January Stock Considerations

A new year and a new month is upon us which is the perfect time to lay out potential stock investments for my dividend income portfolio. This month I am faced with the question of finally dipping my toe into the energy sector, as many dividend growth bloggers have been doing, or perhaps stick with ‘more of the same’ and add to my current holdings and average down where possible. Quite, honestly, despite the recent run up in many of the holdings I currently own I am looking to continue to add to my positions that have worked for me for the past seven plus years. While I recognize that my portfolio might not be the highest yielding among the dividend bloggers, it does offer me reliable dividend growth and peace of mind which I value tremendously. That being said I’d like to highlight several of my January stock considerations. Of course, with all the volatility in the market in recent months, Mr. Market may guide my investment decisions elsewhere.

 

Looking at my taxable account I am first considering Emerson Electric Co. (EMR). An industrial and dividend paying stalwart, EMR seems to be a relatively attractive investment within its sector. Currently, in line with its five year average PE of 20.3, EMR offers a very attractive yield of 3.10%. Similarly, though not in my current portfolio, I am also considering initiating a new position in United Technologies Corporation (UTX). Another dividend stalwart UTX has a lower PE of 16.95 which is in line with its five year average. Yielding 2.10% I may be inclined to pay a little premium for the EMR stock instead.

 

In the consumer staples space I am considering two names that really need no introduction, Kraft Foods Group, Inc. (KRFT) and General Mills, Inc. (GIS). Lower growth KRFT is attracting me because of its current yield while better growth prospect GIS might offer both good current yield with future overall value in the form of dividends plus capital appreciation.

 

Finally, for my taxable account I am considering health care giant Johnson & Johnson (JNJ). After slipping a bit from its recent high and currently yielding a decent 2.60%, JNJ’s valuation appears cheaper than many of its industry peers and is in line with its five year average PE. I have not bought shares of JNJ for quite a few years and would like to add additional exposure to the health sector in my portfolio via this stock.

 

Moving to my ROTH account I have the option to average down on three of my relatively new Canadian bank holdings which I initiated towards the end of 2014. Those names include, The Toronto-Dominion Bank (TD), The Bank of Nova Scotia (BNS) and Royal Bank of Canada (RY). Each of these banks are considered relatively high yield for my portfolio as their rates range from about 3.60% to over 4.0%. A nice rate, to say the least, to be paid to wait while holding the stock.

 

The last stock I am considering for January is Unilever plc (UL). UL is a name that many are very familiar with and around $40 a share seems like a decent value considering future growth prospects and its fairly high current yield of 3.50%. On a valuation basis UL is in line with its five year average but well below industry peers which makes it more attractive than other consumer staple names.

 

On the surface it may seem like I have a long laundry list of potential stock holdings I am considering but the reality is that I am quite familiar with all the names listed above as most have been with me for many, many years. UTX is the only new name I’d potentially add to my portfolio and at current levels seems like a decent risk/reward ratio to take.

 

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 EMR, KRFT, GIS, JNJ, TD, BNS, RY, UL

50 thoughts on “January Stock Considerations

  1. DivHut,
    Like you mentioned on my blog, theres an overlap on a lot of the stocks that both of us are considering. The two not on my watchlist are UTX and EMR. Both great companies for sure – maybe I should take a look at them too.

    Looking forward to see which ones you pick from the list
    R2R
    Roadmap2Retire recently posted…Outlook for January 2015My Profile

    • Hi R2R,

      Barring any surprises from Mr. Market, I’ll definitely be making a purchase from the list of names I mentioned in this post. Though not on your watch list, you should really consider both of those high quality industrial names, UTX and EMR as well. It’s a young month and we’ll see where the market heads in the first full week of trading of the year. Look forward to my “recent buy” post. Thank you for stopping by and commenting.

  2. All good options, with the Canadian banks being some obvious choices for the Roth. Just this past month I built a position in BNS, and will certainly consider the others as capital allows. I will I’d snagged UTX back in 2014 when it dipped in October, but such is life. Plenty of good opportunities for you without departing from your comfort zone.

    Here’s to starting off 2015 with a bang!
    writing2reality recently posted…The Great Divide in P2P Lending: Institutional Demand and the Little GuyMy Profile

    • Hi w2r,

      I fully agree with your sentiment about not having to depart from my comfort zone of investing as many of the names I mentioned are all of high quality and make for great long term investments. Like you, I watched UTX year after year after year and never pulled the trigger. Kind of wish I had several years ago but realize you can’t buy every winner out there. No complaints regarding my portfolio though. Thanks for sharing your thoughts.

