Looking at my blog you probably wouldn't think I hold any fixed income. Surprise! 10% of my investments are infact fixed. I hold them in my thrift savings plan (federal employee 401k) account which I don't really talk about. I have an aggressive allocation of 90% stocks, 10% fixed income. Here's why:
#1: I believe in dividend growth investing. The concept simply makes sense and is easy to execute. Buy and monitor stock in companies who pay a decent yield and will increase dividends faster than the inflation rate. Over time the 2.75%, 3%, 4% yields will grow to a substantial YOC. My timeline for retirement is 16 years. 3% caterpillars have a long time to morph into butterflies.
#2: Interest rates are historically low. Low interest rates mean bond yields are also low. I actually like bonds because of the safety they provide, but right now it is hard to justifiy ownership. Why own an asset that is guaranteed to be eaten away by inflation when you can get something else with a similar yield that can outpace? I'm not bold enough to go 100% stocks, which is why I maintain the 90/10 ratio. If rates were higher I'd have no problem being 75/25 (possibly higher depending). Yes, certain flavors of fixed income such as TIPS can meet inflation. But can they beat it?
#3: I am young. Conventional wisdom says more stocks, less bonds while you are young. I do follow this advise. Not so much for additional risk/reward, but because investments that makes the most sense to me are dividend growth stocks.
Why not further diversify with precious metals, specifically gold? There is no doubt gold has performed extremely well the past few years. Everyone loves gold right now, I even supervise a young soldier who invests $100/mo in a gold fund. Gold is a good store of value, but would pay me absolutely nothing. You'd have to sell it to pay bills; the exact opposite of my goal. As a side note, I always encourage my Joes to save and invest even if it's something I personally wouldn't buy such as a gold fund.
Eventually I will be over allocated to stocks unless I buy fixed income in my brokerage accounts. It's only a matter of time. Once in a while I'll need to make purchases to maintain the balance I want. I'll probably continue to avoid bonds due to low yields, but have thought about preferred stock and possibly junk bond etfs. Look for me to purchase fixed income soon, maybe this month.
Tuesday, March 6, 2012
Saturday, March 3, 2012
Focus on Basic Materials
This week I will be taking a look at dividend growth stocks in the basic materials sector. This sector describes companies involved with the discovery, development, and processing of raw materials such as metals, chemicals, and forestry products. I currently do not have any stocks from this sector in my portfolio, I thought it would be worthwhile to do some research.
I used a stock screener to get started. I screened for P/E less than 20, Est. long term growth greater than 5%, yield greater than 2.5%, dividend growth greater than 5%, payout ratio less than 60%. I then checked the results to get rid of any companies who cut or froze their dividend in the past 5 years. Here are the remaining stocks:
Air Products and Chemicals (APD)
Dividend Increases: 29 years (champion)
Mkt Cap: 19.35B Large Cap
Beta: 1.29
Air Products and Chemicals produces gases, chemicals, and equipment for sale worldwide. APD operates in 4 segments: Merchant Gases (40%); Tonnage Gases (33%); Electronics and Performance Materials (23%); and Equipment and Energy (4%). It has a diverse catalog of products such as oxygen, helium, argon, carbon dioxide, specialty gases, equipment for natural gas liquefaction, equipment for air separation, and materials to manufacture LCD screens. It serves a variety of industries such as medical, glass making, pulp and paper, metal manufacturing, industrial cleaning, petrochemical, and electronics. This company is diversified. Sales by region: U.S. 38%, Europe 31%, Asia 24%, Canada/Latin America 7%.
I expect APD to grow in the low double digits or high single digits. Frankly this company isn't sexy, but sells products needed in a wide variety of industries and is shareholder friendly. To fuel growth, APD is targeting emerging markets in Asia and Russia. Air Products is seeing increasing margins and profits; its future looks bright. I would like to be an investor in APD, the only thing holding me back is the share price. I've come close to buying APD in the past, but at this point in time I'm waiting for a pullback. It has a high beta which could be an advantage in a declining market for investors looking to add shares at better valuations.
