Tuesday, October 4, 2011

Dividend Growth Portfolio Project

The dividend growth portfolio project includes several dividend investing bloggers, each of whom has selected three dividend stocks to include in a hypothetical dividend growth portfolio.

The stock picks that I selected include Enterprise Products Partners (EPD), McDonald’s Corporation (MCD) and Chevron Corporation (CVX).

Chevron Corporation (CVX), through its subsidiaries, engages in petroleum, chemicals, mining, power generation, and energy operations worldwide. It operates in two segments, Upstream and Downstream. Investing in Chevron is a direct play on oil prices and the demand for energy. Long-term, the company is well positioned to capture sufficient profits in its Upstream segment, and has a solid strategy in exploring or acquiring promising assets that will fuel the growth in future earnings per share. Chevron will grow by acquiring and developing assets that will add to its reserves. New field developments are expected to generate 1%-2% annual production growth over the next five years. This dividend achiever has increased dividends for 24 years in a row and yields 3.30% (analysis).

Enterprise Products Partners L.P. (EPD) provides midstream energy services to producers and consumers of natural gas, NGLs, crude oil, refined products, and petrochemicals in North America. Enterprise Products Partners is the largest Master Limited Partnership in the US. Most of the partnership’s income is derived from oil and gas flowing through its vast network of pipelines. While prices of oil and gas are very volatile, the volumes of oil and gas transported in the US is relatively stable. MLPs like Enterprise Product Partners have a virtual monopoly on transporting oil and gas, as it is very expensive to build a pipeline, which is why opening a competing pipeline would not be a feasible idea. A large part of distributions that MLP investors receive are not taxed, as they represent return of capital caused by depreciation expense. This master limited partnership has increased dividends for 14 years in a row and yields 6% (analysis).

McDonald’s Corporation (MCD), together with its subsidiaries, operates as a foodservice retailer worldwide. It franchises and operates McDonald’s restaurants worldwide. Analysts expect the company to manage to deliver 4% - 5% annual sales growth over the next few years. Growth in Asia/Pacific and Europe would likely outstrip US revenue growth. The international segment, which accounts for almost 55% of profits, has accounted for much of the growth in the past and is also expected to deliver growth in the future. The company has been able to achieve sales growth through innovation in its menu, introduction of different drinks as well as using its dollar menu items. This dividend aristocrat has increased dividends for 34 years in a row and yields 3.20% (analysis).

On a side note, my selection of Phillip Morris International (PM) was rejected, because the stock was already included in the portfolio. However, I truly believe PMI to be a great yield/growth combo for long-term investors.


Each of the other participants selected 3 income stocks. The dividend growth bloggers include:


The complete portfolio could be accessed from this link.

As with the other contest I participate in, I only include stocks as a long term investment.

Full disclosure: Long MCD, EPD, CVX

Relevant Articles:

4 comments:

  1. Sounds like an interesting project. This is the first I have visited your site how long is this for? Will you be giving regular updates as to how you are doing compared to the others?

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  2. DGI,

    Excellent picks. I'm long both MCD and CVX and I only wish I would have bought more MCD in the mid-$70's.

    I wasn't aware you tried to pick PM. I'm sorry about stealing your pick. I hope it performs well for both of us as part of the index.

    Best wishes!

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  3. Great post! Glad you're playing along!

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  4. These are very good picks in my view.

    We seemed to have selected a similar set of companies: two moderate yielding blue chip holdings, and one higher yielding MLP each.

    ReplyDelete

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