This year, in an effort to balance my portfolio holdings across all 10 sectors in my watch list, I've changed the way I look for candidates. Rather than search for the best available candidates, I search for the best available candidates by sector. My purchases since January have diversified DivGro to at least 2 holdings per sector, except for Materials, in which I have a single holding. I'll continue to bias purchases with the goal to diversify DivGro, but only if I can identify candidates with good dividend yields and strong dividend growth rates trading at a discount to fair value.The following stocks are the sector winners for May:
| NEW PennyMac Mortgage Investments Trust (PMT) • rank 1 | (*******) | Financials |
| Copa Holdings SA (CPA) • rank 3 | (*******) | Industrials |
| Sturm Ruger & Company Inc. (RGR) • rank 6 | (*******) | Consumer Discretionary |
| Daktronics Inc. (DAKT) • rank 7 | (*******) | Information Technology |
| NEW Alliance Resource Partners LP (ARLP) • rank 9 | (*******) | Energy |
| Avista Corp. (AVA) • rank 10 | (*******) | Utilities |
| BHP Billiton Ltd. (BHP) • rank 11 | (*******) | Materials |
| Owens & Minor Inc. (OMI) • rank 13 | (*******) | Health Care |
| BCE Inc. (BCE) • rank 19 | (*******) | Telecommunication Services |
| Philip Morris International (PM) • rank 21 | (*******) | Consumer Staples |
• PennyMac Mortgage Investment Trust (PMT) | growth 5 yrs | yield 10.07% @ $23.33 | 3-yr CAGR 43.60%
PMT is a real estate investment trust (REIT) operating as a specialty finance company investing primarily in residential mortgage loans and mortgage-related assets. PMT carries more risk than other REITs due to exposure to both interest rate and credit risk. My fair value estimate is $39.40, which translates into a significant discount of 69%.
• Copa Holdings SA (CPA) | growth 5 yrs | yield 2.84% @ $132.27 | 5-yr CAGR 58.57%
Incorporated in 1998, CPA is a Latin American provider of airline passenger and cargo service. The stock trades at a discount of only 21% to my fair value estimate of $160.
• Sturm Ruger & Company Inc. (RGR) | growth 5 yrs | yield 3.55% @ $63.33 | 3-yr CAGR 85.83%
Incorporated in 1969, RGR is engaged in the design, manufacture, and sale of firearms and precision metal investment casings. The stock trades 4% above my fair value estimate of $63.74. With a yield of 3.55% and an impressive dividend growth rate, RGR appears to be an attractive stock for investors seeking both income and growth.
• Daktronics Inc. (DAKT) | growth 9 yrs | yield 2.76% @ $13.68 | 5-yr CAGR 27.23%
DAKT is one of the the world's largest suppliers of electronic scoreboards, computer-programmable displays, and large screen video displays and controls systems. My fair value estimate is $13.20, so DAKT trades at a slight premium. DAKT has a great dividend growth rate.
• Alliance Resource Partners LP (ARLP) | growth 12 yrs | yield 5.25% @ $93.18 | 5-yr CAGR 12.53%
ARLP is a master limited partnership (MLP) engaged in the production and marketing of coal primarily to utilities and industrial users in the United States. It was founded in 1971 and is headquartered in Tulsa, Oklahoma. It trades at about fair value.
• Avista Corp. (AVA) | growth 12 yrs | yield 3.95% @ $32.59 | 5-yr CAGR 12.07%
AVA is a diversified energy company engaged in the generation, transmission and distribution of energy in North America. My fair value estimate for AVA is $33.05, so its trading at about fair value. Sporting a great dividend yield and a decent dividend growth rate, AVA looks quite attractive.
BHP is one of the world's largest diversified natural resources companies. It is involved in mineral exploration, production and processing; oil and gas exploration and development; and steel production and merchandising. BHP trades at a discount of 4% to my fair value estimate is $73.30.
• Owens & Minor Inc. (OMI) | growth 17 yrs | yield 2.98% @ $32.41 | 5-yr CAGR 12.48%
OMI is a Fortune 500 company providing third-party logistics services to manufacturers and suppliers of healthcare and life-science products. It currently trades at a premium of about 12% to my fair value estimate of $30.65. It has the longest history of dividend increases in this month's list.
• BCE Inc. (BCE) | growth 5 yrs | yield 5.12% @ $44.94 | 5-yr CAGR 25.59%
BCE is Canada's largest communications service provider and serves as the holding company
for Bell Canada. The company provides wireless, data communications, telephone, high-speed Internet, direct-to-home satellite television and voice over IP services. My fair value estimate for BCE is $44.10, which means BCE trades at a slight premium.