Compass Minerals Intl. (CMP)
Dividend Increases: 9 years (challenger)
Mkt Cap: 2.36B Mid Cap
Beta: .7
Compass Minerals produces salt and specialty fertilizers for U.S., U.K., and Canadian markets. About 48% of sales come from highway deicing compounds, 33% consumer and industrial salts, and 18% specialty fertilizers. U.S. demand for highway salts typically increases 1-2% per year with prices increasing 3-4% to boot. CMP expands existing mines and also uses an acquisition strategy to meet demand. Compass recently announced it has purchased rights to expand a salt mine in Ontario. In addition to salt mines, Compass uses solar and mechanical technology to extract minerals. CMP has a records management business in the U.K. making use of an old salt mine 500 ft underground to store documents for other businesses. It contributes 1% of sales.
This is a boring but necessary business. Having lived in snowy parts of the country, I recognize clear roads are essential to our way of life. In my opinion CMP is attractively priced right now, a rarity in this market. We've had a mild winter this year, which could explain why this particular stock is still attractive. I like the growth and dividend growth potential of this company coupled with its yield and low payout ratio. I'm definitely adding CMP to my watch list.
Only two companies made my list today. I am aware of other dividend champions in the materials sector such as RPM, NUE, and BMS. These are fairly popular among dividend growth investors, but did not pass my screens for one reason or another. Added CMP to my Watch List page.
I used a stock screener to get started. I screened for P/E less than 20, Est. long term growth greater than 5%, yield greater than 2.5%, dividend growth greater than 5%, payout ratio less than 60%. I then checked the results to get rid of any companies who cut or froze their dividend in the past 5 years. Here are the remaining stocks:
Air Products and Chemicals (APD)
Dividend Increases: 29 years (champion)
Mkt Cap: 19.35B Large Cap
Beta: 1.29
Air Products and Chemicals produces gases, chemicals, and equipment for sale worldwide. APD operates in 4 segments: Merchant Gases (40%); Tonnage Gases (33%); Electronics and Performance Materials (23%); and Equipment and Energy (4%). It has a diverse catalog of products such as oxygen, helium, argon, carbon dioxide, specialty gases, equipment for natural gas liquefaction, equipment for air separation, and materials to manufacture LCD screens. It serves a variety of industries such as medical, glass making, pulp and paper, metal manufacturing, industrial cleaning, petrochemical, and electronics. This company is diversified. Sales by region: U.S. 38%, Europe 31%, Asia 24%, Canada/Latin America 7%.
I expect APD to grow in the low double digits or high single digits. Frankly this company isn't sexy, but sells products needed in a wide variety of industries and is shareholder friendly. To fuel growth, APD is targeting emerging markets in Asia and Russia. Air Products is seeing increasing margins and profits; its future looks bright. I would like to be an investor in APD, the only thing holding me back is the share price. I've come close to buying APD in the past, but at this point in time I'm waiting for a pullback. It has a high beta which could be an advantage in a declining market for investors looking to add shares at better valuations.
Compass Minerals Intl. (CMP)
Dividend Increases: 9 years (challenger)
Mkt Cap: 2.36B Mid Cap
Beta: .7
Compass Minerals produces salt and specialty fertilizers for U.S., U.K., and Canadian markets. About 48% of sales come from highway deicing compounds, 33% consumer and industrial salts, and 18% specialty fertilizers. U.S. demand for highway salts typically increases 1-2% per year with prices increasing 3-4% to boot. CMP expands existing mines and also uses an acquisition strategy to meet demand. Compass recently announced it has purchased rights to expand a salt mine in Ontario. In addition to salt mines, Compass uses solar and mechanical technology to extract minerals. CMP has a records management business in the U.K. making use of an old salt mine 500 ft underground to store documents for other businesses. It contributes 1% of sales.
This is a boring but necessary business. Having lived in snowy parts of the country, I recognize clear roads are essential to our way of life. In my opinion CMP is attractively priced right now, a rarity in this market. We've had a mild winter this year, which could explain why this particular stock is still attractive. I like the growth and dividend growth potential of this company coupled with its yield and low payout ratio. I'm definitely adding CMP to my watch list.
