March 2016 Stock Considerations

I can hardly believe that two months of 2016 are already in the books and that I’m already looking towards my potential March buys. The first two months of year have definitely been roller coaster rides as we saw oil prices spike considerably, the health REITs get demolished and other dividend stalwarts stage nice returns from their recent lows. What does all this mean? Not much in the short term other than some opportunities to continue to load up on some great names selling at much better prices, value and yield. Going into March I plan to stick with my current holdings and not initiate any new positions. With that being said, let’s take a look at my March 2016 stock considerations.

 

First up in my taxable account I am considering adding to my Archer-Daniels-Midland Company (ADM). I have been nibbling on this stock for the past few months as it had a difficult 2015 with falling commodity prices hurting ethanol sales, along with a strong dollar and weakened overseas economies reducing demand for ADM products. Currently offering a decent yield of 3.47% with a PE of 11.6, ADM is also offering some compelling value at current prices. Having staged a nice return from its recent lows, it’s slightly less attractive than a few weeks ago but still offering a decent value at current levels.

 

My next taxable stock consideration is Dover Corporation (DOV). A company with a very long history of dividend raises, that is no doubt feeling a bit of pinch as demand for their oil and gas services are weakening in the near term, DOV still looks attractive at current prices. Currently yielding 2.78% with a moderate payout ratio of 44.0% DOV’s dividend still looks to be quite safe with room for future raises. With a current PE of 16.1 DOV is right around its five year average PE but will well below S&P averages. As with ADM, DOV’s share price has come up from its recent lows as oil prices rebounded.

 

Looking at my ROTH account I am considering The Toronto-Dominion Bank (TD), The Bank of Nova Scotia (BNS) and Royal Bank of Canada (RY) with generous yields of 3.78%, 5.23% and 4.78% respectively. All three banks mentioned have payout ratios under 65% based on current cash flow which makes their dividends quite safe with room for increases. To be blunt, it looks ugly for Canada going forward. Low oil prices, a weakened currency and a potential domestic real estate bust are all putting tremendous pressure on these banks. Of course, that simply translates into an opportune time to initiate or add to positions. Inevitably, the tide will turn but in the meantime you can be paid quite generously to wait it out. In fact, TD just announced a dividend increase of 7.84% going from C$0.51 to C$0.55 per share. I think this gesture speaks volumes considering the enormous headwinds the Canadian banks are currently facing. This just goes to show that a safe dividend is a safe dividend. With enough cash flow and manageable payout ratios, a dividend can continue to be paid even during bad economic times.

 

Also in my ROTH account I am considering adding to my Caterpillar Inc. (CAT) holdings. Though jumping in price from around $57 to $66 in the last few weeks makes this stock slightly less attractive to me, it is still sporting a very attractive yield of 4.63% as well as valuation. Of course, the payout ratio for this stock is on the high side but the dividend still remains quite safe, though I question how impressive a future dividend raise might be.

 

Finally, for the month of March I am considering adding to my HCP, Inc. (HCP). We all saw how HCP’s earnings and guidance essentially brought down the entire health REIT sector in February which no doubt created some interesting buying opportunities within the space as stock price swoons created some very enticing yield. As with the other names mentioned a significant bounce in the space has occurred in the last couple weeks making many of the other health REITs less attractive than in days past, however, HCP still remains relatively weak for a variety of reasons and presents the best value (and risk) for potential returns.

 

What do you think about my potential stock picks for March? Are any of the above names on your monthly watch list? Please let me know below?

 

Disclosure: Long ADM, DOV, TD, BNS, RY, CAT, HCP

43 thoughts on “March 2016 Stock Considerations

  1. KP,

    Those are some nice value stocks to buy for march. I will be looking to add to HCP, VFC, WMT, NOV, WFC, RDS.A, GE, LB, MCD. I may add new positions looking at ETN, TD, BNS, TROW, DE, CAT, ABT, VTR, NHI, WPC, OHI. hopefully i will generate enough income to cover few purchase I have in mind this month.
    Cheers happy dividend hunting

    DP

    • Hi DP,

      Thanks for sharing your potential picks for the month of March. I think it’s important to create this sort of road map of potential buys as it makes pulling the trigger much easier to do without second guessing yourself. You mention many great names above. The reality is that many solid dividend payers are still trading at good values. Thank you for stopping by and commenting.

