Outlook for January 2014

2013 has finally come to an end and what a fantastic year for stocks! The DJIA and S&P 500 gained 28% and 31% respectively for the year. Where stocks will go from here is anybody’s guess. Rise or fall, I will be staying invested while maintain some cash position in my portfolio. If there is a correction, it will provide me with an opportunity to pick up more stocks at a discount.

My Holdings

Provided the right conditions, I intend to add to my positions in Archer Daniels Midland (ADM), Qualcomm (QCOM) or Realty Income Corp (O).

Archer Daniels Midland (ADM) manufactures and sells protein meal, vegetable oil, corn sweeteners, flour, biodiesel, ethanol and other value-added food and feed ingredients; and processes oil-seeds, corn, wheat, cocoa and other agricultural commodities. ADM also engages in futures commission merchant business. ADM is is a dividend champion which has been raising dividends for 38 years. ADM has a 5-yr dividend growth rate (DGR) of 8.8% and a 10-yr DGR of 12.3%.

Qualcomm (QCOM) designs, develops, manufactures and markets digital communications products and services base don CDMA, OFDMA and other technologies. QCOM is the leader in ARM-based processors which are found in the bulk of Windows, BlackBerry and Android devices. QCOM has been raising dividends for 11 years and has a 5-yr DGR of 12.3%.

Realty Income (O) is a REIT that invests in commercial real estate across the US. O has long-term (10-20 year) leases with tenants that are spread across 200 companies and 47 industries. O has been raising dividends for 19 years; has a 5-yr DGR of 1.5% and 10-yr DGR of 4.2%.

Monthly Contributions: Every month, I add to my positions in the following stock and funds:

  • The Bank of Nova Scotia (BNS) is the third largest of the Canadian banks by deposits and market cap. BNS is also the most international of the Canadian banks with exposure in 55 countries outside Canada. BNS saw a pause in its dividend growth from 2008-2010. However, BNS has started raising dividends after the crisis with a 5-yr DGR of 4.53%. I have a DRIP plan in BNS and invest monthly to this holding.
  • Claymore S&P US Dividend Growers ETF (CUD) is an ETF of 83 dividend growers and provides me with exposure to excellent corporations across all sectors. The ETF has a 1.8% yield and pays distributions monthly.
  • iShares Canadian Financial Monthly Income Fund (FIE.A) is an ETF of 24 Canadian financial equities. The fund yields 7% and pays distributions monthly.
  • CI Signature High Income Fund (mutual fund) is a globally diversified fund with a mix of stocks and bonds. The fund yields 6% and pays distribution monthly.
  • CI Global Health Sciences Fund (mutual fund) is a globally diversified fund in the healthcare sector. The fund yields 1.1% and pays distributions annually.
  • Scotia Canadian Balanced Fund (mutual fund) is an index fund tracking the Canadian S&P/TSX Composite Index and the DEX Universe Bond Index. The fund yields 0.52% and pays distributions quarterly.

 

My Watchlist

I am also considering various stocks that are not currently in my portfolio.
Illinois Tool Works (ITW) and Parker-Hannifin Corp (PH) are a play on the industrial sector. I am currently under-invested in the industrial sector and am looking for more exposure on that front. ITW and PH are both dividend champions who have been raising dividends for 39 and 57 years respectively. ITW has a 5-yr DGR of 9.9% and a 10-yr DGR of 12.6%. PH has a 5-yr DGR of 16.2% and 10-yr DGR of 12.9%.HCP Inc. (HCP) invests in properties serving the healthcare industry including sectors such as senior housing, life sciences, medical offices, hospitals and skilled nursing. HCP is a dividend champion that has raised dividends for 28 years; has a 5-yr DGR of 2.4% and a 10-yr DGR of 2.1%.

Kinder Morgan Inc. (KMI) owns and operates energy transportation and storage assets in US and Canada. KMI is the fourth largest energy company in N.America. The company owns an interest in or operates approximately 75,000 miles of pipelines and 180 terminals. KMI has a reputation for its high payouts and has a 5-yr DGR of 10%.Procter & Gamble (PG) and Unilever PLC (UL) are giants in the consumer packaged goods field. PG has five segments – beauty, grooming, healthcare, fabric care and home care. UL has four segments – personal care, foods, refreshment and home care. PG has been raising dividends for 57 years; has a 5-yr DGR of 10.2% and a 10-yr DGR of 10.8%. UL has been raising dividends for 25 years; has a 5-yr 7.07%.