Only two companies made my list today. I am aware of other dividend champions in the materials sector such as RPM, NUE, and BMS. These are fairly popular among dividend growth investors, but did not pass my screens for one reason or another. Added CMP to my Watch List page.
Wednesday, February 29, 2012
February Recap
I purchased stock in two new companies this month, my portfolio now stands at 23 positions. The goal is to build up to 30, but it's not a priority. I'm still trying to conserve cash for better opportunities. This month was my highest dividend total ever; it's because AT&T and my MLPs paid out. All MLPs seem to pay the same month making income uneven if you own 'em. To me it doesn't matter.
New Purchases:
1) 24 shares H.J. Heinz (HNZ) providing $46.08 annual income. HNZ was purchased at $51.73/share + commission.
2) 19 Shares Norfolk Southern (NSC) providing $35.72 annual income. NSC was purchased at $67.93/share + commission.
Sales:
None
Dividends Received: $371.33
General Mills (GIS) - $21.52
AT&T (T) - $80.52
Raytheon (RTN) - $24.51
TC Pipeline (TCP) - $40.81
Exchange Income Corp (EIFZF) - $17.31
Procter & Gamble (PG) - $40.95
Abbott Laboratories (ABT) - $25.92
Boardwalk Pipeline (BWP) - $90.63
LTC Properties (LTC) - $29.16
Dividend Increases:
1) AVA: $.275 to $.29 per quarter. $6.24 annually
2) BWP: $.5275 to $.53 per quarter. $1.71 annually
3) KO: $.47 to $.51 per quarter. $6.24 annually
4) ABT: $.48 to $.51 per quarter. $6.48 annually
5) UNS: $.42 to $.43 per quarter. $4.24 annually
New Capital:
$1080 in February. $300 added to ROTH IRA, $780 added to taxable account. This is more than I normally contribute thanks to spending less than my budget and making some money on the side. The only unusual expenses were a pair of new work boots for $100 and $48 on my dress uniform. I expect to contribute around $800 next month.
Options/Bonus:
None
Well that's it for February. In March I plan to make 2 or 3 purchases. I now have all tax documents needed including K-1's from my MLPs. I will do my taxes soon.
New Purchases:
1) 24 shares H.J. Heinz (HNZ) providing $46.08 annual income. HNZ was purchased at $51.73/share + commission.
2) 19 Shares Norfolk Southern (NSC) providing $35.72 annual income. NSC was purchased at $67.93/share + commission.
Sales:
None
Dividends Received: $371.33
General Mills (GIS) - $21.52
AT&T (T) - $80.52
Raytheon (RTN) - $24.51
TC Pipeline (TCP) - $40.81
Exchange Income Corp (EIFZF) - $17.31
Procter & Gamble (PG) - $40.95
Abbott Laboratories (ABT) - $25.92
Boardwalk Pipeline (BWP) - $90.63
LTC Properties (LTC) - $29.16
Dividend Increases:
1) AVA: $.275 to $.29 per quarter. $6.24 annually
2) BWP: $.5275 to $.53 per quarter. $1.71 annually
3) KO: $.47 to $.51 per quarter. $6.24 annually
4) ABT: $.48 to $.51 per quarter. $6.48 annually
5) UNS: $.42 to $.43 per quarter. $4.24 annually
New Capital:
$1080 in February. $300 added to ROTH IRA, $780 added to taxable account. This is more than I normally contribute thanks to spending less than my budget and making some money on the side. The only unusual expenses were a pair of new work boots for $100 and $48 on my dress uniform. I expect to contribute around $800 next month.
Options/Bonus:
None
Well that's it for February. In March I plan to make 2 or 3 purchases. I now have all tax documents needed including K-1's from my MLPs. I will do my taxes soon.
Monday, February 27, 2012
Unisource Increases Dividend
Today Unisource Energy (UNS) raised its quarterly dividend 2.4%. With 13 years of consecutive increases UNS is part of the dividend contenders category of dividend growth stocks. Unisource is a electric & gas utility located in Arizona.
