July 2015 Stock Considerations

Here we are with half of 2015 already in the books. While I have enjoyed investing and making my monthly buys during the first half of the year I can truly say that I’m excited as ever for the second half of 2015 and eager to read the headlines and other market noise that will inevitably come up during the next six months. Will a debt ceiling discussion make headlines or perhaps another impending fiscal cliff. Will the Fed finally raise interest rates or will some European or Asian financial contagion make market waves? Iran anyone? Ukraine? Russia? Greece? Puerto Rico? Looks like Ebola is making a summertime return among the media outlets. Not to sound too jaded to these top news items but my point is that during all economic conditions, from all time market highs to the lows and depths of severe recession, there will always be a case made to not invest. Of course, this is the noise that we must filter and seek out our own individual high quality stocks that always seem to exist. After all, I keep reading about various new buys among other dividend blogs which just tells me that value and decent sustainable yield still exists out there.

 

Looking at my portfolios going into the month of July I will be adding to positions that are already in my account. I have no interest in finding any new stocks for my portfolios at this time and prefer to continue my usual nibbling on stocks I already own. However, I do plan to shop for a new insurance company as my Chubb Corporation (CB) was just bought out by ACE Limited (ACE) in a cash and stock deal. I have owned CB since 2007 and am sad to see it leave my portfolio and when it finally does I will want to add another property and casualty insurance name to my portfolio. A couple names that I may consider once CB departs are Cincinnati Financial Corp. (CINF) and The Travelers Companies, Inc. (TRV) but those won’t be considerations till the CB/ACE deal goes through. That being said, let’s take a look at my July stock considerations.

 

First up is a relatively new name to my portfolio that I discussed back in April. I’m speaking of Dover Corporation (DOV). DOV is one of those companies that produces products that surround our everyday lives yet is often out of sight. Clamps, conveyors, connectors, specialty glass, display cases, commercial glass refrigerator and freezer doors, kitchen ventilation systems and much more lay in DOV’s core competency. DOV has a current yield of 2.28% with a low payout ratio of 38.4% based on an EPS of 4.38. DOV also stands in a class of its own having raised its dividend for over 59 years consecutively. Just as impressive as its dividend raise history is the ten year annualized dividend growth rate of 11.84%. From a dividend perspective DOV seems to be firing on all cylinders. From a PE standpoint DOV has a current PE of 16.0 which is pretty much in line with its five year average. Forward PE looks more enticing at 15.1. No doubt depressed oil prices have affected DOV’s operating income as a significant portion of their revenue comes from oil and gas support and services.

 

Next, I am considering, surprise, surprise, Canadian banks. As many of you already know I have been buying into the Canadian banks slowly over the past year and I’m not done. The two banks I am considering need no introduction as many are already ubiquitous in various dividend growth portfolios. They are, The Toronto-Dominion Bank (TD) and The Bank of Nova Scotia (BNS). I continue to see value and a great sustainable dividend among the Canadian banks which is why they still attract me at these levels.

 

Finally, I will be considering adding to my positions in the health REIT sector with potential buys in HCP, Inc. (HCP), Health Care REIT, Inc. (HCN) and Ventas, Inc. (VTR). Of course, I always qualify these posts with the statement that Mr. Market may have his own ideas for my potential buys but if the market pretty much stays at current levels I’ll be adding from the names mentioned above.

 

So there you have it. My July stock considerations are DOV, TD, BNS, HCP, HCN and VTR. What’s on your shopping list for the month of July? Please let me know below.