    • Hi easydividend,

      Well, when looking for great long term dividend payers that are trading at much better values and higher yield, many similar names come to mind. Maybe we are ‘dividend brothers’ 🙂 Like the short puts for potentially adding those names to your portfolio. I’m still not in the options world but have it in the back of my head to start one day. Thank you for commenting.

  2. Hey,
    Thanks for keeping us up to date.
    What is your opinion of Johnson Controls (JCN) ?
    Think JCN is a good long term alternative

    have a nive day!

    Kev

    • Hi Kev,

      Quite honestly I have not looked at my JCI in a long time. I have owned that name since 2007 and plan to keep it for the foreseeable future. That being said, from a quick view it does look like its trading at an attractive price, value and yield but I am not interested in adding to my position at this time. I need to look at it more in depth. I do like their battery business though long term and think that one day it could be spun off as a separate company. It’s a solid long time dividend payer that deserves consideration for any portfolio. Appreciate your comment.

  3. DH,

    Archer-Daniels Midland Company has been on my radar for some time now. Despite my interest, I have yet to pull the trigger. I do find the the current yield attractive and I believe there is certainly room for substantial dividend growth in the future. I may just initiate a position in March. Over the past month or so I have been averaging down on BA and OHI. However, I am overweight these two names, which means I am looking to add new stocks to the portfolio. I am also very intrigued by some of the canadian banks (particularly TD and BNS) that you have mentioned.

    All the best.

    DC

    • Hi DC,

      Nothing wrong with averaging down on positions you already own. Just make sure, as you stated, that you do not become too overweight in a particular name or sector. I think many in the dividend growth space averaged down on energy names over the last year only to find themselves owning way too much oil in their portfolios. Of course, the remedy for this, without selling shares, is initiating buys in new companies. From a value and yield perspective it looks like the Canadian banks are offering the most compelling figures. Of course, they are tied to the price of oil and the Canadian economy, both of which are facing serious near term headwinds. Thank you for stopping by and commenting.

  4. Ciao DH,
    I am eying some European stocks (Atlantia, BASF, Cembre, Abertis Infrastructuras) and some UK based equities, on the US side of things I am looking at adding some “core” stocks like KO, PEP, WFC, TROW if I get a good entry point not too far from my average cost. Market rebounded so right now I do not see many occasions as before, ADM is interesting but is non core for me so at the moment I am passing on it.

    Ciao ciao

    Stal

    • Hi Stalflare,

      It’s always interesting to see what others are considering for their new investment dollars. I’m really just familiar with one of the European names you mentioned and agree that going into March the great deals have become a little less attractive since the market rebounded. Still, despite higher prices, many of the stocks mentioned are trading at great value and yield and it’s my investing style to deploy fresh capital every month at least once no matter the market conditions. I have TROW on my watch list for a long time but still have not initiated a position there. Thank you for stopping by and sharing your potential investment picks.

    • Hi R2R,

      It really is a testament to the company, operations and management when a 7.8% increase can be managed during very difficult financial conditions. The fact remains that the large Canadian banks, TD, BNS and RY all have very, very safe dividends with room for growth based on current cash flow. Of course, the longer commodity prices remain depressed and the Canadian dollar that much weaker will make for even more challenging times ahead. All I know for certain is the information I have in the present and presently the Canadian banks still look like compelling buys. As always, I appreciate your comment.

  5. ADM is intriguing. I own some HCP and was always a little iffy about it when I bought. I hope it bounces back but I’m not as confident in HCP as I am with other dividend stocks I own such as MCD, PG, and JNJ.