  3. Hi Keith,
    I’m long UTX, KRFT, GIS, JNJ and UL and plan on keeping them for the long haul. I recently added to my shares of JNJ since the price seemed reasonable (but not really a bargain) and I wanted to get it back into my top 10 holdings.

    If you don’t own any oil stocks, I might suggest that you look at CVX, COP, and XOM. I also hold BP and KMI, but Chevron, Exxon-Mobil, and Conoco-Phillips are just tremendous values for people willing to hold them for 5 years or more. IMHO much better current valuations than the other stocks I listed, above. I don’t know much about the Canuck banks so I can’t give an opinion on them.

    Happy New Year!
    KeithX

    • Hi KeithX,

      Seems like we have quite a few names in common, at least in the consumer and industrial sectors. I fully agree with you on JNJ. Not really cheap but a top quality stock and at least for this month I’m considering paying a little premium for a name like JNJ.

      Regarding the oil patch, I have already added CVX, COP and XOM to my watch list and have commented many times that the yields are really tempting me as share price has fallen for those names but I just can’t get behind the volatility at this point. I would feel more comfortable missing the bottom and buy on the upside rather than continue to average down. Perhaps I am getting more conservative with each passing year and shun extreme volatility. As always, thank you for stopping by and sharing your opinion.

  4. Great list of stocks. Can’t go wrong with any of these I think. EMR, UTX, and KRAFT are the only ones not in our portfolio currently. May add UTX later. Thanks for sharing.
    Tawcan recently posted…Recent buysMy Profile

    • Hi Tawcan,

      The overall sentiment based on my assessment and the comments seems to be that I can’t go wrong with any of the names mentioned, especially when having a long term horizon. I think in this relatively volatile market some “boring” names might be in order, at least from my perspective as I don’t really care for this extreme volatility. I know volatility can create some great opportunities but so can a slower more methodical decline which is more my speed. Thank you for stopping by and commenting.

  5. Keith, you can’t go wrong with any of these! In particular, I’m hoping that JNJ will dip below $100 again. If you’re looking for oil companies, though, I second KeithX’s recommendations of XOM and CVX.

    Nothing wrong with a lower-yielding portfolio either. You get to sleep well at night and have reliable dividend growth, so I’d say that’s a win-win 🙂
    Seraph recently posted…Dividend Income, December 2014My Profile

    • Hi Seraph,

      Like you I would like to see JNJ dip below $100 for my buy but I won’t quibble over a dollar or two above $100 either. The yields for both CVX and XOM seem very compelling for “safer” oil patch names. I also was looking at BP and have added COP to my watch list as well. For now I’m on the energy sector sidelines. As you know I value my sleep 🙂 and I feel my lower yield portfolio is sitting on a more solid footing than one that might be focused too much on high yield plays. Thank you for sharing your thoughts.

    • Hi CD,

      These are pretty much all solid names that are already in my portfolio except for UTX. I am still not comfortable adding an energy play to my portfolio and will most likely add to my existing holdings barring any surprise from Mr. Market. I’m looking at JNJ under $100 or UL under $40 ideally but as I have commented elsewhere I won’t quibble over a dollar or two especially since I have an investment horizon measured in decades. Thank you for stopping by.

  6. DivHut,
    you have great selection of stocks here. I like JNJ a lot, but I think your best selection is BNS, & TD, these are the only two stocks I would invest in. All others I would wait as they seem to be quite overvalued to me. So I would wait for a bigger pullback before buying them, like the pullback we saw last October and see if they get cheaper.
    Martin@hellosuckers.net recently posted…Netflix will be a part of your cable service. Will it hurt Comcast?My Profile

    • Hi HS,

      While I fully agree with your assessment regarding the Canadian bank stocks, as they are the only names I could average down with, I still feel just slightly hesitant about buying them, when compared to my other choices, simply because of their exposure to the oil sector. I still feel no one knows where oil is headed in the near term as more pain for the sector may lay ahead. But then again, who really knows anything. Predictions, even from the lips of the best often turn out wrong. Of course, I always prefer to average down than up with my long term holdings which just means more TD, BNS or RY, so I’ll just have to wait and see how things pan out this week and beyond.