An increase of only 2.4% is disappointing because it doesn't keep up with inflation. I've been worried UNS was going to give investors a small increase this year. I made a comment about this yesterday before the news was released.
The past is the past, looking forward I want to be a shareholder in this company. UNS has been stuck in a rate freeze, but it can't last forever. They will be able to file for new rates in July. On a positive note, its gas business has performed well. I now have a 4.81% YOC with this position. I made an initial purchase February 2011 and averaged down last November.
An increase of only 2.4% is disappointing because it doesn't keep up with inflation. I've been worried UNS was going to give investors a small increase this year. I made a comment about this yesterday before the news was released.
The past is the past, looking forward I want to be a shareholder in this company. UNS has been stuck in a rate freeze, but it can't last forever. They will be able to file for new rates in July. On a positive note, its gas business has performed well. I now have a 4.81% YOC with this position. I made an initial purchase February 2011 and averaged down last November.
Saturday, February 25, 2012
5 Utilities Worth a Look
In 2012 the utility sector has lagged other sectors and the market as a whole. This is a welcome change from last year. I decided to take a look at a small list of companies to prepare myself for future purchases. I like the utilities sector because they sell a product every person and business needs, it's easy to find a nice yield, and they have localized monopolies. I place emphasis on the region of the country they are located to hopefully capitalize on population growth. It would be foolish to buy an electric company in Detroit, for example, where people are leaving en masse. More people means more electricity use.
At first I wanted to discover attractive water utilities since I don't own any. Unfortunately I wasn't able to find any water utes worth my hard earned money. It seems they either have low yields, high payout ratios, or low dividend growth rates. So I'm left with electric and gas utilities, nothing wrong with that. With the utility sector I expect to get a yield of at least 4%, but have lower expectations of growth and payout ratios.
Alliant Energy (LNT)
Industry: Electric & Gas Utilities
Region: Wisconsin, Minnesota, Iowa
Pop. Growth: WI:0.44%, MN: 0.77%, IA: 0.52% (USA: 0.91%)
P/E: 15.92
P/B: 1.62
Long Term Growth (est.): 4.75%
Total Debt/Equity: 92.53%
Yield: 4.16%
Payout Ratio: 62.27%
Div. Growth Rate (5yr): 7.22%
Streak: 9 years
Alliant Energy is an electric and gas utility based in the Midwest. About 83% of revenues comes from electricity; 15% from natural gas. Roughly 53% of power is generated with coal, only 2% gas, 2% wind, and 43% purchased from other companies. I like LNT for its valuation and dividend metrics. It has a nice yield with decent growth potential. Compared to other utilities I researched it has lower debt. LNT seems to rely heavily on coal to produce power. Over 40% is bought from other companies. It does not make use of hydro at all, and only 2% comes from gas which is a cleaner option. Population growth in the areas it serves is lower than the national average. Overall LNT is a decent option, I'm not enthusiastic about its generation methods and the area it serves. I would consider picking up shares at a price of $40.
Avista Corporation (AVA)
Industry: Electric & Gas Utilities
Region: Washington, Oregon, Idaho
Pop. Growth: WA: 1.57%, OR: 1.06%, ID: 1.11% (USA: 0.91%)
P/E: 14.92
P/B: 1.25
Long Term Growth (est.): N/A (Fidelity says 5.68% next year)
Total Debt/Equity: 111.36%
Yield: 4.61%
Payout Ratio: 63.58%
Div. Growth Rate (5yr): 14.87%
Streak: 9 years
I own shares of Avista, and have been pleased so far. As far as utilities go this one is solid. It has favorable valuation and dividend metrics. I like its yield and dividend growth potential. I do not think it will live up to the 14.87% dividend growth listed in my analysis (I took this off Fidelity.com), but I would be thrilled to receive 5-6% increases. The area AVA serves is seeing population growth far greater than the national average which could mean more customers in the future. About 2/3 revenue is from electricity; 1/3 natural gas. AVA relies heavily on environmental friendly power generation sources. 50% of power comes hydro, 35% natural gas (a lot cleaner than coal), 10% coal, 2% biomass, and 2% wind. I have read about concerns that global warming might impact hydroelectric power generation, but have seen no definitive proof. I would be interested in adding to my AVA position around $24.50.
