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05-20-2015, 09:55 PM
(This post was last modified: 05-20-2015, 10:15 PM by stewardinlife.)
Just bought UNP (10) and OHI (14) today as part of my monthly acquisitions.
(05-18-2015, 06:07 PM)stewardinlife Wrote: (05-18-2015, 01:19 PM)EricL Wrote: I would rank them in order of current attractiveness as UNP, OHI, O then WMT.
UNP is trading at fair value for the first time in about a year and a half and OHI is nice with a 6% yield.
I like O as well, but its still a bit expensive in my own opinion.
I sold WMT last fall due to the declining growth rate and relatively weak dividend yield. Just not enough growth there for my tastes.
Long UNP, O, OHI.
Thanks!
Eric, Could you shed some light on your WMT pullout. Just curious, when you say WMT has declining growth rate, are you meaning the stock in general? Is WMT out of your dividend growth rate criteria? What is the typical growth rate you have established personally to be in your portfolio?
From my own research for WMT:
1. It is on Dvivdend Champions list
2. Yield: 2.56
3. It has DGR: 1 yr, 3 yr, 5 yr, 10 yr -- 5.7, 11, 12.6, 14.8 respectively.
Are there any other important metrics that might cause WMT to be a weaker investment?
Your thoughts/elucidation would only help me educate. Thanks in advance.
Paul
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(05-20-2015, 09:55 PM)stewardinlife Wrote: Eric, Could you shed some light on your WMT pullout. Just curious, when you say WMT has declining growth rate, are you meaning the stock in general? Is WMT out of your dividend growth rate criteria? What is the typical growth rate you have established personally to be in your portfolio?
Here is an article I wrote about WMT shortly before I sold it at the beginning of the year. In short, the payout ratio has gotten to a point where it appears management isn't willing to go much higher on, so the last two dividend increases have been around 2% with increases from $0.47 to $0.48 last year, and from $0.48 to $0.49 with the most recent one.
Since that article, analyst earnings estimates have continued to trend lower and are now projected at $4.84 for this year. As a result, I don't see much of a dividend increase happening again next year and I think we will continue to see the $0.04 per year raises until the payout ratio gets back to near the 30% level again.
So in the end, with a relatively low dividend yield of around 2.5%, and my expectations for low to mid single digits earnings growth and dividend growth in the 2% range for the next few years I just think there are much better opportunities out there.
To your last question, I'm generally looking for double digit dividend growth with stocks yielding under 2%, 8-10% dividend growth for the 3% yielders, and 4-8% for the 4%+ yielders.
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(05-20-2015, 11:33 PM)EricL Wrote: (05-20-2015, 09:55 PM)stewardinlife Wrote: Eric, Could you shed some light on your WMT pullout. Just curious, when you say WMT has declining growth rate, are you meaning the stock in general? Is WMT out of your dividend growth rate criteria? What is the typical growth rate you have established personally to be in your portfolio?
Here is an article I wrote about WMT shortly before I sold it at the beginning of the year. In short, the payout ratio has gotten to a point where it appears management isn't willing to go much higher on, so the last two dividend increases have been around 2% with increases from $0.47 to $0.48 last year, and from $0.48 to $0.49 with the most recent one.
Since that article, analyst earnings estimates have continued to trend lower and are now projected at $4.84 for this year. As a result, I don't see much of a dividend increase happening again next year and I think we will continue to see the $0.04 per year raises until the payout ratio gets back to near the 30% level again.
So in the end, with a relatively low dividend yield of around 2.5%, and my expectations for low to mid single digits earnings growth and dividend growth in the 2% range for the next few years I just think there are much better opportunities out there.
To your last question, I'm generally looking for double digit dividend growth with stocks yielding under 2%, 8-10% dividend growth for the 3% yielders, and 4-8% for the 4%+ yielders.
Eric - Thanks. I went through the article and read the comments too. I totally understand your positions in terms of yield and yield's growth numbers -- I think it is a good approach.
As I have mentioned earlier, I have so far KO, JNJ, PM and my recent additions of UNP and OHI. I am a sort-of a late starter to the game at 41, and do want to get a good footing/starting. I researched the ones I have so far, and they seem to generally fit in the yield vs yield growth in the same category as you have outlined. Although PM has an increasing payout ratio and is currently over 80%.
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(05-21-2015, 11:50 AM)stewardinlife Wrote: As I have mentioned earlier, I have so far KO, JNJ, PM and my recent additions of UNP and OHI. I am a sort-of a late starter to the game at 41, and do want to get a good footing/starting. I researched the ones I have so far, and they seem to generally fit in the yield vs yield growth in the same category as you have outlined. Although PM has an increasing payout ratio and is currently over 80%.
I own all but JNJ. I think PM will be just fine in the long run, if you take out currency effects they are growing earnings at a high single digits rate. I expect those effects to normalize over time and I think the payout ratio will get back into line.