 

Disclosure: Long DOV, TD, BNS, HCP, HCN, VTR, CB

38 thoughts on “July 2015 Stock Considerations

  1. Sorry to hear about CB. I was looking at possibly investing with them but now it’d just be an arbitrage play if Mr. Market gives some crazy prices compared to the deal announcement. DOV looks very interesting and it’s hard to argue with a 59 year streak. I like the simple companies that sell things like clamps/fasteners/screws. It’s said the only people that got rich during the gold rush were the pick ax salesmen, not the miners. There’s a reason for that. I’m also looking to add TD to my portfolio, seems like it’s been on my radar for a while now. Maybe July will be the month it finally makes it’s way on board. Out of the REITs I’d only add to VTR but that’s because I think own enough HC REITs in my portfolio and don’t want to add another one. Keep up the good work and looking forward to see what you buy.
    JC recently posted…Dividend Growth Investing at Work – Keeping Your Portfolio Healthy with MedtronicMy Profile

    • Hi JC,

      Well, I guess the CB sale comes with the territory of continually investing in high quality companies. Eventually, they get bought out. I remember when BUD left my portfolio too after it was bought out by InBev. That was a great U.S. dividend paying company. I guess in time I’ll see how July unfolds next week. As I stated I’m only looking to add to my positions and not initiate any new ones. Thank you for sharing your potential July picks. Would love to have you on board as a fellow TD shareholder.

      • Don’t worry DH. Eventually ACE will become too big and spin off CB. I have a feeling 20 years from now Krft-Heinz will spin off to Kraft and Heinz.

        • Hi TBDI,

          I know what you mean. Just look at the effects of airline deregulation as it sought to end airline oligopolies and monopolies which it did for a while, but decades later after mergers and acquisitions have resulted in fewer and fewer airlines once again. Same with the break up of Ma Bell into many baby Bells which today is basically T and VZ. I agree, we may see a spin off in the coming years of some of these companies as they become too large.

  2. DivHut,
    Hey, let’s not get too sad over Chubb! Up 26% in one day is not a bad way to go. I felt that way about Heinz when it was bought out, but now we’re going to see it return with the Kraft merger. If we own enough stocks, these buyouts are bound to happen. Consider it a reward for being a loyal shareholder.

    I own DOV and I think it’s a great choice for a DG portfolio. 59 years is impressive. Low payout and strong balance sheet too!
    -RBD
    Retire Before Dad recently posted…Investment Income Update – June 2015My Profile

    • Hi RBD,

      That’s true. I can’t be too sad about CB leaving my portfolio especially since it’s gone up over 97% since I bought it. But still, I am a dividend investor primarily and my focus is always increased dividend distributions rather than capital appreciation. Time to look forward for a suitable replacement. Happy to be a fellow DOV shareholder with you. I really jumped on that one quite late as I went with other industrial plays in my portfolio. Thank you for stopping by and commenting.

  3. DivHut,

    I agree with you on DOV. It is reaching attractive valuations again, and I don’t mind adding more to my portfolio. Portfolio building is like building a brick wall. I am working on my second layer now. Having said that, I don’t mind adding new companies though I still need to research your Canadian banks :).

    Thanks for sharing your July considerations.
    D4S
    Div4son recently posted…Recent BuysMy Profile

    • Hi D4s,

      Another happy DOV shareholder. Somehow, it’s a name that many dividend growth investors do not have in their portfolios. Not really sure why as it’s an amazing stock from a dividend perspective. Keep building that brick wall of yours. The Canadian banks are starting to look really attractive once again. They’ve all had a pretty bad year with depressed oil prices and a weakened currency taking a toll. As always, I appreciate your comment.

  4. Nice picks, DivHut. I had CB on my watchlist for months and after yesterday’s announcement, I was disappointed that I didnt have a position and had to drop it from my list. There are other fish in the sea though….the hunt continues.

    Really like your picks for the banks and healthcare REITs 🙂

    Happy investing
    R2R
    Roadmap2Retire recently posted…Recent Buy – Johnson & JohnsonMy Profile

    • Hi R2R,

      Glad you like my picks. It’s always interesting to see how many other dividend bloggers pick the same stocks that I plan on buying. It’s always a little comforting finding common investment themes. I don’t think I’ll be as active in July with my buys as I was in June but still looking forward to seeing what I ultimately pull the trigger on. Thank you for stopping by and commenting.

