Santa Yellen sent the market soaring in late December. The Fed’s statement that they could possibly wait longer before the interest rates are raised was greeted by the markets as we have now seen multiple times. As much as the Fed likes to remind that the decision will be data dependent, investors remain happy while the low rates exist. Irrespective of what happens, my course is to stay invested and look for value in the market.
Outlook for January 2015
Looking at the various sector’s performance in 2014, Utilities seem to be where investors have parked their cash – possibly for income purposes. The sector remains overvalued by most measures, and will definitely suffer if and when the interest rates rise. As much as I would like to add to my utilities sector to balance my portfolio (its the smallest sector in my holdings), I cant seem to find decent value. For value investors, oil and commodities are two spots where stocks remain depressed. I continue to monitor this closely and will look for addition here.
- Apple Inc (AAPL) is a new dividend payer/grower. The company started paying dividends in 2012 and has started raising the dividend right out of gate. The fundamentals remain solid and the company is at the forefront of innovation and is a money-making machine. It has been called by many investors/analysts to be the first company to possibly cross the $1T mark and is speculated to do so in 2015.
- Chevron Corp (CVX) is a dividend champion having raised its dividends for 27 years consecutively. Under the current market conditions, where decently valued stocks are hard to find, CVX provides relatively good value. CVX has a 5-yr DGR of 9% and a 10-yr DGR of 10.6%. My Chevron dividend stock analysis can be found here.
- Magna International (MG.TO) is a globally diversified auto parts manufacturer. The company’s parts can be found in almost every major car manufacturer’s products in the world. The company has a low starting yield, but a great dividend growth rate. Magna has raised dividends for 5 years and the 5-yr DGR stands at 76%.
- RioCan REIT (REI.UN.TO) – is one of the largest REITs in Canada and owns a lot of retail real estate across Canada. The company generates 90% of its revenue in Canada and 10% in USA. Although not a dividend grower (5-yr DGR 0.50%), the stock is currently undervalued and I am considering adding to my position simply because there is plenty of value to be found at these levels.
Possible new additions to my holdings
- Energy giants such as Exxon-Mobil (XOM), ConocoPhillips (COP) or Royal Dutch Shell (RDS.B) are all trading at very attractive levels. Each of these companies have very attractive yields and can survive the downturn in the energy sector.
- Canadian banks have reached attractive valuations after the rout in the energy sector. The banks are exposed to the expensive Canadian oil sands and the drop in energy prices has resulted in a drop in the Canadian dollar – which will affect the banks’ balance sheets in the coming quarters. Banks that I would like to own are Royal Bank of Canada (RY), Toronto-Dominion (TD) or add to my existing position in Bank of Nova Scotia (BNS).
- Main Street Capital Corp (MAIN) is a business development company specializing in long- term equity, equity related, and debt investments in small and lower middle market companies. MAIN does not seek to invest in start-up companies or companies with speculative business plans, but rather in traditional or basic businesses. MAIN is a high yielding dividend payer with a yield close to 7%.
- Unilever plc (UL) is a giant in the consumer packaged goods field. The company operates in four segments – personal care, foods, refreshment and home care. Unilever has been raising dividends for 25 years and has a 5-yr DGR of 7.07%.
- On a side note, I would like to add some dividend stalwarts to my portfolio in order to boost up my core holdings over the course of 2015. These stocks are almost always never trading at a discount and especially in current market conditions are quite expensive. However, I will continue keeping an eye on them to add to my portfolio when the opportunity presents itself. The companies are: 3M (MMM), Aqua America Inc (WTR), Coca Cola (KO), Disney (DIS), General Dynamics (GD), Johnson & Johnson (JNJ), Procter & Gamble (PG), Parker-Hannifin Corp (PH), PepsiCo (PEP), Union Pacific Corp (UNP), United Parcel Service (UPS).
I am expecting dividend increase announcements from the following companies in my portfolio.
- Archer Daniels Midland (ADM) – last increase was in Dec 2013 by 26%. I was expecting an announcement in December, but that never came. The dividend raise is imminent as the management has made it clear that the payouts will be increasing. Read the ADM analysis here.
- Canadian National Railway (CNR.TO) – last increase was in Jan 2014 by 16%. Read the CN dividend stock analysis here.
- Omega Healthcare Investors Inc (OHI) – last increase was n Oct 2014 by 1.96%.
What are your thoughts on the stocks mentioned here? Do you own them or are they on your watchlist? What do you think of the current market levels and buying here? Make sure to leave a comment below as I value reading your questions and comments.
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