First batch of DGI stocks to buy

[ken-do-nim]

With my refinance cash-out closing on Monday, and my bonus due shortly, I will be ready to start the Dividend Growth portion of my portfolio (hooray!).  Here is what I'm planning to start with, please please provide me additional suggestions.  Ranked by 5 year growth; not including any company with less than a 1% dividend (Microsoft is at 0.98%, Apple is at 0.67%, Disney is at 0.92%).

1. Taiwan Semiconductor (TSM), 5 year growth: 5.11 (!), yield 1.45%
   
2. BroadCom (AVGO), 5 year growth: 3.17 times (!), yield: 3.11%
   
3. Texas Instruments (TXN), 5 year growth: 3.107 times (!), yield: 2.39%
   
4. Caterpillar (CAT), 5 year growth: 2.95 times, yield: 1.92%
   
5. Eli Lilly (LLY), 5 year growth: 2.74 times, yield: 1.68%
   
6. Hewlett Packard (HP), 5 year growth: 2.67 times, yield: 2.60%
   
7. NextEra Energy, Inc. (NEE), 5 year growth: 2.54 times, yield: 2.06%
   
8. Qualcomm (QCOM), 5 year growth: 2.50 times, yield: 1.97%
   
9. Accenture (ACN), 5 year growth: 2.46 times, yield: 1.38%
   
10. L3Harris (LHX), 5 year growth: 2.30 times, yield: 2.19%
    
11. Lowe's (LOW), 5 year growth: 2.25 times, yield: 1.52%
    
12. Seagate (STX), 5 year growth: 2.2 times, yield: 3.53%
    
13. Target (TGT), 5 year growth: 2.14 times, yield: 1.57%
    
14. The Goldman Sachs Group, Inc. (GS), 5 year growth: 2.08 times, yield: 1.46%
    
15. Citrix Systems, Inc. (CTXS), 5 year growth: 2.07 times, yield: 1.12%
    
16. Home Depot (HD), 5 year growth: 2.05 times, yield: 2.56%
    
17. Walmart (WMT), 5 year growth: 1.91 times, yield: 1.72%
    
18. Watsco (WSO), 5 year growth: 1.86 times, yield: 2.96%
    
19. Starbucks (SBUX), 5 year growth: 1.818 times, 1.69%
    
20. Oracle (ORCL), 5 year growth: 1.77 times, yield: 1.43%
    
21. AbbVie Inc. (ABBV), 5 year growth: 1.76 times, yield: 4.82%
    
22. Xcel Energy Inc. (XEL), 5 year growth: 1.54 times, yield: 2.96%
    
23. WEC Energy Group, Inc. (WEC), 5 year growth: 1.49 times, yield: 3.12%
    
24. Proctor & Gamble (PG), 5 year growth: 1.475 times, yield: 2.57%
    
25. Johnson & Johnson (JNJ), 5 year growth: 1.47 times, yield: 2.59%
    
26. Hercules Capital (HTGC), 5 year growth: 1.31 times, yield: 7.94%
    
27. Pfizer (PFE), 5 year growth: 1.23 times, yield: 4.51%
    
28. Horizon Technology Finance Corporation (HRZN), 5 year growth: 1.21 times, yield: 8.77%
    
29. Sanofi (SNY), 5 year growth: 1.16 times, yield: 3.69%
    
30. PennantPark Floating Rate Capital Ltd. (PFLT), 5 year growth: 1.03 times, yield: 9.33%
    

[fenders53]

(03-04-2021, 09:30 AM)ken-do-nim Wrote: With my refinance cash-out closing on Monday, and my bonus due shortly, I will be ready to start the Dividend Growth portion of my portfolio (hooray!).  Here is what I'm planning to start with, please please provide me additional suggestions.  Ranked by 5 year growth; not including any company with less than a 1% dividend (Microsoft is at 0.98%, Apple is at 0.67%, Disney is at 0.92%).

