Well, things are progressing along nicely. The Fed is being clear with its messages having dropped ‘Patience’ from its speech in March. Current consensus points to a rate increase in fall of the year from the economists – which remains to be seen. In another clear signal at the end of March, Yellen said that rates will see a gradual pace of rate rise starting later this year. This is of course, barring any signs of deflation in the economy. On the home front, the Canadian central bank is holding still with no other indications of further rate cuts. BoC recently indicated that they are starting to see the effects of oil rout in the economy and expect the positive effects from the January rate cut to take a long time.
What does this mean for the equity investments? Based on how the market has reacted when the talk of rates rising comes up, there’s almost always a knee-jerk overreaction in the bond-substitute sectors such as REITs, MLPs and Utilities. Current data suggests that future rates will be much lower than what we have seen in the past, so I will be looking for opportunities over the coming months for picking up new stocks in those sectors or adding to my holdings.
Outlook for April 2015
In February, we started putting together an index-based ETF portfolio for my wife’s portfolio. In order to avoid buying at a market top, we started off with a modest amount of funds put to work. We will continue building our position over the course of the year. The portfolio details are shared here. As for my portfolio, my last purchase has dwindled my cash position, but still have decent amount of cash to fund a purchase in April. As discussed in my 2015 goals post, I am on target maintaining 3-5% of cash position to take advantage of market corrections.
Some of the stocks that I am keeping an eye on from my existing holdings:
- Amgen Inc (AMGN) is a biotech giant and has a relatively short dividend payment history (since 2011). Nevertheless, the numbers are impressive, with a 3-yr DGR of 63% and the company raising its dividend by 30% last year and guiding to raise it again by 30% this year. I started with an initial position of 10 shares. I will be looking to add more shares to my portfolio possibly this month. See my post on why Amgen is a great buy here.
- AT&T (T) is a provider of wireline and wireless telecommunication services. The company has raised dividends for 31 consecutive years with a 5-yr DGR of 2.3%. The recent quarterly results have shown that AT&T can grow revenues with its investments in Mexico, DirecTV, and have cornered the market in car connectivity. AT&T also recently outspent Verizon (VZ) during the spectrum auction, which will help them grow further.
- General Electric (GE) is an industrial conglomerate and has been raising dividends for 5 years. The company is decently valued in the current market conditions. GE has a 5-yr DGR of 1.4%. General Electric is a play on the global industrial market and the company has an ever-increasing backlog of orders.
- Magna International (MG.TO) is the most undervalued stock in my portfolio. The fundamentals are absolutely fantastic and because this company is relatively unknown outside of Canada, unless you follow the automotive sector closely, the stock prices remain subdued. I am tempted to add to my position in this automotive parts giant with a 5-yr DGR of 76%. Magna raised its dividend recently by 16% and the stock split 2:1.
Possible new additions that I am looking at:
- Baxter International (BAX) is a medical device and pharmaceutical company. The company is on the verge of spinning off its biotech arm in mid-2015, called Baxalta, which is expected to create immense value for shareholders. Baxter has a record of spinning off companies which are either successful independently (Edwards Lifesciences was a BAX spinoff), or subsequently acquired by others (Caremark spunoff from BAX was acquired by CVS, Allegiance Healthcare spunoff from BAX was acquired by Cardinal Health). This dividend challenger has a 8-yr track record of raising dividends with a 5-yr DGR of 14.2%.
- 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) and Bank of Montreal (BMO) or add to my existing position in Bank of Nova Scotia (BNS) or Toronto-Dominion (TD). Read details of why I think the banks are attractive to buy now.
- I am also looking to add an insurance name to my portfolio. Some of companies that I am looking at are Intact Financial (IFC.TO), Power Corp (POW.TO) and Chubb Corp (CB).
- In the food and beverage sector, I am looking to add Coca Cola (KO), PepsiCo (PEP), or Starbucks (SBUX).
- I will be looking to add to my pipeline positions in Kinder Morgan Inc (KMI) or InterPipeline Ltd (IPL.TO), but since a big portion in my portfolio in those stocks, I might look at adding another pipeline to my portfolio: looking at either Enbridge (ENB) or TransCanada (TRP).
- I am also looking at adding another REIT to my portfolio: in this space, I want to add a healthcare REIT to complement my position in Omega Healthcare Investors Inc (OHI) and looking to add either HCP Inc (HCP) or Ventas Inc (VTR).
I am expecting dividend increase announcements from the following companies in my portfolio.
- Apple Inc (AAPL) – last increase was 8% in Apr 2014
- Chevron Corp (CVX) – last increase was 7% in Apr 2014
- Johnson & Johnson (JNJ) – last increase was 6.1% in Apr 2014
- Kinder Morgan Inc (KMI) – last increase was 2.27% in Jan 2015
- Omega Healthcare Investors Inc (OHI) – last increase was 1.92% in Jan 2015
- Jean Coutu Group Inc (PJC.A.TO) – last increase was 17.6% in Apr 2014
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.
Photo Credit: Jeff Kubina