For those that have been following DivHut the past couple of months, you already know my affinity for stocks in the financial sector. Quite simply, I find the financial sector to be loaded with the greatest number of relative bargains in the high priced market of the day. Sure, there are some hidden gems in the consumer space, Kellogg Company (K) comes to mind or perhaps a well known industrial like Deere & Company (DE) but with my continual scanning of the market as a whole I seem to find the greatest number of relative bargains in the financial sector. That being said, it was no surprised that I have been adding to my AFLAC Inc. (AFL) position in May, June and July along with other financial sector purchases in The Chubb Corporation (CB), Wells Fargo & Company (WFC) and quasi-financial General Electric Company (GE).
Then, last week I wrote about Canadian stocks that have paid dividends for over 100 years and had my eyes opened to a whole new financial sector, the Canadian banking stocks. I found it interesting that all the “century club” dividend stocks in Canada are banks. Coincidence? Or perhaps more validation that the financial sector, through all its woes is still very robust and presents the best value overall in the market today. With a little more research I plan on adding some of those Canadian banks to my ROTH account.
With all this talk and praise of the financial sector my second tranche of July purchases may surprise some as I happened to add to two consumer sector stocks to my portfolio instead of stocks from the financial sector. I figured it was time to purchase some stock outside the financial space.
I have added 5.1538 shares at $96.25 for a total investment of $500.00 in McDonald’s Corp. (MCD). MCD, a long time holding of mine currently yields a very reasonable 3.20% with a moderate payout ratio of 56.3%. The real mojo for MCD comes with its stellar dividend history and growth. The stock has been paying rising dividends for over 37 years and has a ten year annualized dividend growth rate of 22.8%. No matter how you look at it, MCD has delivered tremendous value to long time shareholders via its dividend. The final selling point for me with MCD was its low current PE of only 17.73 which is in line with its five year history and well below its peers. The forward PE for MCD looks even better at 15.7 suggesting that this stock might be a great value in the current market. Of course, it doesn’t hurt when Morningstar rates a stock you purchase fours stars either.
Finally, I have added 5.7859 shares at $85.74 for a total investment of $500.00 in Philip Morris International, Inc. (PM). PM, another long time holding of mine currently yields a very generous 4.10% with a relatively high, but sustainable, payout ratio of 72.7%. A relatively recent spin off of Altria Group Inc. (MO), PM has managed a very impressive five year annualized dividend growth rate of 18.38%. Like MCD, I found PM to be selling at a reasonable price compared to the S&P with a current PE of 16.59. Forward PE looks even better at a slightly lower 15.3. To be candid, another major factor for adding to my PM position has been the current high yield offered. Again, Morningstar rates PM four stars which doesn’t hurt either.
What do you think about my recent stock purchases in the consumer space? I’d love to hear more insight about these stocks as well as the Canadian banking stocks I have mentioned in another post.
Disclosure: Long MCD, PM