  5. Right on DivHut. That noise just creates buying opportunities for us, so I too am excited to see what the next half of the year will bring. As for your stocks, I remember looking at CB, but did not like the valuation. Then I heard about the ACE acquisition yesterday. It’s the same thing with KRFT. I just see it as incentive to go shopping with the free money. For July I am hoping to find some healthcare and utility stocks. I just made a buy I will be posting up soon, so July has already started off with a proverbial bang! Thanks for sharing.

    – HMB

    • Hi HMB,

      Awesome that you already made a July buy. I probably won’t make that first buy till the middle of the month. I’m curious to know which utility you are looking at. You don’t really read nor see many utilities in dividend growth portfolios. I personally own three, ED, SO and D and plan to keep them for a while longer though I may be tempted to exit the sector altogether one day. Thank you for stopping by and sharing your thoughts.

  6. DH,

    Really like DOV and TRV here, they are high on my list of things I am watching closely. I also still like railroads and asset managers like TROW right now. The Canadian Banks have been undervalued now for a long time, which frankly is ridiculous.

    – Gremlin
    Dividend Gremlin recently posted…Recent Buy, June 2015My Profile

    • Hi DG,

      I would like to find a CB alternative once it does finally leave my portfolio and TRV does look like a good fit to take its place. You mention TROW which is something that I have had on the back burner of my mind for a while. I would like to expand my financial exposure beyond the banks and insurers. Seems like many in the financial sector as a whole are trading a great values. Thank you for stopping by and commenting.

  7. DH,

    Great group of potentials, as always. Personally, I’m really liking the Canadian banks. I’ve scooped up some BNS lately and will continue to add to my position. But, I don’t see how you can go wrong with any of the companies on the watchlist. Best of luck in July. I’m hoping for some good sales!!
    Special Agent Dividend recently posted…Update – Special Agent DividendMy Profile

    • Hi SAD,

      The reality is that the Canadian banks have been looking pretty good for almost a full year. With a lower Canadian dollar as well as depressed oil prices, relative to a year ago, the banks continue to look undervalued while offering high yield dividends at the same time. I think we’ll be seeing a few Canadian bank buys in July. Thank you for stopping by and commenting.

        • Hi SAD,

          The market has definitely given us some insane volatility in recent days with Greece, China and oil in the news. The Canadian banks continue to look attractive and I have a feeling I’ll be adding to my TD and BNS this month if things continue at this pace. Thank you for stopping by and commenting.

  8. A lot of us are losing insurance portfolio favourites at the moment with all the M&A activity. Earlier this year the purchase of Catlin by XL Group was finalised which saw me lose Catlin which was–for me–an excellent investment with superb fundamentals and top yield. But it does provide further capital for new investments. in the end I invested in a similar insurer, Amlin.

    The Health REITs look good as well. I have been looking at them myself recently. However, in the UK they are far thinner on the ground.

    Good luck with your choice. You have plenty of options!
    Dividend Drive recently posted…June 2015: Dividend Income, Trading Activity and Portfolio SnapshotMy Profile

    • Hi DD,

      I mentioned in another comment that I guess it just comes with the territory of always buying high quality names, eventually they get bought out. No doubt with low interest rates still around we will be seeing more M&A activity. Regarding some health REIT exposure, why not invest in some U.S. companies? You have plenty of choices, large and small, in the health REIT sector here. As always, I appreciate your comment.

