May Stock Considerations

Another new month is finally upon us which means it is time for us to take stock of our dividend portfolios and decide where we would like to deploy our fresh capital. For those that have been following DivHut for a while you already know that I have been adding a lot of fresh capital towards my three large Canadian bank holdings, The Toronto-Dominion Bank (TD), The Bank of Nova Scotia (BNS) and Royal Bank of Canada (RY) for many months and April was no different as I completed a BNS buy. However, as the Canadian banks stormed ahead for most of March and April I found the banks to be less of a deal and was looking to expand my portfolio in other directions which led towards five smaller purchases being made last week in the health REIT sector with Health Care REIT, Inc. (HCN), HCP, Inc. (HCP) and Ventas, Inc. (VTR) all being added to my IRA along with newcomers Dover Corporation (DOV) and Archer-Daniels-Midland Company (ADM) added to my taxable account. To be completely honest, I’m not really looking to add any new names to any of my portfolios this month. With five new names added I will most likely be looking to see if there is an opportunity to average down my cost in any of these new holdings or buy into other positions already in my accounts. Typically, I won’t average down a position unless there is a 5% or more decline in my average buy price. With that being said, let’s take a look at some of my May stock considerations.

 

As mentioned above my first choices will most likely be one or more of the stocks recently purchased last month which include, BNS, HCN, HCP, VTR, DOV and ADM. However, there are other names that have been catching my eye for a while but I simply haven’t pulled the trigger yet. The name that fits this category most is Johnson & Johnson (JNJ). JNJ has been with me since the beginning and is currently yielding a decent 2.80% with a current PE of 17.6 which is slightly below its five year average. Forward PE for JNJ looks a lot more enticing at just 16.3. Recent weakness in share price has made JNJ a popular pick among many of the dividend bloggers last month as the stock price hit the $100 mark and piqued the interest of many long term investors, myself included. With JNJ hovering around this $100 mark for quite some time and with a decent value it may be a good time for me to finally add to this name.

 

Another long time holding of mine that I would consider adding to in May is Emerson Electric Co. (EMR). This industrial machine sports a decent current PE of 18.9 which is not necessarily a bargain but is still lower than its five year average PE with a better looking forward PE of just 15.0. Of course, a safe current yield of 3.30% doesn’t hurt either.

 

Finally, I am also revisiting another long time industrial holding of mine Caterpillar Inc. (CAT). This stock had a pretty good run last month rising from the high $70s to the high $80s currently and still sports a pretty compelling PE of 14.9 which is well below its five year average. Of course, we all know the boom and bust cyclical nature of an industrial name like CAT and therein lay some potential short term risk. But, like with EMR, CAT does offer a pretty nice current yield of 3.30% which is safe and can lessen some of near term price swoons should they occur.

 

What do you think about my stock considerations for the month of May? Are any of the names mentioned above on your watch list for the month as well? Please let me know below.

 

On a side note, Mrs. DivHut and I officially opened up a custodial account for baby DivHut and if all goes to plan his first dividend purchases will be made in May. Stocks we are considering for baby DivHut are familiar names that he’s already a consumer of, Similac (ABT), Head to Toe body wash (JNJ) and Pampers (PG).

 

Disclosure: Long TD, BNS, RY, DOV, ADM, HCN, HCP, VTR, JNJ, EMR, CAT, ABT, PG

60 thoughts on “May Stock Considerations

  1. That’s a solid watchlist you have there, Keith.

    I recently purchased some BNS right when it dipped below $50, which I’m glad I did since it has now bounced back into the mid 50s. CAT and EMR are both on my watchlist, with the latter in particular being one of my choices as an industrials replacement for GE, which I sold a week ago. JNJ is one of my largest holdings and one that I’m always watching for opportunities to average down my costbasis in. I think it’d make a fine choice as baby DivHut’s first stock ever 😉

    Thanks for sharing man!

