Stock Ideas for June 2018

We’re almost halfway 2018 and it looks like this year is going to be a solid year in terms of conscientiously investing my savings in dividend growth stocks. Throughout this year I’ve been able to buy stocks every month and in some cases I really locked in some nice yields. Wild swings in the stock market gave us the opportunity to buy terrific companies at low or reasonable valuations. The last twelve months I’ve put most of my monthly savings in REITs – KIM, O, OHI, SKT, VTR – and other companies like MO, PEP, T and XOM. These are all high-yielding stocks. I really like that idea. And yes, some have a low dividend growth rate. It’s true that the dividend growth rate matters in a big way for increasing our net worth. But when these stocks trade for such low valuations, I really think there’s no harm in investing your money in dividend growth stocks with a lower than average dividend growth rate for a while. Besides, I’m convinced that some names will show higher growth numbers in a year or two. Let’s get back to the subject, please…

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This Friday I will be able to invest a welcome amount of fresh capital of $1.000. The last couple of days I’ve been thinking about which stocks to buy. I really like that feeling of knowing these investments will get me a nice and growing income for the years ahead. The looming trade wars of the USA with China and the EU and the prospect of rising interest rates have resulted in some great businesses trading at low or reasonable valuations and high dividend yields.

I’d love to buy me a beaten down business in the consumer goods sector again. Last month I started a position in PEP. Man, was I excited about this buy! It’s really cool to see people standing in front of you at the grocery store, paying for drinks and snacks of the company you own. The stocks which are currently (still) on the buy list for many dividend growth investors lately are GIS, KHC, KMB, PEP and PG. My favorites are GIS and KMB. I don’t own stocks of these companies yet.

I’m not a big fan of KHC for example. I’d love to own a part of their flagship product Heinz. It’s an amazing product and it has been around for more than 150 years. My little daughters are already insisting on their dollop of ketchup at dinner. No matter what we eat ☺️. I think the Board will get the company on track with cost reductions and slimming down their product portfolio. Buffett is very positive about 3G Capital and their cost cutting strategy for KHC. That’s a real plus. But, I don’t feel quite comfortable about their pile of debt and dividend growth in the future. I don’t know, maybe I’m too pessimistic on this company.

Additions to existing positions like SKT and VTR is also an attractive possibility. Prices have gone up lately and I feel like the pessimism has shifted towards a more neutral stand by the market. I do think these stocks will remain volatile this year so there’s a big chance this opportunity will last for a while. But, who knows? Their dividends are safe and yield around 6.0% at the moment.

JNJ is also on my radar again. This is a true gem, as we all know. It’s a wonderful and a steadily growing business, yielding just shy of 3% these days. I’d love to add this quality name to my basket.

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*: Heinz had built up quite a track record regarding paying dividends and was a Dividend Aristocrat for more than a decade until it lowered its dividend back in 2003. Since 2004, Heinz has increased its dividend annually. Kraft was a spinoff from Mondelez International. As a standalone company Mondelez put together a respectable track record of dividend growth that goes back to the early 2000s. In the years following the financial crisis Mondelez kept its dividend flat for a couple of years.

So, it all comes down to a choice for GIS, JNJ, KMB, SKT or VTR. Isn’t that a sweet problem?

What is on your buy list for the month of June?

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8 thoughts on “Stock Ideas for June 2018

  1. nice compound. so many choices these days. look forward to seeing which one you decide upon. i topped up my position in telus this month to get enough to drip a stock

    cheers

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    • I’ve looked at Telus a number of times. It’s a nice dividend growth stock. Their dividend growth rate is higher than the US names like T snd VZ. I really like to diversify my portfolio with some wonderful Canadian businesses, but there are too many US companies for sale at the moment. Good luck with your investment, I’m sure you’ll be fine 👍

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  2. All pretty good names. All in varying sectors as well so might have to take a look at your allocation if you are light on something. My vote is for JNJ or PG, but also really like KMB, GIS, and KH. Although I have been holding off on GIS. Too much other value in the market to take advantage of right now. And I wasn’t a fan of them doing share buy backs at the peak and their recent acquisition of blue buffalo lowered their credit rating down because of the new debt. I am sure it is all short term and will still be a good long term hold, but just my thoughts. They still have a great dividend very long term.

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    • Dividend Daze, thanks for your comment.

      I’d love to buy JNJ. I regularly check out the price and valuation metrics. It’s such a beauty and SWAN stock. The healthcare sector is also the place to be if you want to make a good long term bet. A forward annual increase of their dividend with 7% is also attractive.

      As you, I’m a bit worried on the takeover of Blue Buffalo by GIS. I already own two businesses which made big acquisitions, T and CVS. No one knows how that will play out. So it feels like I should hold back on GIS.

      Thanks for sharing your view. Really appreciated!

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  3. HI DC, my top choice from your list would be JNJ. They’ve been so steady and reliable over the years. Their recent pullback has me interested as well. JNJ has been growing their dividend at about a 7% compound annual growth rate over the past 10 years, but it’s been trending a bit lower more recently. Have to love their AAA credit rating… not easy to come by!

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  4. Engineering Dividends, sorry for my late response. JNJ is certainly a high conviction pick. It’s truly a SWAN stock and lays a rock-solid foundation for a dividend growth stocks portfolio. Hopefully, it will come down further when the interest rates go up.

    Did you post any stock ideas for the month of June?

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