Monday, July 6, 2015

Dividend Companies I am Considering this Month

The goal of every dividend investor is to generate dividend income that is larger than their annual expenses. This coveted goal is called the dividend crossover point. Regular readers know that my goal is to reach the dividend crossover point somewhere around 2018. I am on track to achieve that, because I put money to work every month, and have been doing that after starting from scratch more than 8 years ago. When you have a goal, and a plan to achieve that goal, the important thing is to keep working towards that goal. I do this by constantly searching for attractively valued companies, which also have good prospects to grow dividend income in the future.

In the article below, I have highlighted a few companies, which I am considering adding to. I had included Chubb (CB) when I originally started thinking about what purchases I am considering for July. However, insurer ACE Limited (ACE) decided to acquire Chubb last week, which derailed those plans. That being said, I will add ACE to my list for further review, and will post an analysis shortly. As I have said before, quality dividend growth stocks are more likely to be acquired by larger competitors.



3M Company (MMM) operates as a diversified technology company worldwide. 3M is a dividend king, which has raised dividends for 57 years in a row. The company has managed to raise its annual dividends by 9%/year over the past decade. During same time period, earnings per share have risen by 7.20%/year. Currently, the company is selling for 19.60 times forward earnings and yields 2.60%. Check my analysis of 3M Company for more information about the company.

United Technologies Corporation (UTX) provides technology products and services to building systems and aerospace industries worldwide. United Technologies is a dividend achiever, which has raised dividends for 22 years in a row. The company has managed to raise its annual dividends by 12.90%/year over the past decade. During same time period, earnings per share have risen by 9.50%/year. Currently, the company is selling for 15.70 times forward earnings and yields 2.30%. Check my analysis of United Technologies for more information about the company.

Ameriprise Financial, Inc. (AMP), through its subsidiaries, provides various financial products and services to individual and institutional clients in the United States and internationally. Ameriprise is a dividend achiever, and has raised dividends for 10 years in a row. The company has managed to raise its annual dividends by 27.20%/year over the past five years. During same time period, earnings per share have risen by 12.10%/year. Currently, the company is selling for 13.20 times earnings and yields 2.10%. Check my analysis of Ameriprise Financial for more information about this dividend achiever.

Eaton Corporation plc (ETN) operates as a power management company worldwide. The company has managed to grow dividends for six years in a row. Eaton is the type of company that grows dividends for several years in a row, and then keeps the distribution unchanged for a few years during a recession. For example, between 2008 and 2009, the company kept the dividend unchanged. The company has managed to raise its annual dividends by 13.80%/year over the past decade. Currently, the company is selling for 14.20 times forward earnings and yields 3.30%. Check my analysis of Eaton Corporation for more information about the company. I recently initiated a small position as way to monitor the company better.

Lockheed Martin Corporation (LMT), a security and aerospace company, engages in the research, design, development, manufacture, integration, and sustainment of technology systems, products, and services. Lockheed Martin is a dividend achiever, which has raised dividends for 12 years in a row. The company has managed to raise its annual dividends by 19.70%/year over the past decade. During same time period, earnings per share have risen by 14.80%/year. Currently, the company is selling for 16.70 times forward earnings and yields 3.20%. Check my analysis of Lockheed Martin for more information about the company.

Exxon Mobil Corporation (XOM) explores for and produces crude oil and natural gas in the United States, Canada/South America, Europe, Africa, Asia, and Australia/Oceania. Exxon Mobil is a dividend champion, which has raised dividends for 33 years in a row. The company has managed to raise its annual dividends by 9.80%/year over the past decade. During same time period, earnings per share have risen by 6.90%/year. Currently, the company is selling for 19.20 times forward earnings and yields 3.50%. Check my analysis of Exxon Mobil for more information about this energy behemoth.

Several REITs on my watchlist are also starting to look attractive. I would likely be able to add to them later in the month, or early next month, since I last added to my REITs in May. I try to spread purchases out over several months, in order to avoid buying the same company all the time, and in order to increase diversity of holdings.

W. P. Carey Inc. (WPC) is an equity real estate investment trust, which invests in the real estate markets across the globe. This REIT has managed to boost distributions for 18 years in a row. The ten year dividend growth rate is 7.50%/year. Currently, it is selling for 12.30 times FFO and yields 6.40%. Check my analysis of W.P. Carey for more information on this REIT.