Rogers Communications Inc (RCI.B) and Telus Corp (T) are both Canadian communication providers and together with BCE Inc (BCE) form the Big-3 in Canada’s wireless sector. The Big-3 together control 91% of the wireless market and provide excellent combination of growth and income opportunities. Rogers has been growing dividends for 7 years and has a 5-yr DGR of 11.74%. Telus has been growing dividends for 8 years and has a 5-yr DGR of 9.08%.
Walgreen Co (WAG) operates drugstores in the US. The company provides access to consumer goods and services, pharmacy, health and wellness services across the US. WAG is a dividend champion that has been raising dividends for 38 years. WAG has a 5-yr DGR of 23.7% and a 10-yr DGR of 21.2%.
Textainer Group Holdings (TGH) engages in purchase, ownership, management, leasing and resale of a fleet of marine cargo containers worldwide. TGH was recently downgraded from Outperform to Market Perform, but there is still plenty of potential for an upside. TGH is a Dividend Challenger that has been raising dividends for 7 years and has a 5-yr DGR of 52.1%.

Index – China ETF

I am also considering adding a new index fund to my portfolio to track the Chinese market/economy. Read about my comparison of available ETFs here.
What are your thoughts on the stocks mentioned here? Do you own them or are they on your watchlist?
Disclosure: My full list of holdings are available here.

10 thoughts on “Outlook for January 2014

  1. Hi R2R,

    I will also not sell any shares!
    And that’s why I hope for a correction, so I can buy more shares for less money.

    In 2014 I will probably buy:
    – HCP (U.S.)
    – Lockheed Martin (U.S.)
    – Accenture (IE)
    – Ameriprise Financial (U.S.)
    – Intel (U.S.)
    – Swiss Re (CH)

    Best regards
    D-S

    • Hi D-S,
      Absolutely! I am hoping for a correction too so that I can find some better entry points.

      Your watchlist looks like a good set of companies to invest in. I am unfamiliar with Swiss Re and will have to take a look into it.

      Thanks for the comment. Best wishes.
      R2R

  2. I own several of the companies that you mentioned but would love to own some ITW and UL. Hopefully I’ll get a chance to add them to my arsenal in 2014. 2013 was a huge year for equity investors, especially US companies. 30% returns sure are nice, although I’d have preferred a slower march up to current levels, maybe hitting it in late 2014. I don’t expect a repeat but as far as where we’ll end up there’s just no telling. I’ll just focus on looking for solid income generating opportunities and do my best to capitalize when I can. 2014 will probably bring some diversification into real estate and building a larger cash position unless the markets decide to get choppy. Happy 2014!

    • I feel the same way – even though 2013 was a great year, it rose too fast and I wish there was a more gradual buildup. 2014 should be interesting and I hope to capitalize if there is any correction by picking up some more stocks.

      Thats so great you are looking into diversification into real estate next year. Wish you the best in your new endeavors. We will be looking into real estate as well but for living in and not as an investment.

      regards
      R2R

  3. R2R,

    Happy New Year. I like that you have an organized watch list like this and I’m thinking about writing down my own (I have a loose list in my broker account, but I need to prioritize my top wants list). Also looking to build an income fund portfolio like yours in my retirement accounts using ETFs. Lots to do as always in 2014.
    -RBD

    • Happy new year to you too, RBD.
      I find that writing and maintaining a list like this helps. I keep an eye on a lot more stocks but after more and more filtering, I have reduced the list to a few.

      ETFs can be a great complement to provide income. Also, I always recommend people use index funds to take advantage of broader market moves as we saw in 2013.

      Hope your 2014 brings you closer to your goals. Wishing you the best.

      regards
      R2R

  4. I don’t expect the huge gains in 2014 that we had in 2013. I could be wrong though but there is no way the markets can sustain that type of growth for long. I hope this creates some buying opportunities. I want to add to WAG but it’s so hard for me to with it being up about 100% from my basis. I almost added more TGH but by the time I transferred funds, it had popped a few points. UL and ITW are companies I’d like to own at some point. Good luck in 2014.

    • I agree, AAI. 2014 will likely not see the same kind of growth. I should’ve acted on WAG and bought it in early 2013 but I ended going for something else instead. Oh well…I will be keeping a close eye on it and looking for buying opportunities.
      I need more exposure in industrials and ITW, PH are great plays for that sector, IMO. Heres to the new year and wish you the best for 2014.

      regards

  5. Happy 2014! I’d like to get an opportunity to buy DEO, UTX, HON, and many others at cheaper prices than today. Stock prices seem to have gotten ahead of earnings so I expect some pullbacks in 2014.

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