1. BroadCom (AVGO), 5 year growth: 3.17 times (!), yield: 3.11%
   
2. Texas Instruments (TXN), 5 year growth: 3.107 times (!), yield: 2.39%
   
3. Caterpillar (CAT), 5 year growth: 2.95 times, yield: 1.92%
   
4. Eli Lilly (LLY), 5 year growth: 2.74 times, yield: 1.68%
   
5. Hewlett Packard (HP), 5 year growth: 2.67 times, yield: 2.60%
   
6. Qualcomm (QCOM), 5 year growth: 2.50 times, yield: 1.97%
   
7. Accenture (ACN), 5 year growth: 2.46 times, yield: 1.38%
   
8. L3Harris (LHX), 5 year growth: 2.30 times, yield: 2.19%
   
9. Lowe's (LOW), 5 year growth: 2.25 times, yield: 1.52%
   
10. Seagate (STX), 5 year growth: 2.2 times, yield: 3.53%
    
11. Target (TGT), 5 year growth: 2.14 times, yield: 1.57%
    
12. Home Depot (HD), 5 year growth: 2.05 times, yield: 2.56%
    
13. Walmart (WMT), 5 year growth: 1.91 times, yield: 1.72%
    
14. Watsco (WSO), 5 year growth: 1.86 times, yield: 2.96%
    
15. Starbucks (SBUX), 5 year growth: 1.818 times, 1.69%
    
16. Oracle (ORCL), 5 year growth: 1.77 times, yield: 1.43%
    
17. Proctor & Gamble (PG), 5 year growth: 1.475 times, yield: 2.57%
    
18. Johnson & Johnson (JNJ), 5 year growth: 1.47 times, yield: 2.59% 
    
19. Pfizer (PFE), 5 year growth: 1.23 times, yield: 4.51%
    
20. Sanofi (SNY), 5 year growth: 1.16 times, yield: 3.69%
    

Not a bad list.  Do we get to vote a few off the island? 

-Upgrade PFE.  It won't be hard.  I nominate BMY or MDT.  Or JNJ and LLY is enough pharma anyway? 

-Add a consumer staple and trim one retail stock.  I like TGT better than WMT FWIW. 

-Add an industrial to go with CAT.  I nominate HON or APD.  Go slow on industrials.  They are too expensive and it doesn't matter that MOMO will probably run them a little higher.   

-Sell us on Oracle and HP.  You're a techie.  This all you got man?  Any cloud exposure in this list? Sounds like Boomer tech stuff I'd buy because I didn't know any better. 

Average into the expensive ones.  Don't let the cash blast make you rush into high PEs.  I don't care if I am wrong 90 days from now.  DGI is not about that.    

I like your slight lean into chips.  The bust cycles are going to get shorter IMO.

[ken-do-nim]

It seems I missed ABBV; so yeah probably don't need a few at the bottom.

Cloud exposure and why buy Oracle, in one article: https://www.fool.com/investing/2020/12/2...-vs-oracle

[fenders53]

A couple stocks per sector would be a great starting point. Encourages you to buy the best quality. Five big box retailers is OK of course, but I'd rather have one less and add another sector like finance, insurance, cyclical materials. You don't have to own all the S&P sectors of course. It's your port. You can always pile in on a sector later when it's actually beaten up. I own a number of DGI stocks I would never suggest you buy today. It sure appears Tech is going to give you a decent entry point.

[ken-do-nim]

Right, the trick is finding ones that qualify as dividend growth. There's a lot of stocks that pay dividends, but don't have growth in the last 5 years, or have tremendous growth but don't pay a dividend (or much of one). I will also be picking up pure growth stocks too for sure like the 3 I mentioned.

For instance, I'm excited to buy DocuSign, which has quintupled since it debuted in 2018, but it doesn't pay a dividend so I didn't list it above. Another I can't wait to get is Twilio, which has gone up 13 times in value in the last 5 years, but again doesn't pay a dividend. https://seekingalpha.com/article/4411034...ng-started

I really have 4 lists:

• dividend growth stocks, which is what I'm starting with (about 40% of my cash)
  
• growth stocks (about 20% of my cash)
  
• pure dividend plays like Carnival Cruise Lines and Verizon (about 5% of my cash)
  
• ETFs to cover various sectors (about 35% of my cash)
  

[fenders53]

It's tough at the moment. I can give you a list of 50 good DGI stocks, and at least half of them do not represent anything close to a fair historical valuation. It's OK to buy a couple shares of those but it's foolish to load up unless you like watching an underperforming stock in your port for the next five years.

[ken-do-nim]

The list would help though. I like your idea of categorizing the list by sector rather than just ranked by performance.

[fenders53]

(03-04-2021, 11:28 AM)ken-do-nim Wrote: The list would help though.  I like your idea of categorizing the list by sector rather than just ranked by performance.

That is exactly the purpose of this forum and a thread like this.  We'll help you make your own list.  I know you have done some research already.  

Run the list back up to maybe 30-35
-then we can set some aside for better valuation someday.  
-some we can vote off the island until they demonstrate they can run a GROWING business into the FUTURE.  (PFE, T)
-keep culling until you have that list back to 20 (even if you only buy 12 next week.  Maybe weigh the purchase by current valuation.  (Not auto $2000 in each pick or whatever).  It's OK to buy 3X as much AVGO than another overpriced slow grower you want to build on a dip.  

The gang will help you cull.  I'd start by visiting the S&P 11 sector list.  Pick at least one name from each sector for consideration (whether you buy it now or later.)  Look at the Dividend Aristocrat list if you haven't lately.  Your list already contains many of them.   