    Cheers

    • Hi ZtZ,

      It seems like all the Canadian banks had a solid run the last couple of months. I don’t think it’s coincidence that oil had a nice run up too in that same time period. I’m still looking to add more BNS in May but as you have read from my post I am looking outside the finance sector. I’m still planning to keep my GE as is but I can understand why you wanted to unload that name. For my money and GE yield I’m comfortable leaving it as is. With the dividend increase of JNJ recently announced it looks like a potential buy for my portfolio and possibly baby DivHut too. Thank you for stopping by and commenting.

  2. DH,

    Thanks for sharing your stock watch list. One quick note, as it may interest you and baby DH, is that with JNJ’s recent div increase of 7.1%, you are almost getting 3.0% based on the $100.13 closing price. We are looking forward to hopefully better prices for healthcare as there seems to be the beginning of a rotation out of the sector.

    All the best.

    FD
    Forward Dividends recently posted…Strong FinishMy Profile

    • Hi FD,

      Thank you for the JNJ update regarding the dividend. I was aware of the recent increase that was announced and with a yield in the 3% range JNJ is a little higher on the buy list for myself and baby DivHut. Of course, baby DivHut has a much longer investment time frame and if in fact a rotation out of health stocks does occur it will be a great opportunity to average down on that dividend stalwart. As always I appreciate your comment.

  3. All are pretty solid names and I just added some more shares of JNJ because the recent dividend increase three their yield to the 3% mark. EMR is also looking good here compared to a lot of the consumer staples. I really want to add more of those but the valuations are making it difficult. The health care REITs are looking pretty good from a valuation stand point. Im also considering a small position in QCOM or CSCO because they’re undervalued here but its hard to tell if thats due to technology headwinds or just being out of favor. The tech companies are much harder for me to see the future of because theres always someone out there looking for an improvement to current tech. Have a great weekend.
    JC recently posted…Weekly Roundup – May 2, 2015My Profile

    • Hi JC,

      It seems that many have been liking JNJ ever since it hit around $100 and now with the dividend increase I’m getting the sense that JNJ is the place to be at current yield and valuation. It seems that almost any other stock is better than the high priced consumer staples. Man, would I love to add to my CL, CLX, UL, DEO, PG, GIS and more but not at current price/valuations which is why I began to look elsewhere. BNS is still high on my list too so we’ll see if the Canadian banks still storm ahead as they have the last couple of months. Thanks for sharing your tech considerations as well. I’m still not biting into any tech for my portfolio. Thank you for stopping by and commenting and enjoy the rest of your weekend.

    • Hi FV,

      Ha! I sure wish that for him. Of course, we want good health and happiness too but having a passive income portfolio throwing off cash for him doesn’t hurt either. I’ll keep you posted when we make that first buy for his portfolio.

    • Hi DE,

      I feel any stock I choose from the ones I mentioned will be great long term buys. I sure wish I could add other names but I’m not crazy to pay certain valuations for some of the consumer staples out there. Happy to hear your child just received that first passive income. I wish my parents had set something like this up for me when I was born or at least a child. Think about it. If most parents would set up long term dividend growth portfolios for their kids we’d have a lot more people in better financial situations. And the beauty, it doesn’t have to be much. Starting at age zero you can set aside $50 a month… too much… save $25 a month, less than a dollar a day and give your kid a little head start. Great to hear you are looking out for your child as we are. I appreciate your comment.

  4. Thanks for sharing your stock considerations… Health Care REITs have been popular among DGI investors lately. We have HCP and OHI on our watch list and looking to possibly pull the trigger this upcoming week.

    We also like JNJ under $100. Would consider adding to our current holding in May if the opportunity presents itself.

