In this article I will be discussing some companies and funds on my watch list as promised. There are many great companies I’d like to own, but I find it hard to see much value in the current market situation. I think these companies/funds are nevertheless quite attractive:
Dividend growth stocks:
The Target Corporation (TGT) is an American retail company. There have been a lot of problems lately with data breaches and CEO resigning. This has caused the price to drop dramatically after mid 2013. I think these problems are rather temporary and this is an overreaction. After all we are talking about a Dividend Aristocrat with a dividend growth streak of 42 years. The current dividend yields 3.5 % with a payout ratio of 70 % (with EPS of 2013). However I believe that the EPS will be better and the payout ratio will be more like 60 %. The dividend yield has yielded 1.9 % on average during last five years so there has been a huge change in valuation lately. This company is high on my list.
Exxon Mobil (XOM) is an oil and gas company and the third largest company in the world. This company has been raising dividend every year since 1983 and currently yields 2.7 %. I usually would like to get an initial yield above 3 %, but I’m willing to make an exception if everything else looks good. The growth rate of the dividend has been good and the payout ratio (TTM) is very low at 34 %. I think these things compensate the low yield. The PE ratio is currently at 13.9, which is slightly above the 5-year average, but still not bad. This company is high on my list.
Procter & Gamble (PG) is an American multinational consumer goods company. I’m sure we can all agree that PG is a great company, so the only question is the valuation. Currently it has a PE-ratio of 21.1, which is quite a bit over the 5-year average of 17.3. The dividend yields 3.2 %, which I think is good, considering current market situation and quality of the company. I can count on PG to raise its dividend year after year. The valuation of PG is currently so much above the historical valuation, so this stock is not on top of my list, but I still see it as a good candidate.
Amsterdam Commodities N.V. (Acomo) is a Dutch company operating in the field of agricultural products. This company was brought to my attention by Robin at A Dividend Dream!. The company offers a 4.5 % dividend yield with a sustainable payout ratio of approximately 50 %. The stock isn’t valued too highly, having a PE of 14.6. Stable industry, good yield and reasonable valuation sounds good.
Vanguard FTSE Europe ETF (VGK) tracks the performance of FTSE Developed Europe Index. This is completely European ETF, so there isn’t that much geographical diversification here. However, many of the companies on the list are multinational. If you take a look at the ten largest holdings you find some good dividend growth stocks like Royal Dutch Shell and Nestle there. The fund uses full replication, which means that they actually invest in all of the companies. Here you can see the important numbers of the fund:
Global X SuperDividend ETF (SDIV) tracks the performance of companies that rank among the highest dividend yielding equity securities in the world. There are certain dividend stability filters, which should provide some stability to the high dividend yield. As the fund’s name says, this is a global fund. The US is the largest area and accounts for about 25 %. Here you can see the important numbers of the fund:
A wild card:
Seadrill (SDRL) is an offshore drilling company founded in 2005 by ex-Norwegian billionaire John Fredriksen. He still has a major ownership in the company and he makes sure the owners are rewarded with dividends. The dividend currently yields 10 % with a payout ratio of 37 %. The PE ratio is ridiculously low at 3.6, which means that investors see huge risk in this stock. This is a really volatile stock, but offers great possibilities as well.
Side note to Finnish readers: Dividends from this company are taxed as earned income.
I haven’t been yet able to open the account to the new brokerage so I haven’t yet pulled the trigger on any of these. I should get my account opened soon. I’ll let you know what I decide to buy; currently I’m leaning towards a mix of TGT, XOM, SDIV and SDRL. I’ll update my portfolio after the purchases, there has already been some changes.
Do you see any value in the current market situation?
Full disclosure: None