    • Hi DD,

      Investing in REITs is a slightly different beast than the “standard” dividend stalwarts you mention. Though HCP suffered a pretty big fall in February, as did every other health REIT, they all have rebounded quite nicely form their lows. HCP seems to present the biggest risk/reward profile among the health REITs and I have a feeling that in time the stock will rebound to former levels. Of course, you must always be comfortable with any investment you make and can even expect the “standard” dividend stalwarts to stumble every now and then. A little over a decade ago MCD was in the teens. JNJ had its issues with recalls a few years ago and was in the $60s. Solid names like GE and WFC had to cut their dividends not that long ago. The point I’m trying to make is that any stock can fall from grace. The question just becomes of your willingness to hold on and buy more, if you still believe in the company in question, or cut and run. Thank you for stopping by and commenting.

    • Hi R2R,

      Nice to see the steep decline in the health REITs did not phase you. I think many began to second guess their choices in the health REIT sector after we saw every name get dragged down by HCP. Many have rebounded quite nicely from their lows and I have a feeling that in time all the names will go back to their former levels. Happy to be a fellow shareholder with you in many great dividend payers. It will be interesting to see if March picks up the volatility of January and February. As always, I appreciate your comment.

    • Hi JC,

      My sentiments exactly. You can never buy at an absolute low just like you can never sell at an absolute high. Even though all the names mentioned have rebounded quite a bit from their recent lows they still present us with some great value and safe yield and that’s what really matters when deciding on a particular purchase. Thank you for sharing your thoughts.

  6. DivHut,

    I’ve also been keeping my eye on CAT. Their dividend is awesome but while I was waiting for my monthly budget to finalize, the price took off! To the early bird go the spoils I suppose. I’m hoping they will come back down a little so I can jump on the train for awhile.

    -Dividend Monster
    Dividend Monster recently posted…Dividend Income: FebruaryMy Profile

    • Hi DM,

      CAT did have a nice jump from its recent lows but still sports a pretty attractive yield and good value though I’m not too excited about its payout ratio. The dividend still appears to be safe based on current cash flow which is my primary concern. The reality is that CAT will still be facing some near term headwinds with its business which is always something to consider before making a buy. Of course, some of the best returns can be made when buying quality businesses while their down. Thank you for commenting.

  7. DivHut,

    Nice job with TD’s dividend increase. I’ve been trying to stick to the div aristocrat area – T Rowe, ADM, JNJ if they ever go on sale, etc..

    On my eyes are ADM as well and T. Rowe. I think maybe even some of the community banks I follow given what is going on that “small” niche of an industry.

    Thanks again and nice post!

    -Lanny
    Dividend Diplomats recently posted…First KMI… now BBL… The PainMy Profile

    • Hi DD,

      Even with the considerable market rebound from the the recent lows of a few weeks ago, there are still quite a few names selling at attractive prices. ADM was a name that traded around $30 not that long ago. I’d call that a sale. I have TROW on my watch list but probably will not buy it in March. I’m still focusing on my current holdings and looking to average down on the names mentioned in this post. I’m always excited to see what the upcoming month will bring us in terms of sales, volatility, etc. Thank you for stopping by and commenting.

  8. Truly some awesome choices you have to pick from! ADM seems to be the stock of choice of late, as numerous fellow DGIers are stocking up. It’s one that I have on my radar now that I’ve seen some compelling reasons to buy from the bloggers. The Canadian banks are still an excellent option and I plan to add to my BNS stake as well. The YOC is very attractive for such a great company.
    Special Agent Dividend recently posted…Weekly Activity – Stock Purchases, Dividends, Passive IncomeMy Profile

    • Hi SAD,

      I think many of our fellow DGI bloggers like(d) ADM for the same reasons. An awesome dividend raise history, great value and relatively high current yield (because of lower stock prices) make it a compelling choice for any long term investor. I’d say the way things look today, my first buy will probably be a Canadian bank. Of course, as you know, Mr. Market has a way of guiding our purchases despite our investment intentions. As always, I appreciate your comment.

  9. What more is there to say other than that is one impressive list of considerations. I own ADM and HCP and have considered adding more to both as well. Due to HCP’s impairment issues, I think I would lean towards ADM. At least that is my preference of the two. You can’t go wrong with any of the companies on this list though!

    I’m sure you’ll end up making a great choice that will result in some strong dividend income to your portfolio. Keep us updated…take care!