    • Hi DD,

      GIS is a very well run and well diversified play in the consumer staples sector. While there has been chatter regarding less cereal being consumed at breakfast time, their stable of brands spans every meal of the day and snack time too. A little expensive for my taste but I’m willing to pay a bit of a premium for this quality name and nice 3%+ yield. Thank you for sharing your thoughts.

  7. Keith,

    Great list of companies on your radar. I especially like JNJ and UL.

    Unilever has offered decent value for investors for many years and I’m sure will continue to do so for the foreseeable future. That’s why I doubled my position only a couple of days ago.

    Looking forward to reading what you ultimately decided to add to your portfolio.

    All the best for 2015,
    NMW
    No More Waffles recently posted…Dividend Income for December 2014My Profile

    • Hi NMW,

      Given enough cash I’d be buying every name I mentioned in this article but the reality is I am bound by a limited cash horde for any given month, as we all are. I really would like to add to my JNJ as I mentioned I have not added to my holding in a very long time and would like to increase my health sector exposure. UL is a relatively new holding for me as I initiated a position several months ago. I rarely add new names to my portfolio and 2014 was the first time in about six or seven years that I added new names (TD, BNS, RY and UL). If UL goes well below $40 it may make my shortlist of January buys. We’ll see how things go. I feel no matter which stock I pick there’s a good chance I’ll be happy with my decision in a decade from now. As always I appreciate you stopping by and commenting.

  8. Nice set of stocks on your watch list. I do not think I had heard or researched UTX, but looking them up via your link, they seem to be a good value. As for my watch list, I’m looking at ADM, GSK, IP, KMB, NSC, and PEP. Not sure I’ll initiate any positions, as I’m still doing research though. Speaking to your portfolio, I think it best you stick with what keeps you comfortable.

    Have a great 2015!

    – HMB
    HMB recently posted…Stuffing MoneyBags – December ’14My Profile

    • Hi HMB,

      Ever since I became a long term dividend growth investor I have only stuck with names that make me comfortable which is why I own no tech or energy names. The volatility of those sectors just makes me nervous. As you can see from my portfolio my two largest sector holdings are consumer staples and industrial names.

      UTX is a good industrial name. I do not own it but have been watching it for several years. I just never pulled the trigger on that one. Your list of names looks really solid too except for one name I wouldn’t consider for my portfolio, IP. Not that it’s a bad company, I used to own it and it did serve me well (Foolish Dividend Investing) if you want to read about it. Thank you for stopping by and commenting. Look forward to a solid 2015.

    • Hi Pullingmyselfup,

      Well, for the longest time I only owned one bank in my entire portfolio, WFC. I think that gives you an idea about what I think about U.S. banks. That being said, there is only one other American bank I would consider, USB. Because I was so light in the financial sector I wanted additional exposure which led me to the large Canadian banks and TD, BNS and RY. We’ll see how they do in the coming months and years as talk about a real estate bubble in Canada is circulating as well as talk about the Canadian bank exposure to the oil patch. I’m confident in holding those names for my long term portfolio and any decline would simply afford me better price buying opportunities. Thank you for stopping by.

  9. DivHut,

    Nice slew of stocks there. UTX is a big dividend player, over 20+ years of growth with a solid growth rate. Can’t go wrong with them or EMR, depends on what yield you are going for, just make sure the growth rate is there as well.

    Canadian bank stocks – enough said, great players. Also, Unilever has been quite popular lately (over the last month or so), seems to be value there based on the recent purchases by our community.

    Excited on what you decide on and will wait for your article! Keep us posted and nice article!

    -Lanny
    Dividend Diplomats recently posted…Stock Purchase 12/30 – ROKMy Profile

    • Hi DD,

      From the list of stocks mentioned I feel any choice I make will be a good long term buy which is basically how I narrowed down my list to the ones in the article. I have mentioned in the past that I would love to add to some other solid names such as GWW, VFC, BDX, BCR and others but valuations and relatively low yields convinced me to wait for a better buying opportunity for those names. UL has been quite popular as of late as I bought into it along with many other dividend growth bloggers. I think anywhere around $40 or below is a nice entry price assuming current market conditions of course.

      Thank you for the kind words about this article and for taking the time to comment.

