A little more than three years ago, I left a job that provided matching 401(k) contributions. I had worked there for some time, so I had a decent amount of money to roll over into a new IRA account. Around the same time, my wife came into an unexpected inheritance that provided her the opportunity to open her own Roth IRA. I manage both accounts, so I've spent countless hours running screens and performing other research to figure out how to invest our money for our eventual retirement.
I don't have any particular method of investing; but I tend to favor stocks that pay dividends, allowing some room for companies that are purely growth-oriented. As a young investor, I do not focus on defensive stocks with high yields (although I do hold a couple of those), but on stocks that show potential for dividend and earnings growth now and for years into the future. I do monitor my stocks daily, but don't pay much attention to short-term price fluctuations, since my goal is investing for the long term, not trading.
In this article, I will discuss each of my holdings one-by-one, giving a brief explanation of how I believe each fits into my portfolio. It is my hope that providing this starting point will both enable and motivate my fellow young investors to conduct their own research to decide which companies will help them retire comfortably.
I will list my holdings alphabetically by ticker symbol. Stats and company profile information is from Morningstar and Yahoo Finance.
ConocoPhillips (NYSE:COP) explores for, develops, and produces crude oil, bitumen, natural gas, liquefied natural gas, and natural gas liquids worldwide. It is the largest independent pure-play exploration and production company in the world. I wanted to invest in the ongoing North American energy boom, and COP provides me with that opportunity with its assets in Canadian oil sands, as well as the Permian, Bakken and Eagle Ford formations.
COP is cheap, currently trading at a P/E ratio of 9.00. The company expects to achieve a 3 to 5 percent production growth rate, and analysts project 5.1 percent earnings growth over the next five years. COP pays a hefty dividend of $2.76 per year, for a yield of 4.2 percent. A healthy payout ratio of 37 percent leaves the company plenty of room to continue to reward investors with dividend increases.
CVS Caremark (NYSE:CVS) provides integrated pharmacy health care services in the United States. The company operates through Pharmacy Services and Retail Pharmacy segments. This is my investment in the current and future healthcare needs of the baby boomer population. It provides me with an investment in both retail and pharmacy benefit management, which serves the needs of millions of sick and aging Americans.
CVS might seem a bit pricey, with a trailing P/E ratio of 19.56. However, the companies estimated earnings growth of 13.5 percent over the next five years alleviates any fears I might have had over current valuation. CVS pays a dividend of $1.10 per year, which equates to a 1.5 percent yield. The low payout ratio of 24 percent ensures continued dividend growth for patient investors.
Gilead Sciences (NASDAQ:GILD) is a research-based biopharmaceutical company that discovers, develops and commercializes new medicines for different medical sectors. This is my high-growth biotech stock. Its current portfolio of drugs, and its prolific pipeline of drugs in various stages of development provide treatment for an array of diseases.
GILD's current P/E ratio of 44.15 might scare off some investors who might worry the stock is overvalued. Those who share that concern would do well to take a look at the estimated five-year earnings growth rate of 36.1 percent. It is both my hope and my belief that five years from now GILD at $80 will seem tremendously cheap. As a biotech, GILD suffers from some volatility in pricing. As I stated above, daily and short-term fluctuations do not concern me much when looking at the projected long-term growth of this stock.
Organovo Holdings (NYSEMKT:ONVO) is a three-dimensional biology company focused on delivering breakthrough bioprinting technology and creating tissue on demand for research and medical applications. This is my one speculative stock, which makes up a very small percentage of my portfolio. ONVO's technology is unquestionably disruptive to an industry that spends untold billions of dollars on developing drugs, only to see many drugs scrapped due to toxicology results from human trials.
ONVO currently has zero revenue, but has nearly $50 million in cash, compared with only $18,000 in debt. There is no revenue because the company isn't selling anything; yet. ONVO recently delivered its first 3-D liver tissue product, and expects commercial launch of the same later this year. If all goes well, pharmaceutical companies might be lining up to save millions of dollars in R&D costs.
Procter & Gamble (NYSE:PG) provides branded consumer packaged goods. It markets its products in about 180 countries through mass merchandisers, grocery stores, membership club stores, drug stores, department stores among others. PG produces 26 brands that generate more than $1 billion in annual sales. This is my defensive, high-yield stock. People are going to continue buying PG products regardless of the macro environment. PG provides investors with exposure to emerging markets, with products available in 180 countries. The company has also rewarded long-term investors by increasing its dividend for nearly 60 years.
PG is admittedly a bit expensive with its 20.96 P/E. But analysts estimate 8.7 percent earnings growth over the next five years. The company pays its investors an annual dividend of $2.41, for a yield of 3.1 percent. It's 64 percent payout ratio, along with continued growth, allow for continued dividend increases.
Silgan Holdings (NASDAQ:SLGN) is a manufacturer of rigid packaging for shelf-stable food and other consumer goods products. It has three business segments namely, metal containers, closures and plastic containers. It's hard to imagine many companies more boring than this one. But SLGN is a money-maker. The metal can your peaches came in? The metal cap on your bottle of Snapple? The plastic shampoo bottle you just threw in your recycle bin? It's likely at least one of those was manufactured by SLGN. The company's list of customers is a veritable Who's Who of food, beverage and cosmetic powerhouses.
SLGN is reasonably priced, with a 16.99 P/E. Estimated five-year earnings growth is 10.2 percent. The company pays an annual dividend of $0.60 for a yield of 1.2 percent. The payout ratio is low, at 20 percent. That, combined with continued earnings growth, leaves a lot of room for future dividend hikes. In fact, the SLGN's board recently approved a 7.1 percent raise for investors.
Skyworks Solutions (NASDAQ:SWKS), together with its consolidated subsidiaries, is an innovator of high reliability analog and mixed signal semiconductors. This is my technology stock. In layman's terms, SWKS makes chips for devices that communicate with each other. As the world becomes more and more connected with wireless technology, the opportunities for growth for in this sector are tremendous.
SWKS is very reasonably priced for a growth company in the technology sector. The current P/E is 23.12. Analysts predict a robust earnings growth rate of 16.2 percent over the next five years. The board of SWKS recently announced plans to initiate a quarterly dividend of $0.11 per share, which would amount to a yield of 1.19 percent yield at the current share price. With trailing EPS of $1.60, the payout ratio is 27.5 percent
Unum Group (NYSE:UNM) provides group and individual disability products in the U.S. and the U.K. It also offers a portfolio of other insurance products, including longterm care insurance, life insurance, employee-paid group benefits & other related services. This is my holding in the financial sector. The inevitable rise of interest rates will benefit financials and insurance companies. UNM is kind of an under-the-radar company in an industry that is highly profitable.
Like many insurance companies, UNM is cheaply valued, with a P/E ratio of 11.04. Five-year earnings growth is projected at 9 percent per year. UNM pays a $0.58 annual dividend, for a yield of 1.7 percent. Its payout ratio is very low at 17 percent, leaving plenty of room for dividend increases.
Conclusion: My current portfolio yield is 1.85 percent. As I've stated several times in this article, I believe my holdings provide me with much room for dividend and earnings growth over the coming years. With continued investment, I hope my wife and I can eventually afford to retire comfortably. My hope is the same for others who might be inspired to initiate research for their own retirement portfolios.
Disclosure: I am long COP, SLGN, CVS, ONVO, GILD, UNM, PG, SWKS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.