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