• Philip Morris International (PM) | growth 6 yrs | yield 4.40% @ $85.80 | 5-yr CAGR 28.40%
PM is a holding company engaged in the manufacture and sale of tobacco products outside the US. It trades at a discount of 4% to my fair value estimate of $89. Since its spin off from Altria Group Inc. (MO) in 2008, PM has returned more than $59 billion to its shareholders through share repurchases and dividends.
I have enough cash for a single non-MLP buy. Once more, BHP is top Materials sector stock. I don't want to buy BHP because I already own the related BBL. The runner-up in the Materials Sector is Syngenta AG (SYT), ranked 14th in my dashboard. I'll take a look at it soon.
Thanks for reading! Any of these candidates of interest to you?
I own BHP Billiton (really the BBL american ADR). I bought it at 56$ and could not be happier. The dividend has been increased once , freom 0.57$ to 0.59$ (that's an 3,38% increase). It's not a big step fordward but small steps make huge difference in the long run. The rest of my portfolio can be found at:
ReplyDeletehttp://www.dividendogma.com/cartera-de-valores/
Keep up with the good job here at divgro!
Thanks for stopping by, Jose! I'll take a look at your portfolio -- thanks for sharing.
DeleteI also own BBL and I'm very happy with that purchase -- up 11% and dividends of just over $100.
Take care!
I have recently linked to your blog from mine. I hope you don't mind, if so please let me know. My portfolio s completely dividend oriented as yours but I'm still into some companies I got some years ago that I should sell. BHP Billiton was my first contrarian buy. No one seemed to care about it a couple of years ago but mining is something that always will be needed and last year BHP was getting into shape reducing non core activities.
DeleteAnother strategic buy for me is Unilever which is silently becoming an european dividend aristocrat. My analysis on Unilever, any comments welcome!
http://www.dividendogma.com/unilever-incrementa-su-dividendo-analisis/
Of course I don't mind you linking to my blog -- thanks for doing that. I had a look at your blog (with Google Translate's help). Very nice! Keep up the good work.
DeleteCheers
Ferdi
I am trying to find a nice program / spreadsheet to track my portfolio and like your breakdown. Would you care to share what you use?
ReplyDeleteHi David, thanks for stopping by. I use Google Drive/Spreadsheet for DivGro-related portfolio tracking. I've put a version of the spreadsheet in a public folder:
Deletehttps://docs.google.com/spreadsheet/ccc?key=0AopfKA_9Y4dRdGV1UzFiX3ZJWTZsT180am9sSWtxM1E&usp=sharing
Let me know if you have any issues downloading or using it.
Cheers!
OMI is my favorite on the list...maybe because of the 17-year growth and its international exposure. Nevertheless, I think I will wait for a dip below $30.
ReplyDeleteThat would be a good price to pick up shares of OMI. It would ensure a yield on cost above 3%. According to Dividend Channel, OMI is trading in oversold territory, since their measure of Relative Strength (a momentum indicator) for OMI has dipped below 30. That's generally a good time to buy, as it creates a better opportunity for dividend investors to capture a higher yield.
DeleteThanks for stopping by!
I've been doing some research as well and some of the stocks I was looking at are on your list. Great finds :) Hard to find good value stocks in this bullish economy.
ReplyDeleteYou're right! Its getting harder to find value. Many of the stocks in my watch list that are trickling up to the top, are smaller caps, somewhat riskier opportunities. Several of them also have a short history of dividend increases. Having said that, Dividend Champions all started with 5-year streaks, later 10-years streaks, and so forth...
DeleteThanks for another great article. I will add PM to my watch list. Do you currently like the current price for PM? I like the fact that they are constantly raising their Dividends. Thanks!
ReplyDeleteDividend Mongrel
http://dividendmongrel.blogspot.com/
Hi Brian -- thanks for stopping by!
DeleteYou'll note that my fair value estimate for PM is $89, so, yes, I think PM is still a good buy at its current price of about $87. There's some turmoil in the tobacco industry (buyout rumors) and PM is trading at a discount to its peers and well below its historical average. I already own MO, so, for the time being, I'm not interested in PM.
You should do your own research, of course, but i like PM at this level. Take care!
These posts help a lot. I think for the majority of us (dividend growth investors) David's CCC list is a great starting point. But in the end it still takes effort to distill it down to a list of companies that are worth investing in. With regards to that this list comes in really handy!
ReplyDeleteThanks!
DW
Hi Dividend & Whisky!
DeleteThanks for your kind words. You're right, Dave Fish's CCC list is great and the mere fact that it is updated every month is extremely valuable. I hope to continue this present series of posts at least until the end of 2014, when my process of diversification (expanding to about 36 stocks) should be finished.
Cheers!