Emera, Inc. (EMRAF / EMA on TSX)
Industry: Electric & Gas Utilities
Region: Nova Scotia, Maine, Massachusetts, Grand Bahama, St. Lucia
Pop. Growth: NS: 0.9%, ME: -0.01%, MA: 0.61%,G.B.: 0.60% (USA: 0.91%)
P/E: 16.90
P/B: 2.57
Long Term Growth (est.): 6.55%
Total Debt/Equity: 222.17%
Yield: 4.04%
Payout Ratio: 67.84%
Div. Growth Rate (5yr): 8.35%
Streak: 5 years
Emera is the most interesting utility that made my list today. I spent time researching Canadian utilities and this is the best one I could find. First of all this corporation is Canadian, which means withholding taxes will be incurred on the dividend. You can avoid withholding taxes by putting it in an IRA or ROTH IRA. There is a weird tax rule which allows this. I own a different Canadian Corp in my ROTH, it is true. The dividends are paid in Canadian dollars and will be converted to USD for American investors. With Emera you get a lot of diversification. It does business in Canada, USA, and Caribbean countries. This company has been paying and increasing dividends since 1992 with annual dividend increases the past 5 years. There have been dividend freezes from time to time, but no reductions. With utilities I do not expect endless annual increases. Emera generates 57% of power from coal, 21% gas, 11% hydro, 6% wind, and 5% imported. It is trending away from coal. I read the company is shooting for a 70-75% payout ratio, I expect to see healthy dividend increases down the road. I will be spending more time researching this company, but currently have a $31 target buy price in mind.
Southern Company (SO)
Industry: Electric Utilities / Wireless Communications
Region: Georgia, Alabama, Florida, Mississippi
Pop. Growth: GA: 1.32%, AL: 0.48%, FL: 1.36%, MS: 0.38% (USA: 0.91%)
P/E: 17.47
P/B: 2.23
Long Term Growth (est.): 5.85%
Total Debt/Equity: 210.62%
Yield: 4.24%
Payout Ratio: 72.86%
Div. Growth Rate (5yr): 4.05%
Streak: 10 years
The Southern Company is one of the largest utilities with a market cap of $36.8B. It is a huge regulated electric utility operating in the southern region of the U.S. (as if the name didn't give this away HAHA). It also generates power sold to other utilities. SO is currently building the first new nuclear power plant on U.S. soil in 30 years. I am in favor of nuclear energy, to me this is exciting. The reactors are being built in Georgia as an addition to an existing nuclear facility. SO has a lot experience with nuclear energy, I trust them with the responsibility. SO sources of generation: 58% coal, 25% oil and gas, 15% nuclear, 2% hydro. What I like about The Southern Company is that they are located in a fast growing region of the U.S. The south is seeing a population boom. I like the dividend yield and the fact the company is a dividend contender. While SO doesn't sell natural gas, it has diversified into other businesses such as fiber optic solutions and a cell phone service. It seems to me the valuations and payout ratio are kind of high. I also worry about hurricanes. The last thing an investor needs is another hurricane Katrina. I believe SO is a quality company; I have a buy target of $41.
Westar Energy (WR)
Industry: Electric Utilities
Region: Kansas
Pop. Growth: KS: 0.64% (USA is 0.91%)
P/E: 15.22
P/B: 1.30
Long Term Growth (est.): 4.22%
Total Debt/Equity: 127.51%
Yield: 4.57%
Payout Ratio: 68.28%
Div. Growth Rate (5yr): 5.06%
Streak: 7 years
Westar Energy is the largest electric utility in Kansas. About 77% of electricity is generated by coal, 13% nuclear, 8% gas, and 2% wind. The company is spending a lot of capital on projects to reduce emissions of their coal plants. WR offers an attractive yield with dividends increasing faster than inflation. Nothing stood out when I researched the company, but it seems to be a good candidate. I will spend more time looking at WR, I would consider picking up shares around $26.75.