    Hope you enjoy the rest of your weekend. Best wishes! AFFJ
    A Frugal Family’s Journey recently posted…P2P Accounts (Update) – April 2015My Profile

    • Hi AFFJ,

      As you can see from my portfolio I have stuck to the ‘traditional’ dividend growth stocks without venturing into the exotics like MLPs or REITs. Of course, I have been watching these investments for years but never pulled the trigger. It was my free trades that enabled me to finally make several small buys and get my feet wet in the space. I also like OHI, LTC and NHI in the health REIT space but have been considering other names as well such as DLR, O, WPC, PSA, and AVB. As you stated, we’ll see how May unfolds but I feel that long term anything mentioned in the blog post would make a good long term buy. Enjoy the rest of your weekend and thank you for commenting.

    • Hi R2R,

      Thank you for that vote of confidence. As I mentioned to AFFJ above, ‘I feel that long term anything mentioned in the blog post would make a good long term buy.’ We’ll see how May starts out and see where I’ll be deploying my fresh capital. Of course, BNS is still high on my list unless the Canadian banks keep climbing as they have the last couple of months. Thank you for commenting.

    • Hi KeithX,

      30 and out has a nice ring to it. Of course, first is continued health and happiness and a growing passive income generating portfolio too. With so much time on his side it seems like almost any dividend stalwart could be a great pick for him. I plan to keep you posted as to his first buy and maybe even create a new baby DivHut page with his portfolio holdings just for fun. Thank you for commenting.

    • Hi IS,

      It’s a solid list with little controversy that’s for sure. I feel confident with any pick really going forward but have to say that after BNS, JNJ is looking pretty good to me especially after the recently announced dividend increase. Plus it looks like many of the dividend bloggers are liking it too at around the $100 mark. Enjoy the rest of the weekend and thank you for commenting.

    • Hi Vivianne,

      PG sells many, many things that are in hundreds of millions of homes all over the world. Pampers is just one of their many billion dollar brands. I would highly recommend looking at the stock as a consideration for a long term dividend portfolio but would caution about buying at valuations that may be too rich. I’d love to add to many consumer staples in my portfolio besides PG but not at current price/valuations which is why I’m looking at other sectors. Thank you for stopping by and commenting.

    • Hi DD,

      Selling puts is a great way to generate a little cash should they expire or at the very least get you in a stock a reduced price that you are already comfortable buying into. Seems like EMR and JNJ are getting the most love among the dividend bloggers these days. More so than for CAT. Thank you for stopping by and sharing your thoughts.

  5. Nice May considerations. All great names and ones that will be sure to help you on your FI journey. I especially like baby DivHut’s stock considerations, it’s truly awesome that he will be on the path before he even knows what it’s all about.

    – HMB

    • Hi HMB,

      I feel very confident buying any name that I mentioned in the blog post though it seems that many of the dividend bloggers are liking JNJ and EMR the most. Of course, some of the health REITs are looking attractive as well and it seems that many already hold one or more of the names that I recently bought. I’ll keep everyone posted as to the baby DivHut buys in the coming weeks and months and perhaps will add a new baby DivHut page with updates to his portfolio every now and then. I feel very happy to able to start his dividend investing journey at birth and hope that all the time in front of him will create a nice dividend generating portfolio when he becomes an adult. Thank you for stopping by and commenting.

    • Hi TBDI,

      It’s interesting that you mention the utilities as many bloggers don’t even consider them for their portfolios. I haven’t bought any utilities in many, many years and probably won’t be adding to my current holdings of D, SO and ED any time soon. 2014 was a banner year for the entire utility sector and with very slow to low growth and a pretty sharp run up in prices over the last year I’d be waiting for a pullback before buying more. I know the current yield is nice on SO and ED but I like the growth prospects for EMR and JNJ much more. As always I appreciate your comment.

    • Hi Martin,

      I really like health stocks and health REITs for the next twenty to thirty years. I think anything in that realm should perform pretty nicely with less volatility than commodity based stocks such as oil or steel for example. I feel like with my recent buy in DOV last week I have a proxy play on oil as a major component of DOV’s total revenue is largely tied to the oil and gas industry. Thank you for stopping by and commenting.

  6. Keith,

    Great watchlist, i like almost every name on it.

