Discussion: My current watch list

 

This is my watch list as of February 2018.  Additions and deletions can and will occur.

3M Company (MMM)

Abbott Labs (ABT)

AFLAC (AFL)

Air Products (APD)

Albemarle (ALB)

American Express (AXP)

American States Water (AWR)

Analog Devices (ADI)

Anheuser-Busch InBev (BUD)

Apple (AAPL)

Aqua America (WTR)

Archer-Daniels Midland (ADM)

AT&T (T)

Automatic Data Processing (ADP)

Badger Meter (BMI)

Baxter International (BAX)

Becton, Dickinson (BDX)

Bemis Co (BMS)

BHP Billiton ADR (BHP)

Bio-Techne Corp (TECH)

Boeing (BA)

Brown-Forman ‘B’ (BF-B)

C H Robinson (CHRW)

Cardinal Health (CAH)

Caterpillar (CAT)

Chevron (CVX)

Church & Dwight (CHD)

Cintas (CTAS)

Cisco Systems (CSCO)

Clorox (CLX)

Coca-Cola (KO)

Colgate-Palmolive (CL)

Consolidated Edison (ED)

Cummins (CMI)

CVS Health (CVS)

Deere & Co (DE)

Dominion Energy (D)

Donaldson Co (DCI)

Dover Corp (DOV)

Ecolab (ECL)

Emerson Electric (EMR)

Enbridge (ENB)

Estee Lauder (EL)

Exxon Mobil (XOM)

General Dynamics (GD)

General Mills (GIS)

Genuine Parts Co (GPC)

Graco (GGG)

Hasbro (HAS)

Hershey Co (HSY)

Home Depot (HD)

Honeywell (HON)

Hormel Foods (HRL)

Illinois Tool Works (ITW)

Intel Corp (INTC)

International Business Machines (IBM)

International Paper (IP)

J M Smucker (SJM)

J P Morgan Chase (JPM)

Johnson & Johnson (JNJ)

Kellogg (K)

Kimberly-Clark (KMB)

Kraft Heinz (KHC)

Kroger Co (KR)

Lockheed Martin (LMT)

McCormick & Co (MKC)

McDonald’s (MCD)

Medtronic PLC (MDT)

Microsoft (MSFT)

NextEra Energy (NEE)

Norfolk Southern (NSC)

Northrop Grumman (NOC)

Northwest Natural Gas (NWN)

Occidental Petroleum (OXY)

Oracle Corp (ORCL)

Parker-Hannifin (PH)

Pentair PLC (PNR)

PepsiCo (PEP)

PPG Industries (PPG)

Praxair (PX)

Procter & Gamble (PG)

Public Storage (PSA)

QUALCOMM (QCOM)

Raytheon (RTN)

Realty Income (O)

Schlumberger NV (SLB)

Sherwin-Williams (SHW)

Southern Co (SO)

Stanley Black & Decker (SWK)

Sysco Corp (SYY)

Target (TGT)

Texas Instruments (TXN)

Tyson Foods (TSN)

UGI Corp (UGI)

Unilever ADR (UL)

Union Pacific (UNP)

United Parcel Service (UPS)

United Technologies (UTX)

V F Corp (VFC)

Verizon (VZ)

W W Grainger (GWW)

Walgreens Boots Alliance (WBA)

WalMart (WMT)

Wells Fargo (WFC)

WGL Holdings (WGL)

Walt Disney Co (DIS)

Yum Brands (YUM)

It’s a diversified list of primarily “no-brainer” companies because it doesn’t have to be complicated to be successful.  In fact, it’s better if it’s not.  Many of these companies have repeat-use, necessity type products or services that are purchased, used, and purchased again over and over and over.  And, have been providing these products and/or services for years and years.  Think Coca-Cola beverages, Procter & Gamble personal products, Air Products industrial gases, and Johnson & Johnson consumer health products.

I have no intention of trying to follow the thousands of companies that pay a dividend.  And more importantly, there’s really no need to.  I just need a manageable list that includes enough companies moving independently of each other that gives me a reasonable chance of finding an attractive investment month after  month.

The list is light on financials and retailers because companies in these industries seem to have more difficulty surviving long-term.  Many industries aren’t represented at all for the same reason.  I’m only interested in companies that I feel like I don’t have to worry about.  And, within the list, different companies have different purposes.  Some are favored for reinvesting, some for dividend collecting, some for trading, and some for all three.

I’ve developed specific criteria for each of these companies that trigger an investment decision.  Some are applied globally throughout the list and some are applied only to specific stocks.  I’ve learned through experience that the “one size fits all” approach is not the best approach.  Because each company’s stock trades in what is essentially its own “market”, each company has its own “personality” leading to its own set of criteria or hurdles.  This approach may require a little more effort but enhanced returns are the reward.

And as always, this list is mine.  It doesn’t have to be yours.  Do with it what you will.  At the very worst it’s a good place to start.

Creating a Dividend Collection Business

 

 

 

Discussion: Creating a watch list

Creating, maintaining, and frequently checking a watch list of companies in which you would like to invest is an essential part of the dividend collecting process.  It’s vital to know which companies you’re interested in before they move into an attractive price range for investing so that when they do you can act.  I monitor my companies throughout the month and make my investing decisions at the end of each month.  This method leads to fewer decisions and less trading, which for me is always a good thing.