I added these companies to my watch list with the exception of AVA (I already own it).
At first I wanted to discover attractive water utilities since I don't own any. Unfortunately I wasn't able to find any water utes worth my hard earned money. It seems they either have low yields, high payout ratios, or low dividend growth rates. So I'm left with electric and gas utilities, nothing wrong with that. With the utility sector I expect to get a yield of at least 4%, but have lower expectations of growth and payout ratios.
Alliant Energy (LNT)
Industry: Electric & Gas Utilities
Region: Wisconsin, Minnesota, Iowa
Pop. Growth: WI:0.44%, MN: 0.77%, IA: 0.52% (USA: 0.91%)
P/E: 15.92
P/B: 1.62
Long Term Growth (est.): 4.75%
Total Debt/Equity: 92.53%
Yield: 4.16%
Payout Ratio: 62.27%
Div. Growth Rate (5yr): 7.22%
Streak: 9 years
Alliant Energy is an electric and gas utility based in the Midwest. About 83% of revenues comes from electricity; 15% from natural gas. Roughly 53% of power is generated with coal, only 2% gas, 2% wind, and 43% purchased from other companies. I like LNT for its valuation and dividend metrics. It has a nice yield with decent growth potential. Compared to other utilities I researched it has lower debt. LNT seems to rely heavily on coal to produce power. Over 40% is bought from other companies. It does not make use of hydro at all, and only 2% comes from gas which is a cleaner option. Population growth in the areas it serves is lower than the national average. Overall LNT is a decent option, I'm not enthusiastic about its generation methods and the area it serves. I would consider picking up shares at a price of $40.
Avista Corporation (AVA)
Industry: Electric & Gas Utilities
Region: Washington, Oregon, Idaho
Pop. Growth: WA: 1.57%, OR: 1.06%, ID: 1.11% (USA: 0.91%)
P/E: 14.92
P/B: 1.25
Long Term Growth (est.): N/A (Fidelity says 5.68% next year)
Total Debt/Equity: 111.36%
Yield: 4.61%
Payout Ratio: 63.58%
Div. Growth Rate (5yr): 14.87%
Streak: 9 years
I own shares of Avista, and have been pleased so far. As far as utilities go this one is solid. It has favorable valuation and dividend metrics. I like its yield and dividend growth potential. I do not think it will live up to the 14.87% dividend growth listed in my analysis (I took this off Fidelity.com), but I would be thrilled to receive 5-6% increases. The area AVA serves is seeing population growth far greater than the national average which could mean more customers in the future. About 2/3 revenue is from electricity; 1/3 natural gas. AVA relies heavily on environmental friendly power generation sources. 50% of power comes hydro, 35% natural gas (a lot cleaner than coal), 10% coal, 2% biomass, and 2% wind. I have read about concerns that global warming might impact hydroelectric power generation, but have seen no definitive proof. I would be interested in adding to my AVA position around $24.50.
Emera, Inc. (EMRAF / EMA on TSX)
Industry: Electric & Gas Utilities
Region: Nova Scotia, Maine, Massachusetts, Grand Bahama, St. Lucia
Pop. Growth: NS: 0.9%, ME: -0.01%, MA: 0.61%,G.B.: 0.60% (USA: 0.91%)
P/E: 16.90
P/B: 2.57
Long Term Growth (est.): 6.55%
Total Debt/Equity: 222.17%
Yield: 4.04%
Payout Ratio: 67.84%
Div. Growth Rate (5yr): 8.35%
Streak: 5 years
Emera is the most interesting utility that made my list today. I spent time researching Canadian utilities and this is the best one I could find. First of all this corporation is Canadian, which means withholding taxes will be incurred on the dividend. You can avoid withholding taxes by putting it in an IRA or ROTH IRA. There is a weird tax rule which allows this. I own a different Canadian Corp in my ROTH, it is true. The dividends are paid in Canadian dollars and will be converted to USD for American investors. With Emera you get a lot of diversification. It does business in Canada, USA, and Caribbean countries. This company has been paying and increasing dividends since 1992 with annual dividend increases the past 5 years. There have been dividend freezes from time to time, but no reductions. With utilities I do not expect endless annual increases. Emera generates 57% of power from coal, 21% gas, 11% hydro, 6% wind, and 5% imported. It is trending away from coal. I read the company is shooting for a 70-75% payout ratio, I expect to see healthy dividend increases down the road. I will be spending more time researching this company, but currently have a $31 target buy price in mind.