    To me JNJ offers compelling value at the moment. With its recent dividend increase it now sports a 3% yield. Even though US stocks are relatively expensive for me right now I consider adding to my investment when funds become available.

    I think it’s great you’re already building a dividend portfolio for Baby DivHut. Compounding those dividends will make for a big surprise when he turns 18!

    Best wishes,
    NMW
    No More Waffles recently posted…Dividend Income for April 2015My Profile

    • Hi NMW,

      I have to agree that JNJ is high up on my list for a May buy especially if the price remains around $100. The new current yield is healthy and PEs are looking a little subdued for the stock. I still may opt for BNS if the Canadian banks still stay low but they have really come up quite strong in the last couple of months and it’s no surprise that oil gained as well during the same time.

      Speaking of JNJ, it may very well be baby DivHut’s first dividend stock. I’m not looking to rush parenthood and want to savor every moment I can with him but I admit that I am very excited at the prospect of seeing his portfolio when he officially becomes a legal adult. Thank you for stopping by and commenting.

  7. DivHut,

    Great watch list up there. I am too fond of JNJ and CAT at the moment, with my primary focus on building up the JNJ position, without a doubt. Would like to have it doubled where I currently sit at with it.

    Great stocks and what’s awesome, as similar to MDP, I see you tend to focus on building up large positions in stocks you already own, something I believe I am going to start doing more if the value is right.

    Good luck!

    -Lanny
    Dividend Diplomats recently posted…Bert’s April Dividend IncomeMy Profile

    • Hi DD,

      It seems that with each comment left JNJ is the clear favorite these days among the dividend bloggers. I’m guessing that valuation along with the dividend raise has made it a lot more appealing to many.

      It is very rare for me to add new positions to my portfolio. Prior to last year it has been about six years since I added a single new stock. I simply keep adding to the positions I already have. However, in the last ten months I added BNS, TD, RY, UL, DOV, ADM, HCP, HCN and VTR. I guess I made up for all the time I haven’t added a new position. Going forward I plan to build up these new positions, as you stated if ‘value is right.’ True there are many great companies that exist and long term it’s important to diversify our dividend income streams just in case there is a cut or elimination in the future but also within reason. Owning one hundred companies might be a bit too much. 🙂 Thank you for stopping by and commenting.

  8. Can’t blame you for wanting to add to existing positions; you have a very solid and sizeable portfolio as it is. I like all your choices; think they provide good value – CAT and EMR more so though. And congrats to the little dude for getting his first stocks! Talk about hitting the ground running! 🙂
    DividendDeveloper recently posted…Recent Buy – 05/01/2015My Profile

    • Hi DD,

      Up until last month my portfolio has consisted exclusively of ‘boring’ lower yielding dividend stocks. Call it my conservative nature. No REITs, MLPs, BDCs or other high yield plays as I wasn’t comfortable owning any of those instruments in the early days of my portfolio construction. I have been watching REITs though for many years and did want to get my feet wet within the health care REIT world and for the first time I initiated small positions in HCP, HCN and VTR. I feel that with my portfolio a certain size I can add some exposure to alternative stocks.

      Baby DivHut will most likely be making his first buy sometime this month. I have a great feeling of satisfaction knowing that we are starting him off early with plenty of compounding time ahead. Thank you for stopping by and commenting.

    • Hi DGJ,

      As mentioned in the blog post, I haven’t really found anything ‘new’ that interests me going forward. With new positions initiated in April in DOV, ADM, HCP, HCN and VTR along with my other stock considerations for other long term holdings I have I feel that there are enough great stocks to choose from that I already own. It looks like JNJ might be baby DivHut’s first buy too. Though I’d like some PG and other names, I’m not willing to pay up for certain valuations just yet. Thank you for sharing your thoughts.

