNQ for a basket to start. Thanks man and looking forward to following your decision + journey in the new year.
    Dividend Ten recently posted…Dec 2016 Income/ Expenses/ Portfolio NotesMy Profile

    • Hi DT,

      VNQ is not a bad place to start for getting some REIT exposure. Instant diversification across every REIT type imaginable. It’s true the REITs are operating with big near term uncertainties but over the long haul I think they should be fine. Of course, the time to consider any stock or asset class is when times look shaky and share prices reflect that with the REITs these days. Thank you for sharing your thoughts.

    • Hi DG,

      I have been adding to my UL and DEO the last several weeks. I made several buys in those names to close out 2016. Of course, I’d love for the staples to go further on sale but as long as better value and yield (north of 3%) presents itself I’ll feel comfortable nibbling on the names mentioned above. Thank you for commenting. Good luck in ’17!

  15. Very solid list.. Thank you so much for the sharing. I recently purchased UL and DEO. I have eyed on KO and PG for quite some time. I hope KO could drop to below $40, and PG reach around $80. If they wouldn’t drop that much, I’m considering to sell cash secured puts.

    • Hi MU,

      I think every dividend investor would like to see even better pricing for the names I mentioned. As you know, the consumer staples rarely go on sale and sometimes you have to pay a little extra for buying into a quality dividend paying stock. If KO and UL go under $40 I suspect we’ll be seeing a lot more buying in those names. Thanks for stopping by and sharing your considerations.

    • Hi TDP,

      UL has been quite popular the last several weeks as prices dipped below $40. In general, I’d like to start the year with some solid consumer staples and then potentially look elsewhere to invest. Of course, I’m also looking at the REITs but they are definitely a high risk high reward group when compared to the staples. Sometimes you just have to jump in when others are getting out. Thank you for stopping by and commenting.

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