Southern Company (SO)
Industry: Electric Utilities / Wireless Communications
Region: Georgia, Alabama, Florida, Mississippi
Pop. Growth: GA: 1.32%, AL: 0.48%, FL: 1.36%, MS: 0.38% (USA: 0.91%)
P/E: 17.47
P/B: 2.23
Long Term Growth (est.): 5.85%
Total Debt/Equity: 210.62%
Yield: 4.24%
Payout Ratio: 72.86%
Div. Growth Rate (5yr): 4.05%
Streak: 10 years
The Southern Company is one of the largest utilities with a market cap of $36.8B. It is a huge regulated electric utility operating in the southern region of the U.S. (as if the name didn't give this away HAHA). It also generates power sold to other utilities. SO is currently building the first new nuclear power plant on U.S. soil in 30 years. I am in favor of nuclear energy, to me this is exciting. The reactors are being built in Georgia as an addition to an existing nuclear facility. SO has a lot experience with nuclear energy, I trust them with the responsibility. SO sources of generation: 58% coal, 25% oil and gas, 15% nuclear, 2% hydro. What I like about The Southern Company is that they are located in a fast growing region of the U.S. The south is seeing a population boom. I like the dividend yield and the fact the company is a dividend contender. While SO doesn't sell natural gas, it has diversified into other businesses such as fiber optic solutions and a cell phone service. It seems to me the valuations and payout ratio are kind of high. I also worry about hurricanes. The last thing an investor needs is another hurricane Katrina. I believe SO is a quality company; I have a buy target of $41.
Westar Energy (WR)
Industry: Electric Utilities
Region: Kansas
Pop. Growth: KS: 0.64% (USA is 0.91%)
P/E: 15.22
P/B: 1.30
Long Term Growth (est.): 4.22%
Total Debt/Equity: 127.51%
Yield: 4.57%
Payout Ratio: 68.28%
Div. Growth Rate (5yr): 5.06%
Streak: 7 years
Westar Energy is the largest electric utility in Kansas. About 77% of electricity is generated by coal, 13% nuclear, 8% gas, and 2% wind. The company is spending a lot of capital on projects to reduce emissions of their coal plants. WR offers an attractive yield with dividends increasing faster than inflation. Nothing stood out when I researched the company, but it seems to be a good candidate. I will spend more time looking at WR, I would consider picking up shares around $26.75.
I added these companies to my watch list with the exception of AVA (I already own it).
Friday, February 24, 2012
Thoughts
This was a boring week for stocks. The market was flat, with the DOW managing to break 13,000 a few times. Good candidates for new money are far and few between. At this time GIS and SNH are the most appealing of the stocks I regularly monitor. I plan to make 2 or 3 purchases next month, it's always good to look ahead. If I can't find any good buys I might add to my KO or JNJ positions, or maybe add another utility. I will be researching the utility sector this weekend since it has seen a welcomed drop recently. In fact utilities have been the worst the performing sector in 2012. There are a lot of good utility companies it can be difficult to narrow the choices down.
I've also considered selling ITW, as it has seen a 30% price run up since I bought it only three months ago. At $56 ITW is only paying 2.57%, which is not great. The only problem is that if I sell it, then what? Not many stocks are grabbing my attention, and the last thing I need is more cash. I should be getting a bonus check the end of April or early May, which is why I'm trying to slowly use up my cash position.