  9. Interesting list — I’ve been interested in REITs lately and I like the list you’ve included here. Of course, there are some other great (non-REIT) stocks that you mention, too. I like JNJ and ADM, though I wish the latter would give me a better entry point…

    Take care
    FerdiS
    FerdiS recently posted…Recent Buy: Omega Healthcare Investors IncMy Profile

    • Hi FerdiS,

      I too wished for better entry points for a few of the names I bought last month but the reality is that I have been waiting a long time for better entry points only to watch the market march ahead without me. I guess the solace to initiating a position that is not ideally priced, yet would complement your portfolio, is to simply nibble on the new buy which is what I did. I feel very comfortable committing about $500 in each of those REITs and ADM for example knowing that prices may decline severely and I’ll be able to average down easily. In this way, I can at least get my feet wet and start earning some dividend income while I wait to add more. Thank you for stopping by and commenting.

    • Hi BSR,

      The Canadian banks have been great so far. I started buying them in the summer of 2014 when oil was at its peak and so were the Canadian banks and as everything was going down I added to my three holdings TD, BNS and RY each month since my first buys. Now with two of my holdings in the black (TD and RY) and one (BNS) slightly in the red it seems that I’ll be laying off the Canadian banks for a while and most likely be adding to my health REITs and other holdings already in my account. As always I appreciate your comment.

    • Hi Tawcan,

      CAT had a nice run up in the last month or so but I feel still offers a pretty decent value and current yield. We’ll see how May starts to unfold in the coming trading days. Regarding my Canadian banks, that I have been adding to every month since last summer, I feel like I might be easing off the gas pedal as only BNS would be my consideration for now. Looks like JNJ and the health REITs are higher on my May buy list. Of course, I always qualify a statement like that with Mr. Market always does what he wants to and may alter any plan I have for May. As always I appreciate you stopping by and commenting.

    • Hi MU,

      Looks like in May I’ll be adding to positions I already in my portfolio as opposed to initiating a new position in another stock. I think JNJ and the health REITs are at the forefront of my May buys but I’m waiting to see how the first few trading days unfold. I’m patient. As long as I make at least one buy each month I’m happy. I’ll be updating my custodian account buys as well for baby DivHut. I think a custodial account is a great way to get minors invested in the stock market. Hopefully by the time baby DivHut is an adult he’ll want to continue adding to his passive income portfolio. Thank you for stopping by and commenting.

    • Hi DG,

      JNJ will most likely be baby DivHut’s first buy. After the recent dividend increase and decent valuation for the stock I feel it can be a great long term buy for him. Of course, over time we’ll fill his portfolio with several names in various sectors and let the magic of time and compounding do their thing for the next two decades. Thank you for sharing your thoughts.

    • Hi Scott,

      I think any pick from my list will be a winner long term and with baby DivHut having two decades of compounding before he has control of his account there’s a good chance that his Pampers will be providing him a nice passive income as a young adult. Thank you for stopping by and commenting.

  10. Hi DivHut,

    I am a newcomer to the whole investment and dividend scene. I have been hesitating for a few months now as investment seemed scary and overwhelming. Then I stumbled on your posts and it has piqued my interest and curious nature.

    I have to admit a lot of the lingo is lost on me, for example REIT I have seen a lot. Could you suggest somewhere to brush up on these acronyms? Also, I know I should ultimately consult a professional as I intend to, but do you have any suggestions on a first buy as well as ideal starting amount? I am in my late twenties and want to get myself on to a good start and maybe get portfolios started for my kids once I get the hang of it.

    Thanks for the great info and I hope to continue reading your posts in the future!

    • Hi Kassandra,

      I can understand that a lot of the ‘lingo’ can seem overwhelming and scary, especially if you have no idea what anyone is talking about. That being said, I would recommend you follow DivHut and click around the many other investment blogs listed on my Blogroll. Many are written in a very personal manner in plain English and I have found that the blog owners are very open and transparent and willing to answer any question you may have. I would also take a look at The Dividend Mantra Way: Achieving Financial Independence By Living Below Your Means And Investing In Dividend Growth Stocks. Take a look at Investopedia and their dictionary section.