    Bert
    Dividend Diplomats recently posted…Dividend Diplomats Recent Buy – T. Rowe (TROW)My Profile

    • Hi DD,

      We’ll see how March unfolds. Will the volatility and wild price swings we saw in January and February continue? Who knows. All I know is that I have my list of potential buys based on the information of the day and as you stated, I can’t really go wrong with any of the companies mentioned, especially since I plan to continue my nibbling into these positions. ADM really came back quite strong from its recent lows as pretty much every name mentioned so it will be interesting to see which way I go though all things being equal I may buy into a Canadian bank once again. As always, I appreciate your comment.

  10. Hey DH,

    Nice list of considerations here. Always love a monthly watch list. Love all those Canadian banks as you know, just missing TD from my pretty large collection of RY, BNS, NA and CWB. A lot to like in many of them. Recently calculated my sector allocation to financials is 35% of my portfolio tough, so might be time to shy away from these deals and diversify a bit.

    DB
    Dividend Beginner recently posted…How to Earn a Strong Yield on Cost (YOC)My Profile

    • Hi DB,

      I think creating a monthly watch list helps take some of the guesswork out of choosing where to deploy your capital. In a sense, the research has already been done and you essentially are waiting to pull the trigger on one of more of your potential picks. Looks like I may bite into the Canadian banks once more in March. The financial sector is still not my largest and I feel comfortable adding more at this time. Thank you for stopping by and commenting.

    • Hi DG,

      A lot of the stocks mentioned really rebounded quite a bit from their recent lows but still offer good value and yield at current levels. As it stands now, it looks like I’ll be adding to my Canadian banks first but as you know, Mr. Market may present us with new opportunities at any time. Thank you for sharing your thoughts.

    • Hi DaC,

      Congrats on your addition to your DEO. It’s a great stock that’s very defensive. I have held that name in my portfolio since 2007 with no plans to sell any of it. The stocks mentioned in this post are all in the red in my portfolios and I’d like to look at March as an opportunity to average down on some names that I plan to hold for a long, long time. Their yields and values still look compelling even though they have all rebounded quite abit from their recent lows. Thank you for stopping by and commenting.

    • Hi DFG,

      Congrats on picking up some ADM. The stock has rebounded quite nicely from its February lows as some are starting to concede a bottom in oil has been reached. Of course, no one really knows if this is the case until we are many more months down the road but it does look like sentiment has changed for now. Of course, CAT also climbed back from its lows as well. Though I like it long term, I’d say its dividend payout ratio seems a bit high for this tough economic climate it is operating in. Thank you for sharing your thoughts.

    • Hi DW,

      You have to love the resilience of the Canadian banks. They are all operating in such a hostile economic climate yet continue to pay and raise their dividends like clockwork. Though their yields are relatively high historically, they are all well covered with continued room for growth. Thank you for stopping by and commenting.

  11. Nice list! Definitely waiting for some cash to be able to invest more in ADM and CAT. I also recently had a conversation with a guy from Personal Capital about optimum portfolio allocation. Turns out that their model shows that I’m underweighted in alternative investments (primarily US and international real estate). I’m at just under 3% right now and optimally they feel I should be closer to 10%. Since I generally only like to add REITs to a tax-free account, I’ll strongly be considering adding more exposure to a healthcare REIT.
    Scott recently posted…February 2016 IncomeMy Profile

    • Hi Scott,

      Even with the market rebounding as nicely as it has the last few weeks deals are still out there, just not as impressive. ADM, CAT and many others have really roared back to life and as I write this comment it looks like the Canadian banks will be my go to buy(s) for the month of March. Of course, Mr. Market always has a way of steering your investment objectives. Thank you for stopping by and commenting.

  12. I would go with either RY or TD bank 🙂
    I recently bought RY, AGU, AAPL, MMM and EMA.TO (you should look into this one if you are not familiar with Canadian utilities).
    Cheers,
    Mike

    • Hi DG,

      I am considering those two Canadian banks as well. I think I might have enough BNS for now and my RY position is the smallest of the three. Thanks for pointing out EMA.TO. That’s a new name I have never considered before. We often talk about all the solid investments in the U.S. markets but I have found that Canada offers just as many great long term stable dividend payers too. Thank you for commenting.

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