My goal as an investor has always been to find those companies that are built to last. Those are the quality businesses, which possess some sort of a moat around them, that allow them to earn high returns, grow profits and dividends over time. Those are defensible businesses, which do well through most phases of the economic cycle. I believe that each of those businesses below will be around in 20 – 30 years, selling a similar type of goods and services to its clients. If they maintain their moats, chances are they will compound my capital and income for several decades. I could then live off that growing income, reinvest the excess back, and never have to sell shares to pay my expenses during the next bear market. My only goal is to avoid overpaying for these shares. Unfortunately, everyone knows that those businesses are good quality ones, with predictable earnings and revenues. Therefore, I had to pay close to full fair value on a few of them. However, I remind myself the words of Buffett that it is better to buy a good business at a poor price, rather than a poor business at a bargain price.
The companies I added to last week include:
McCormick & Company (MKC) manufactures, markets, and distributes spices, seasoning mixes, condiments, and other flavorful products to retail outlets, food manufacturers, and foodservice businesses. It operates in two segments, Consumer and Industrial. This dividend champion has managed to increase distributions for 29 years in a row. The ten year dividend growth rate is 10.20%/year. Currently, the stock is selling for 20 times forward earnings and yields 2.20%. Since this is a retirement account purchase, I will likely reinvest dividends in this stock. Check my analysis of McCormick
PepsiCo, Inc. (PEP) operates as a food and beverage company worldwide. This dividend champion has managed to increase distributions for 42 years in a row. The ten year dividend growth rate is 12.50%/year. Currently, the stock is selling for 19.60 times forward earnings and yields 2.80%. Check my analysis of PepsiCo.
Kimberly-Clark Corporation (KMB), together with its subsidiaries, manufactures and markets personal care, consumer tissue, and health care products worldwide. It operates through four segments: Personal Care, Consumer Tissue, K-C Professional, and Health Care. This dividend champion has managed to increase distributions for 43 consecutive years. The ten year dividend growth rate is 8.20%/year. Currently, the stock is selling for 18.80 times forward earnings and yields 3.10%. Check my analysis of Kimberly-Clark.
Johnson & Johnson (JNJ), together with its subsidiaries, is engaged in the research and development, manufacture, and sale of various products in the health care field worldwide. The company operates in three segments: Consumer, Pharmaceutical, and Medical Devices and Diagnostics. This dividend king has managed to increase distributions for 52 years in a row. The ten year dividend growth rate is 9.70%/year. Currently, the stock is selling for 16.10 times forward earnings and yields 2.80%. Check my analysis of Johnson & Johnson.
Baxter International Inc. (BAX) develops, manufactures, and markets products for people with hemophilia, immune disorders, infectious diseases, kidney diseases, trauma, and other chronic and acute medical conditions. This dividend stock has managed to increase distributions for 8 years in a row. The ten year dividend growth rate is 13.20%/year. Currently, the stock is selling for 15.20 times forward earnings and yields 3%. Check my analysis of Baxter.
The Chubb Corporation (CB), through its subsidiaries, provides property and casualty insurance to businesses and individuals. This dividend champion has managed to increase distributions for 32 years in a row. The ten year dividend growth rate is 9.80%/year. Currently, the stock is selling for 12.50 times forward earnings and yields 2%. Check my analysis of Chubb Corporation.
Full Disclosure: Long all companies mentioned above
- Dividend Growth Stocks are Compounding Machines
- Let dividends do the heavy lifting for your retirement
- Dividend Kings List for 2015
- How to never run out of money in retirement
- How to be a successful dividend investor
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