Step One is to identify those companies in which you would like to invest.  For me, they must pay a dividend; have a dominant position in its industry or a dominant brand; and have all the hallmarks of being in business for many years to come.  Your own experience with brands/companies as well as the S&P 500 is a good place to look for ideas.  Most of my targets are large, well-established, multi-national companies.  Amgen, Boeing, Caterpillar, General Dynamics, Pepsi, and Procter & Gamble are a just few examples.  Currently there are around 100 companies on my list which is fairly typical.

Step Two is to set up the watch list so that it is easily available to monitor.  I use Seeking Alpha for my watch list.  It is a free site and you can register with your email address.  Then just follow the prompts to create a portfolio (your watch list), save it, and you’re in business.  After logging in to the site, just click on portfolio in the menu bar and your list will appear with current updating prices.  If you enable email alerts, Seeking Alpha will notify you of any news about your companies.  You can also choose which companies on which to receive alerts in the settings menu.   Yahoo Finance is another option for setting up a watch list.  Both options also have mobile apps.

Step Three is simply to check on your list frequently so that you stay up-to-date with prices.  It’s also prudent to create an abbreviated list of those companies that are at or near investing range.  Being prepared to act before hand is much better than trying to make decisions on the fly at the last minute.

So that’s it.  Nothing difficult.  Just requires a little thought/research, pre-planning, and consistent monitoring.  Being well organized before the time to make your decisions is the key.

Here’s my current watch list.

Creating a Dividend Collection Business

Discussion: 3 Paths

There are three paths I follow with dividend stocks.  Reinvesting, collecting, and trading.  I have strict guidelines for each.  I never ignore those guidelines.  And, I have three separate accounts for these paths so that I can easily and accurately judge the progress of each.

Because I’m in my late 50s I have a minimum of a 3% dividend yield for those stocks I choose to invest in for the reinvesting track.  The simple reason is I don’t have many years until retirement so I feel like I need to start with a higher dividend yield to compensate for the lack of years going forward.  If you’re considerably younger and have time on your side, there’s no reason to set such a high hurdle for the starting yield unless that’s just your preference.  I concentrate on those stocks that meet my 3% minimum and that are either at a low monthly close for the last year or more and are less than 30% above the 60 month (5 year) moving average, or meet the 3% minimum and are below the 60 month moving average.  I plan to hold these stocks forever.

For the collecting track, I invest in those stocks that have at least a 1% dividend yield, are less than 30% above the 60 month moving average, and are at a low monthly close for the last year or more.  In this path I’ll hold a stock and collect the dividends until the stock price doubles at which point I’ll sell half of the position to reclaim the original investment and then hold the remaining half as a permanent value holding.  This can be used as a gradual method to create an emergency fund if you collect the dividends and don’t reuse them for investing.  This path allows me to invest in attractive companies that don’t meet the 3% minimum of the reinvesting path.

I allocate a small portion of my capital to the occasional purchase of a dividend stock that has had a significant correction from it’s 5 year high close and look to sell for a small profit (15% or more) based on a monthly target scale that increase over time.  These opportunities are fairly infrequent, and my goal is to sell these stocks within no more than 1 year.  It’s very much a hit-and-run strategy.  I only employ a small percentage of my capital per each trade, and I don’t use stops.  Going in I’m prepared to hold these trades for as long as it takes to meet the target which has a maximum of 50%, even if takes years.  I choose to view each trade in this path individually and not collectively as an averaging process.  The basic idea for this path is to continue to reinvest the profits in the next trade as a means of compounding gains over and over again.  My ultimate goal here is to create multiple “income” streams so that one or more are ongoing at all times.

I strictly adhere to “the #1 rule is don’t lose money” and “the #2 rule is never forget rule #1” mantra for all my investment paths.  And, for most people I recommend the reinvesting and collecting paths over the trading path.  They are the most forgiving, the easiest to manage, and make the best use of the “time is on our side” function of investing.

But, I find when discussing investing with people they almost always gravitate to the trading path.  And I get it.  It’s more exciting.  But because trading relies totally on random short term price movements, it’s also very much like gambling.  While my trading path is based on very high probability setups, there is absolutely no guarantee that each setup will perform in a timely manner.  The market does what the market does, especially in the short term.  So you absolutely have to understand that, acknowledge that, and prepared for that when trading.  In other words, when trading I expect the worst and accept what happens when it happens.   You can’t control the market so it’s useless to get upset if it doesn’t do exactly what you thought it would.  You just have to accept what it gives you and move on.  Only using dividend stocks in trading is my way of hedging against an uncertain outcome because if I’m forced to hang on to a trade for many months, even years, I’m collecting dividends while I do.

If I were forced to choose only one path, it would be the reinvesting track.  It is an autopilot process.  It makes the best use of time.  And, it’s self-correcting in many ways.  It is without a doubt the best way to create a substantial dividend stream over time, which is my primary purpose for this entire process.

Creating a Dividend Collection Business