Also keep in mind that tobacco companies traditionally have high payout ratios compared to other industries.
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(05-21-2015, 11:59 AM)EricL Wrote: (05-21-2015, 11:50 AM)stewardinlife Wrote: As I have mentioned earlier, I have so far KO, JNJ, PM and my recent additions of UNP and OHI. I am a sort-of a late starter to the game at 41, and do want to get a good footing/starting. I researched the ones I have so far, and they seem to generally fit in the yield vs yield growth in the same category as you have outlined. Although PM has an increasing payout ratio and is currently over 80%.
I own all but JNJ. I think PM will be just fine in the long run, if you take out currency effects they are growing earnings at a high single digits rate. I expect those effects to normalize over time and I think the payout ratio will get back into line.
Also keep in mind that tobacco companies traditionally have high payout ratios compared to other industries.
Will do thanks.
Also, what are your thoughts on not owning JNJ? It appears to have almost close to double-digit DGR for the last decade for its close to 3% yield. It's being touted as the "one" that every portfolio should have or something like that  Thanks.
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(05-21-2015, 01:16 PM)stewardinlife Wrote: Also, what are your thoughts on not owning JNJ? It appears to have almost close to double-digit DGR for the last decade for its close to 3% yield. It's being touted as the "one" that every portfolio should have or something like that Thanks.
JNJ was overvalued when I put my portfolio together and hasn't been cheap enough yet to convince me to add it. I recently added GILD and ABBV over it due to their higher growth rates and in ABBV's case, higher dividend yield.
If I was relying on my dividends for income, JNJ would be at the top of the list. It has a decent near 3% yield and at AAA rated is as safe as they come. But its payout ratio has steadily climbed from the mid 30's to near 50% and the dividend growth rate has slowly fallen from the mid teens in the early 2000's to a 6-8% range in recent years. With earnings projected to grow at a 5% rate going forward, I don't expect dividend growth to be much higher than 5-7% unless something fundamentally changes to increase the earnings growth rate.
So basically, 3% yield plus 5-7% growth just doesn't quite meet my criteria at this time, but if it drops some more and gets that yield up a bit more I may have to take a closer look.
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(05-21-2015, 01:45 PM)EricL Wrote: (05-21-2015, 01:16 PM)stewardinlife Wrote: Also, what are your thoughts on not owning JNJ? It appears to have almost close to double-digit DGR for the last decade for its close to 3% yield. It's being touted as the "one" that every portfolio should have or something like that Thanks.
JNJ was overvalued when I put my portfolio together and hasn't been cheap enough yet to convince me to add it. I recently added GILD and ABBV over it due to their higher growth rates and in ABBV's case, higher dividend yield.
If I was relying on my dividends for income, JNJ would be at the top of the list. It has a decent near 3% yield and at AAA rated is as safe as they come. But its payout ratio has steadily climbed from the mid 30's to near 50% and the dividend growth rate has slowly fallen from the mid teens in the early 2000's to a 6-8% range in recent years. With earnings projected to grow at a 5% rate going forward, I don't expect dividend growth to be much higher than 5-7% unless something fundamentally changes to increase the earnings growth rate.
So basically, 3% yield plus 5-7% growth just doesn't quite meet my criteria at this time, but if it drops some more and gets that yield up a bit more I may have to take a closer look.
Great. Discussing with you has been very helpful.
I am going to be tuning my portfolio as I progress in understanding(hopefully) the various philosophies.
One of the criteria that I am looking in terms of the overall portfolio is to aim for at least 10-12% ( x% div yield + y% div growth) on quality companies. Is this something that is okay to incorporate, considering I will have around 20 more yrs. to actively contribute to my portfolio? Thanks!
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07-23-2015, 05:36 AM
(This post was last modified: 07-23-2015, 05:55 AM by scapaflow.)
Hi @all!
I´m new here and from Europe/Germany - since sep 2014 i´m building my DGI portfolio - hope we can share some good ideas over here? i´m activ too @seeking alpha.
My portfolio exist about 35 stocks/etf up to now - only problem is to handle the fx problem, so don´t be surprised to see some € etf in there to balance the portfolio. After the baseline of this DGI exist, i have 20 years to come to accumulate via reinvesting divs and additonal cash every month - 5 more stocks and groundwork will be finished ;-)
sunny greetings from Germany
scapa
ps. in next days i will share my portfolio in the right thread!
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Welcome scapaflow! Very glad to have you here.
Do you have the next five stocks picked out already, or are you just targeting 40 holdings?
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(07-23-2015, 07:51 AM)Kerim Wrote: Welcome scapaflow! Very glad to have you here.
Do you have the next five stocks picked out already, or are you just targeting 40 holdings?
Today i bought number six IBM, remaining 5 are O, OHI, EMR, MSFT and PFF -> but in the matter of pff i´m not so sure - u´ll get 6% but not the div hikes like from 3M et al....
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