  10. This is an interesting list for consideration. For industrials, I am considering GE but am not sure if I want to pull the trigger. UL is definitely on my purchase list. I saw it at $39.90 yesterday but decided to hold out for a better price. I would also love to add to my JNJ holding but am not keen at these levels. If it dips below $100 I will definitely buy more. I am not big on bank stocks so cannot comment on the Canadian banks. Good luck with what you decide and I will check back to see.
    Lynx recently posted…Portfolio Update December 2014My Profile

    • Hi Lynx,

      I have added to my GE position in December and was looking to add to some of my smaller positions which is why it did not make my consideration list. Of course, if prices decline below $25 I’ll consider GE again. Similarly, UL under $40 catches my eye as well. I’m comfortable waiting several days or a week even to see how the markets open up in their first full week of trading.

      You sound like me when you say you would “love to add to my JNJ holding but am not keen at these levels.” It’s my sentiment exactly and if it dips below $100 it will be a top consideration. The bottom line is that these are all good long term buys and a dollar or two higher or lower won’t matter much when investing for a decade or two. I am confident that down the road, my future self will be happy no matter what buy I make today. Thank you for stopping by and sharing your thoughts.

  11. Hi DH,

    I just added KO, PEP, KRFT, and UL to my Loyal3 account. I’m hoarding up consumer goods/defensive in anticipation for the next crash (i know bearish). I’m eying GIS and JNJ if I can get a good price.

    Water is an interesting investment. I’m thinking of hoarding up WTR at the right price or buying middlesex water on this dip. I need more research but what’s safer than water?
    The Broke Dividend Investor recently posted…December DividendsMy Profile

      • My AAA, insured, 5% bond from Wyoming is probably the safest thing I have. Cash is safe unless it’s in a bank and black friday happens all over again and the feds prohibits all withdrawal.

        In a sell off, save your cash and let your dividends do the buying. Cheers
        The Broke Dividend Investor recently posted…December DividendsMy Profile

    • Hi TBDI,

      I love the consumer staples space. In fact, it is my largest sector holding and I consider it to be a core sector of my portfolio. I think I will always be heavy in the consumer staples space no matter how high or low markets go because of their defensive nature. I will say that the consumer staples sector served me well when the market fell off a cliff in 2008/09. Sure every position I had was in the red but with just one bank stock in my portfolio, no tech or energy either, I was able to remain calm and not sell a single share as my portfolio was less volatile than most on a relative scale.

      I looked at WTR and AWR a while back but never pulled the trigger on either. While water utilties seem like a stable dividend player they do not possess much in the way of growth. You might want to consider water services companies that pay dividends. Thank you for stopping by and commenting.

    • Hi Dennis,

      Every month I like to look at my portfolio and try and narrow down an investment thesis to assist in my final investment decision. Of course, these considerations are only as good as market conditions allow. As we all know, Mr. Market has a way of altering even the best laid plans. I’m curious to know what I’ll be buying myself this month and which stock or two will make the January cut. Thank you for commenting.

  12. Hi DH,

    I just added 30 shares of UL into my Roth IRA at $39.95 and am looking at KRFT and GE at the moment. I was wondering if had specific reasoning behind which stocks you hold in your Roth IRA, and which you hold in your Brokerage Account. Is there and advantage for certain stocks in a Roth IRA? I only have enough to invest about $5,000-$6,000 a year so I’m just sticking with a Roth IRA for now. Thanks for the post, I enjoy reading your articles!

    -TTT

    • Hi DLee,

      Nice pick up of UL under $40. I think many of the dividend bloggers like UL under $40. I’ll be watching it this month for sure.

      Regarding my ROTH account and some of my holdings there I can tell you that there are some advantages for holding certain names in tax advantaged accounts simply because of withholding taxes. For example, my three Canadian banks, TD, BNS and RY are all in my ROTH account because Canada does not apply a withholding tax on dividends as long as the Canadian stocks are held in a retirement account. Of course, every country has different rules and tax treaties in place so please check before making your investment decision. Some countries like the U.K. do not apply withholding taxes on any stock held in a taxable or retirement account which is why you might see UL in taxable and retirement accounts alike. Then there are some investors that don’t mind the withholding taxes as they receive a foreign tax credit on their income tax statement. The bottom line is that the decision to place certain stocks in taxable or retirement accounts depends on your specific situation. But for my money, I’d rather not get hit with any withholding taxes which is why I hold certain stocks in my ROTH and not in my taxable account. Happy to hear you are enjoying my articles. Thank you for commenting.