  9. HI DH,

    As always great to read your blog. I am curious to understand what will happen to current CB shareholders like you after the ACE buyout of CB is completed ? Its good to know CB shares is up with the news but also as you said CB is going to be out of your portfolio. Does this mean you CB shares are automatically converted as cash/sale? are you forced to sell those shares you have? the deal is completed early next year what will happen until than would you continue holding CB shares?
    I can’t imagine asking anyone other than you. I would very much appreciate you sharing your knowledge and educating me. Thanks in advance

    • Hi Dipu,

      The ACE buyout of CB was a cash and stock purchase similar to the recent Heinz/Kraft buyout. Till the actual buyout occurs in the first quarter of 2016 nothing will happen. CB shareholders will continue to receive their dividends and the stock will continue to trade under the CB ticker. However, once the deal gets formally approved current CB shareholders will receive $62.93 in cash and 0.6019 shares of ACE and that will be the end of CB as an independently traded entity. Once the deal is approved the shares will automatically be converted to ACE shares and I’ll receive a cash portion credited to my account. Hope this answers your question.

    • Hi DD,

      I was first watching DOV in recent months at under $70 and it has shot up quickly and now falling again to those levels which is why I am considering it once again. No doubt the low oil prices and a curb in oil rig drilling has hurt revenues for this oil and gas services company. It’s still a quality company that may be hurting in the near term with depressed oil. Thank you for stopping by and commenting.

  10. Hi DH,

    VTR, JNJ, and KO are my three for this month. I suspect a good greece default, interest rate hike, or hillary clinton/donald trump/rand paul scare will give us plenty of opportunities to make some good buys in July. The only problem I have is not having enough money!!!

    • Hi TBDI,

      Well said. A lot of scary headlines that can potentially sink the markets. No use in waiting them out… just find those high quality names and look beyond the market prognosticators. I’d like to add to my KO position as well but not at current price/valuation. I see other names in the near term that look a little more attractive to me. Thank you for sharing your thoughts.

  11. Good list right there DH. Last month was pretty active for me with more than $15K invested. I also added BNS last month in my portfolio along with 2 other financial companies: USB and JPM. With likely coming rate hike in Sept, financial companies margin will be positively impacted and these companies should benefit. I’m also looking at some REITs like VTR & OHI and few energy companies as well this month. Race on!
    Race2Retirement recently posted…Recent Stock Purchase I – July 2015My Profile

    • Hi R2R,

      Any time you can invest $15K in a single month is solid month by any measure. USB is the only other American bank that I’d consider for my portfolio. Right now I just have WFC and my three Canadian banks. Rate hike headlines seem to give us better buying opportunities as REITs seem to get hammered as well as other stocks every time it’s mentioned. I think better prices are coming our way again for REITs. Thank you for stopping by and commenting.

  12. Great picks for july Divhut, I like Dov as well even though the yield is a bit low for me. I prefer to start out at 3%+ in yield. Canadian banks seem to be on everybody’s list, isn’t Canada in a real estate bubble? That might hurt the banks, and that’s when Ill jump in. Good luck and looking forward to your dividend reporting soon.
    EL @ Moneywatch101 recently posted…The 3 Emergency Fund AccountsMy Profile

    • Hi EL,

      DOV continues to look interesting to me, especially in recent weeks as it has dropped from around $75 to around $67. For me, the dividend growth story along with a fair looking valuation keeps it high on my July buy list. Of course, yield wise the Canadian banks look more compelling. I may just have to buy into both in July. So far, I have yet to pull the trigger this month. Thank you for stopping by and commenting.

  13. Hi DH. You know my position on the Canadian Banks – I love ’em. So I’m definitely buying up Scotiabank (BNS), Bank of Montreal (BMO) and maybe even some TD if I can get some shares for under $40. TD shares are trading pretty close to that right now. I like TD yielding over 4%. Of course fears about Greece and China have made poor old Mr. Market a psychological mess right now so I think buying is good.
    My Road to Wealth and Freedom recently posted…The Joy of Being a Dividend InvestorMy Profile

    • Hi MRtWaF,

      The Canadian banks have really dropped quite nicely in recent weeks. You know the saying about market volatility and investment opportunities. They often go hand in hand. I’m continuing to watch the Canadian banks for July. If things stay like this I’m sure I’ll be adding to my positions. Thank you for stopping by and commenting.

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