      Personal finance is, well, ‘personal’ and as such I do not give out any formal recommendations as to what an individual should buy. Everyone is in a different situation and what may work for me and my comfort level may not be appropriate or work for your needs. That being said, you are welcome to view my real world portfolio that I share online. These are all the stocks that I currently hold. I also update DivHut frequently highlighting my recent stock buys and reasoning.

      As far as starting out, you may want to look into Sharebuilder. This is where I have my account. If you are a Costco member they offer discounted commissions. Another new interesting broker to emerge is Loyal3. Though you cannot buy every public company out there they do offer enough of a selection of some solid dividend payers and their minimum buy is $10 with zero commission.

      It’s funny you mention your kids as I just had my first baby in March and this month we opened a custodial account for him and will be buying only dividend stocks for him and let them reinvest and compound for the next two decades.

      Please feel free to stop by again and ask any question you may have via comment or my contact info on the site.

  11. Hey DivHut,
    Seems you’re comments are hot with CAT discussion. Added them to my watchlist back when they were trading above 100 in 2011/2012, the swings on that stock the past 5 years from 100 to 50 keep me away personally. Yield is nice, if you plan on holding for an upswing/forever.
    Cheers,
    Rich (27)
    Redeemed Finance recently posted…Recent Buy – Hewlett PackardMy Profile

    • Hi RF,

      My intentions for CAT has always been to keep it for a very, very long time if not indefinite. As long as the dividend continues to climb and the yield remains healthy I see no reason to sell this dividend stalwart. Of course, I plan to only add to my existing position if valuations are reasonable and I have the opportunity to average down my buy price. Thank you for stopping by and commenting.

  12. DH,

    Nice watchlist. It’s pretty hard to go wrong with JNJ as far as my money is concerned. It’s been a long term holding for me as well for years now. The amount of positive press it has been getting since it ran up to $100 is interesting considering how downbeat everyone was on it while it stagnated in the $60s for so long. Market commentators seem to praise what goes up even after bashing the same stocks when they were cheaper, eh?

    I picked up some more Jean Coutu (PJC.A) shares this week and have been tempted to initiate a position in Telus (T). Hoping for a better valuation (lower price) on T… hopefully I’m not sidelined for years.

    Take care!
    – Ryan from GRB
    Get Rich Brothers recently posted…Recent Buy: The Jean Coutu Group (Rebuy)My Profile

    • Hi GRB,

      I totally hear you on JNJ. I remember when it was constantly being bashed just a few short years ago when they had all those recall issues etc. The $60s was a good price to get in on some JNJ. Actually my average price is $64.46. You can’t listen to the talking heads at all. Just focus on your own plan and know that they are all journalists first and market timers and economic “experts” second. It’s all about media sensationalism.

      I am not familiar with Jean Coutu, however, Telus is known to me. There really are a lot of really great companies out there that deserve a spot in a long term dividend growth portfolio. You know the saying, so many great companies so little capital. Thank you for stopping by and commenting. Still haven’t made a May buy but I know something will happen later this month.

  13. Lots of great companies on here, DivHut! JNJ and CAT caught my eye when I read this mainly because I recently bought more JNJ and initiated a position with CAT. The former’s 7% dividend increase definitely made me happy, especially considering the amount of work on my part it took to make that increase possible (none at all. My favorite amount of work).

    Sincerely,
    ARB–Angry Retail Banker
    ARB recently posted…Beyond The Suspicious Activity Report: Is Your Bank Calling The Cops When You Withdraw Money? (Hint: No)My Profile

    • Hi ARB,

      That’s always the fun part about investing in solid long term dividend growers… the annual dividend increase. If JNJ settles around $100 I’ll be looking to add some as well as make it a first buy for baby DivHut. CAT seemed to climb nicely in the last month and is not as attractive to me as it once was. Of course, I know the argument about in investing for the long term and not quibbling over a dollar or two here and there. After all, in ten or twenty years it really won’t matter. Thank you for sharing your thoughts.

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