Omega Healthcare Investors, Inc. (OHI) is a real estate investment firm that invests in long-term healthcare healthcare facilities. This REIT has managed to boost distributions for 13 years in a row. The ten year dividend growth rate is 10.90%/year. Currently, it is selling for 12.80 times FFO and yields 6.20%. Check my analysis of Omega Healthcare Investors for more information on this REIT.

HCP, Inc. (HCP) is a hybrid real estate investment trust that invests in properties serving the healthcare industry including sectors of healthcare such as senior housing, life science, medical office, hospital and skilled nursing. This REIT has managed to boost distributions for 30 years in a row. The ten year dividend growth rate is 2.70%/year. Currently, it is selling for 12.20 times FFO and yields 6.10%. Check my analysis of HCP, Inc for more information on this REIT.

Full Disclosure: Long all companies above ( except for ACE)

Relevant Articles:

Five Things to Look For in a Real Estate Investment Trust
The importance of pricing and valuation in dividend investing
Dividend Growth Stocks Are Still Great Acquisitions
How to become a successful dividend investor
Dividend Champions - The Best List for Dividend Investors

15 comments:

  1. Ciao DGI,

    Have you ever considered UHT as a possible REIT buy? If I am not mistaken they have been paying rising dividends for more than 25 years, they are engaged in the health sector (which unfortunately is quite stable as need for health is always going to be there) but I rarely see it mentioned in the several blogs that I follow, Ever considered it?
    One more question: any takes of Greek crisis? I know that you concentrate on the US market, so in a way you are far from the problem, but don't you think that there could be side effects in the US too?

    Ciao ciao

    Stalflare

    ReplyDelete
    Replies
    1. Hi Stalflare,

      UHT has really low dividend growth. As for Greece, I welcome any weakness in stock prices due to that.

      DGI

      Delete
  2. Some really strong blue chip names on the list, DGI. Thanks for sharing your watchlist

    R2R

    ReplyDelete
    Replies
    1. Glad you liked the list. Good luck in your dividend investing journey!

      Delete
  3. Is Eaton (ETN) not domiciled in Ireland where they have 20% withholding taxes on dividends paid to non-residents?

    ReplyDelete
    Replies
    1. I have never had ANY withholding taxes on dividends coming from ETN or ACN. I own them through Interactive Brokers and/or Sogotrade.

      Delete
  4. BBL is taking a beating lately, surprised it didn't make the list .I'm actually a bit worried it might do a dividend cut.

    ReplyDelete
    Replies
    1. I would make an exception to the "sell when dividend is cut" rule IF them end up cutting their dividend.

      They have large exposure to iron ore, which has been battered the last 4 years. When iron ore pick up in the future, BBL will rise in value. I'm holding on to them until then

      Delete
    2. I have never been a huge fan of BBL : http://www.dividendgrowthinvestor.com/2013/02/bhp-billiton-bbl-dividend-stock-analysis.html

      Owning commodity companies is difficult as a dividend investor.

      Delete
  5. That's odd. I was just looking at Eaton Corp after I bumped into it whilst researching my investment in Rolls-Royce holdings (not written that up yet!). It looks an excellent company (incidentally you missed the EPS growth rate percentage from the piece).

    The oil majors are also looking very attractive in the current environment. It is of course tough but they are used to weathering such conditions! I am not surprised as a result to see Exxon on there!

    Good luck with your choice.

    ReplyDelete
    Replies
    1. Ha, great minds think alike, right? ;-)

      I consider XOM the most attractive oil major currently. The rest have very high dividend payments, which raises the risk of a cut. At DGI, we try to avoid cuts in dividend income.

      Delete
    2. I recently added WPC and OHI last month, looking forward to seeing what these two high quality companies can do for my dividends. Nice list overall, I'm with you with wanting to own many of those as well.

      Delete
  6. DGI,
    Are the dividends from those REITs qualified dividends or are they taxed at the capital gains rate?

    ReplyDelete
    Replies
    1. Mostly these dividends are "ordinary". You might want to check with each REIT on their site, how dividends were taxed historically. Check WP Carey:

      http://www.wpcarey.com/tax-information

      Delete
  7. Any thoughts on CVX? Like all oil stocks, it has been hammered as well. The dividend has me holding but a 90% reduction in profits is concerning.

    ReplyDelete

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