Also, this is a DGI list and if you are like me we want some income now.  A few of the high Div stocks like ABBV can make the average yield acceptable now.  Consider a utility like AEP many of us like at current price.  It has a near 4% yield for now and actually grows the business and the dividend. There are others.  One UTE is enough for now.  I really like APD here for an industrial with a decent yield.  Or cheat a little and make that your materials sectors stock.  (They do sell elemental gases they "mine" from the atmosphere.  Those true materials stocks are better bought when the economy dips and they look like they will go BK.  I wouldn;t go deep in a chemicals company without a pullback.  Get a little yield and save a spot for a few low yielders that grow.  (Like MSFT or APPL on a hard dip).  One REIT would be appropriate for a DGI port too.  PEP is a good consumer staples stock on discount.  Some of this can (and probably should) be boring.  It won't seem so boring when it doesn't drop 50% in a bear market.  

Put zero yield traps in this port.  Don't pretend they are DGI.

[crimsonghost747]

I would indeed recommend adding an utility in there. They might keep going lower if the market continues to think that bond yields will rise, but over the long term it's hard to go wrong with a good utility. They won't give you amazing gains but it's nice and stable and you can find some with decent dividends.

Quite a lot of tech there too, I'm not familiar with the details on all those companies but in general a lot of tech stocks still seem to have a bit too much air in their valuations.

[fenders53]

(03-06-2021, 02:50 AM)crimsonghost747 Wrote: I would indeed recommend adding an utility in there. They might keep going lower if the market continues to think that bond yields will rise, but over the long term it's hard to go wrong with a good utility. They won't give you amazing gains but it's nice and stable and you can find some with decent dividends.

Quite a lot of tech there too, I'm not familiar with the details on all those companies but in general a lot of tech stocks still seem to have a bit too much air in their valuations.

Tech is what he knows.  He needs to offset that with his DGI port or I wouldn't bother or his port volatility will remain as it is now, subject to a 50% pullback when the market actually pulls back.

[NilesMike]

Make your list of quality DGI stocks, no limit as to the number of tickers.

Divide your available investment cash pile into 20 lumps.

When a stock on your list drops 10% off a prior high, you buy it with one lump. If it drops another 10% you spend the second lump on it.

Some will fall even lower of course but you have bought at reasonable prices and should be able to withstand some drawdown.

Others will pull back 10% and zoom, leaving you only 1 lump invested-for now.

Just be patient and buy what your analysis shows are quality stocks.

Pull up some charts on the Aristocrats and you will see how well this simple method works, especially if you have time on your side-unlike Fenders and me.

[fenders53]

(03-06-2021, 12:17 PM)NilesMike Wrote: Make your list of quality DGI stocks, no limit as to the number of tickers.

Divide your available investment cash pile into 20 lumps.

When a stock on your list drops 10% off a prior high, you buy it with one lump. If it drops another 10% you spend the second lump on it.

Some will fall even lower of course but you have bought at reasonable prices and should be able to withstand some drawdown.

Others will pull back 10% and zoom, leaving you only 1 lump invested-for now.

Just be patient and buy what your analysis shows are quality stocks.

Pull up some charts on the Aristocrats and you will see how well this simple method works, especially if you have time on your side-unlike Fenders and me.

I like Mike's plan even better than the paragraphs I already typed.  Excuse me original poster while I talk about you right in front of you.    You clearly prefer planning things out neatly and that's great.  Here is what I smelled coming next week when I read the first post. "I just put about 5% each in these 20 DGI stocks because I got some cash coming soon."  Yeah don't do that because it's not wise lol.    I'm sure you'd like to knock some of the volatility out of you leveraged port after this weeks beatdown?.  Buying a bunch of stodgy companies near all-time highs may not give that result. The market has shifted to value, for now.  

Make your list and Mike is right, no length limit with one caveat. You do some DD and put no crap on your list. We are never too shy to tell ou when you come up with a bad idea. Kidding but not really. I'll stick with my earlier advice.  I'll sell it and buy a share of something else. What's the harm in a no commission world?  Grossly overpay and you will question the DGI strat for years.

Restated, Mike and I aren't so arrogant to think we can time the market, but we know a frothy market when we see it.  You aren't old as a dirt clod like Mike , but you don't have 45 years to compound either so valuation does matter.  It's been said our total return is predestined the day we purchase.  I have found that to be true when buying mature companies.  JNJ isn't likely to run 3X in 10 years so we shouldn't pay the 52WK high price.  JNJ is a handy example because it actually is down about 10% and ready for a purchase IMO.  And you don't have to buy at down 10-20-30.  I'd probably tweak those numbers.  It could lead to you skipping the very best DGI stocks because the lesser dropped much faster as they are inclined to do.  The initial list is important so you aren't sifting through dumpsters for a dividend stock down 20%. It's OK to buy a share of an overpriced company to get it in the port. I have found that useful inspiration. I have also sold off a couple shares that ran 40% before I had a chance to build a position. That stinks but better than a poke in the eye. I bought two shares of GNRC and it promptly ran $70 on a week of bad TX weather. I sold it because I thought it was gone forever and lookie there, it's dropped $50 in just a few weeks. I might get another chance to buy it like I mean it. It's hard not to force trades, or beat yourself up in the short term for missing one.