In non-financial news I will be up for reenlistment soon. I've talked to my career counselor about getting an assignment to Germany or Korea. Germany or anywhere in Europe is my top choice, but is hard to get. It would be an opportunity of lifetime to be able to travel all over Europe for a few years. I'd be happy with Korea too (which is easy to get). One of the reasons I joined the Army was to see the world, I'm going to do just that. The bad news is that budget cuts ended bonuses in my field and my dream of going to OCS to become a commissioned officer is not going to happen. They changed age limits to become an officer, yet another way for the Army to reduce its size. The Army is really cracking down right now, they're looking for ways to get rid of people. I have a friend in the Air Force, it's the same story.
I've also considered selling ITW, as it has seen a 30% price run up since I bought it only three months ago. At $56 ITW is only paying 2.57%, which is not great. The only problem is that if I sell it, then what? Not many stocks are grabbing my attention, and the last thing I need is more cash. I should be getting a bonus check the end of April or early May, which is why I'm trying to slowly use up my cash position.
In non-financial news I will be up for reenlistment soon. I've talked to my career counselor about getting an assignment to Germany or Korea. Germany or anywhere in Europe is my top choice, but is hard to get. It would be an opportunity of lifetime to be able to travel all over Europe for a few years. I'd be happy with Korea too (which is easy to get). One of the reasons I joined the Army was to see the world, I'm going to do just that. The bad news is that budget cuts ended bonuses in my field and my dream of going to OCS to become a commissioned officer is not going to happen. They changed age limits to become an officer, yet another way for the Army to reduce its size. The Army is really cracking down right now, they're looking for ways to get rid of people. I have a friend in the Air Force, it's the same story.
Saturday, February 18, 2012
Abbott Increases Dividend
Abbott Laboratories (ABT) announced it has raised it's quarterly dividend 6.3% to $.51 from $.48 per share. This increase is the 40th straight year shareholders have received a raise, placing it in the prestigious dividend champions category of dividend growth stocks. 6.3% is a mediocre increase for ABT in my opinion, but nothing to sneeze at. Any increase at all is welcome, it is a sign the company aligns itself with shareholders' interests.
ABT is planning a spinoff in 2012. It plans to seperate its pharmaceutical business from the rest of the company. I currently am holding my ABT position, but am not looking to add additional shares until the the spinoff is complete. I think I will hold both the new stocks, but will only add to the parent company. I'm not into pure drug companies.
With the new increase, ABT pays an annual dividend of $2.04 which represents a yield of 3.62% based off the current price. Honestly this is a pretty good entry yield, but like I said I'm going to wait until the direction of the company becomes clearer. The payout ratio is creeping up, it is now 67.8%; the p/e is also pretty high at 18.7. More reasons to place my money elsewhere. I was lucky enough to pick up shares during the volatility madness of August 2011. At the time, equities were getting hammered and huge market swings were a daily occurence. I saw an opportunity and managed to get a yield over 4% at the time. I believe in dividend growth investing, even during times of extreme distress. I don't know if that makes me smart or it's just dumb luck. So far so good, either way I'll take it.
Cheers to you ABT. 40 straight years is an impressive feat.
ABT is planning a spinoff in 2012. It plans to seperate its pharmaceutical business from the rest of the company. I currently am holding my ABT position, but am not looking to add additional shares until the the spinoff is complete. I think I will hold both the new stocks, but will only add to the parent company. I'm not into pure drug companies.
With the new increase, ABT pays an annual dividend of $2.04 which represents a yield of 3.62% based off the current price. Honestly this is a pretty good entry yield, but like I said I'm going to wait until the direction of the company becomes clearer. The payout ratio is creeping up, it is now 67.8%; the p/e is also pretty high at 18.7. More reasons to place my money elsewhere. I was lucky enough to pick up shares during the volatility madness of August 2011. At the time, equities were getting hammered and huge market swings were a daily occurence. I saw an opportunity and managed to get a yield over 4% at the time. I believe in dividend growth investing, even during times of extreme distress. I don't know if that makes me smart or it's just dumb luck. So far so good, either way I'll take it.
Cheers to you ABT. 40 straight years is an impressive feat.
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