    • Hi Cazadividendos,

      It’s no surprise that most of the dividend bloggers are watching the same names. I know oil stocks have been quite hot in recent weeks as every divided growth blogger has been buying up shares in that sector. I wanted to highlight some relative great buys in sectors other than energy. The Canadian banks are the only holdings that would allow me to average down in price. It’s interesting to see how low oil prices will potentially affect those banks. Thank you for stopping by and commenting.

    • Hi Geblin,

      Thanks for sharing some of your holdings with us. UL has been a pretty popular name in recent weeks as it fell from its highs and I can understand you not wanting more if you are already fairly heavy on it. As you mentioned my list is pretty solid and with that knowledge I feel confident in any pick that I make, especially looking ten or more years out. Thank you for stopping by and commenting.

    • Hi PIM,

      Thanks for sharing some of your holdings with us. Always good to hear about some common names in the various DGI portfolios out there. Energy is still on my watch list. I have quite a few names that I have added over the last few months as enticing price/valuation/yield all started coming into play. I’m just waiting for some of the crazy volatility to die down a bit before jumping in. Just my personal preference. Nothing against energy as I have owned KMP, ETP, EPD and CVX in the past. Thank you for stopping by.

  13. Hey DiHut,
    This is an excellent list that you have…
    I agree with your philosophy, not systematically chasing the highest yields but seeking quality that always do wonders over time…
    I like EMR, UTX and UL a lot. Wonderful companies at decent prices…I have a harder time with GIS and KRFT where I am missing some catalysts….
    JNJ is a corporate wonder but a bit pricey….I love it with a yield closer to 3%…as far as Canadian banks,they all look phenomenal on paper….it is just beyond my zone of comfort….don’t know enough about them…
    All the best to you, with a lot of growing dividends.
    LTI

    • Hi LTI,

      I have sketched a fairly broad list of January stock considerations and the points you make for several of the stocks are well taken. I realize that KRFT might be viewed almost as a “utility stock” with low growth but a fairly substantial yield. JNJ is simply a quality company that almost always commands some sort of premium. Other potential picks also have their negative points and quite frankly if I had the cash I’d buy every stock I listed as there is never a perfect stock or perfect time to buy anything. No one ever buys at the lowest possible price just like no one ever sells at the absolute peak. Somehow it always seems that after every purchase made the stock price drifts just a bit lower. In any case, I’m pretty sure my future self will be happy with whatever January pick I make. As always, I appreciate you stopping by and commenting.

  14. DH,

    Good set of stocks there to look at. Long JNJ, KRFT, and and UL myself, and I have one of the big 5 (CM) Canuck banks and I like it a lot.

    Surprised with KRFT and GIS you did not include K on that list. Really good valuation currently as well, decent yield and growth. Dividend growth was stagnant until 2005, but looks to be on track for being a nice growth choice.

    Still the ones you have there are all quality.

    – Gremlin

    • Hi DG,

      With a market sell off occurring because of weak oil prices and slower demad outside the U.S. I have a feeling many of the names I mentioned might have some more favorable pricing this month. While KRFT and GIS have been long time holdings of mine, K just never made my list. While K has a low PE and nice yield I find that growth is not something too stellar. I find K to be very reliant on breakfast cereals as well and lacks the product diversity of GIS at a time when less people are eating cereal in the morning. Of course, with lower oil input costs go down and may help the bottom line for K in 2015. Thank you for stopping by and commenting.

    • Hi DD,

      Well if you look at my portfolio you’ll see that I am not invested in any energy names. The volatility is just too much for my taste and I would much rather buy on the way up and miss the proverbial bottom than continually average down. Think about all the energy purchases made by our fellow dividend bloggers in the last four to eight weeks. Not pretty. That being said, I am watching the space as I have invested in energy in the past owning CVX, ETP, KMP, EPD and have quite a few energy names on my watch list. Thank you for stopping by and sharing your thoughts.

    • Hi XLP,

      UL makes many brands that are used on a daily basis and Lipton tea is no exception. I too enjoy a good cup of Lipton. I’ll be watching UL to see if it dips below $40 to make an additional buy. Thanks for commenting.

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