This week's activities in Abba's Aces included lots of buying of good yielding dividend stocks. There seems to be a "Great Rotation" taking place out of dividend stocks and into other assets. As you can see from the Utilities SPDR ETF (XLU), since 01May13 it has dropped 8.34% while the SPDR S&P500 ETF (SPY) is up 3.2%. Other prime examples include Verizon (VZ) down 6.8%, Consolidated Edison (ED) down 9.76%, and Hasbro (HAS) down 5%.
I took this opportunity to be greedy when others were fearful, and picked up income paying stocks at what I believed to be good prices such as Travelers Companies (TRV), PepsiCo (PEP), and Waste Management (WM). Though these stocks aren't really high yielders, they were "the babies that were thrown out with the bath water". Let's take a look at each one individually really quick and find out if we can pick up some more.
While the S&P500 was up 0.78% for the week of 03Jun13, Travelers was down 0.33%. This is not bad for Travelers considering the ex-date for the dividend was during this week which accounted for 0.61% of the loss, accounting for the dividend, the stock would be up 0.28%. Travelers is engaged in the property and casualty insurance industry, where it is one of the top players. I always believe that insurance companies are great to invest in because if you own a home or car, you sure know that you want to protect your assets and buy insurance to do just that. You know as well as I do that you keep paying that monthly bill to your insurance company and nothing ever happens to your property, you can almost go years without ever having to use your insurance even, and that whole time the insurance company is just collecting your money and making money off of it. As we can see from the chart below that the relative strength index (RSI) started to spike upwards in dramatic fashion and the moving average convergence-divergence (MACD) graph also started to spike upwards with the divergence decreasing. Both these graphs indicate bullish patterns. If you believe in the housing and automobile recovery stories going on, then you have to believe in an insurance company such as Travelers.
While the S&P500 was up only 0.78% for the week of 03Jun13, Pepsi was up 2.14%. This is pretty good for Pepsi considering the ex-date for the dividend was during this week which accounted for 0.7%, accounting for the dividend, the stock would be up 2.84%. During the week Pepsi made an additional jump into the snacks business by partnering up with the German company Muller and opened a new yogurt plant which will produce yogurt to compete with the kinds of Chobani, Danone, and General Mills' (GIS) Yoplait brands.
That wasn't the only news for Pepsi on the week; there was speculation on Thursday that the company was in talks to buy Sodastream (SODA). Pepsi CEO Indra Nooyi claimed that it was the first time she was hearing about that news and that it was not true at all. As we can see from the chart below, the relative strength index (RSI) started to spike upwards in dramatic fashion and the moving average convergence-divergence (MACD) graph also started to spike upwards with the divergence decreasing. Both these graphs indicate bullish patterns. It is quite safe to say that every day there is at least one Pepsi product getting consumed for every person here in The States, and as China's population continues to get wealthier, more snacks they will be consuming will more than likely be Pepsi snacks. With that said I think Pepsi is a great company to invest in and will continue doing so.
While the S&P500 was up 0.78% for the week of 03Jun13, Waste Management was down 3.48%. This is not good for Waste Management, even including the ex-date for the dividend that was during this week which accounted for 0.88% of the loss, accounting for the dividend, the stock would still be down 2.6%. The stock was down 5% alone on Friday morning (07Jun13) after the open but then rebounded very nicely to close only down 0.3%.
I scoured the internet the entire morning on Friday but could not anything on why the stock may have been down that much. I initially thought the entire market might follow with it because the jobs report number, but the entire market actually escalated upwards and brought Waste Management with it. As we can see from the chart below, the relative strength index (RSI) is still dropping and the moving average convergence-divergence (MACD) graph also is dropping with the divergence increasing. Both these graphs indicate a bearish pattern, but may be bottoming out shortly if I see the divergence bars on the MACD chart getting smaller. So long as nothing happened that could harm earnings on Friday morning, I continue to believe this stock can provide some protection in your portfolio with its dividend.
I believe the beating on dividend paying stocks has come to a stop for now. I will continue to use the Warren Buffett method of picking stocks: picking up those that are common to everyday living with good dividend yields. Both Travelers and Pepsi exhibit these qualities to me, and I will continue to buy into them, but I will hold off on buying anymore of Waste Management for now.