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…
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.
*: 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?