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Summary

  • By maxing out tax deferred accounts, I am deferring taxes on dividends and capital gains for several decades. In some accounts, I am also receiving a tax break today.
  • While prices are elevated, it is still possible to find good candidates for a long-term dividend portfolio which has a 20 + years time horizon.
  • I have decided to add the new funds in the best positions that I already own. I am listing the companies I am considering in the article.

Ever since last year, I am on a quest to max out any tax-deferred vehicles available for me. This is in an effort to diversify my asset base, since the majority of my money is in taxable brokerage accounts. However, by maxing out tax deferred accounts, I am deferring taxes on dividends and capital gains for several decades. In the case of some accounts like 401 (NYSE:K) and SEP IRA, I am also receiving a pretty nice tax break today. I have maxed out 401 and SEP IRA for 2014, the next goal is to max out my Roth.

Last year, I separated my Roth IRA contribution and made approximately 30 transactions. I ended up paying less than 0.50% on the total thing, which was great. This year, I am finding less quality companies to invest in, that are also available at attractive valuations. As a result, I am going to split the results in only a few companies.

Many readers of the site know that I own a lot of companies in my dividend portfolio. Since I already own too many companies, I have decided to add the new funds in the best positions that I already own. However, I am going to refrain from allocating any of the new funds in the five holdings with the largest portfolio weights. This means that companies like Philip Morris International (NYSE:PM) would not be considered, given the fact that I am overweight in it, relative to any other holdings. I will also exclude certain foreign companies from consideration for my Roth IRA, because of dividend taxes that foreign governments withhold from my distributions at source.

The companies I am interested in purchasing include:

Exxon Mobil Corporation (NYSE:XOM) explores and produces for crude oil and natural gas. The company has managed to increase dividends for 32 years in a row. In the past decade, this dividend champion has managed to boost distributions by 9.60%/year, and earnings per share by 8.90%/year. Currently, the stock is selling at 13 times forward earnings and yields 2.70%.

International Business Machines Corporation (NYSE:IBM) provides information technology products and services worldwide. The company has managed to increase dividends for 32 years in a row. In the past decade, this dividend achiever has managed to boost distributions by 9.60%/year, and earnings per share by 13.20%/year. Currently, the stock is selling at 10.30 times forward earnings and yields 2.40%.

ConocoPhillips (NYSE:COP) explores for, develops, and produces crude oil, bitumen, natural gas, liquefied natural gas, and natural gas liquids worldwide. The company has managed to increase dividends for 13 years in a row. In the past decade, this dividend achiever has managed to boost distributions by 15.70%/year, and earnings per share by 6.20%/year. Currently, the stock is selling at 12.70 times forward earnings and yields 3.40%.

Altria Group, Inc. (NYSE:MO), through its subsidiaries, manufactures and sells cigarettes, smokeless products, and wine in the United States and internationally. The company has managed to increase dividends for 44 years in a row. In the past decade, this dividend champion has managed to boost distributions by 11.40%/year. Currently, the stock is selling at 16.50 times forward earnings and yields 4.70%.

Ameriprise Financial, Inc. (NYSE:AMP), through its subsidiaries, provides a range of financial products and services in the United States and internationally. The company has managed to increase dividends for 9 years in a row. In the past five years, this dividend company has managed to boost distributions by 24.90%/year, and earnings per share by 12.40%/year over the past six years. Currently, the stock is selling at times forward earnings and yields 2%. Check my analysis of Ameriprise.

General Mills, Inc. (NYSE:GIS) produces and markets branded consumer foods in the United States and internationally. The company has managed to increase dividends for 11 years in a row. In the past decade, this dividend achiever has managed to boost distributions by 9.90%/year, and earnings per share by 8.60%/year. Currently, the stock is selling at 19.20 times forward earnings and yields 3%.

The Chubb Corporation (NYSE:CB), through its subsidiaries, provides property and casualty insurance to businesses and individuals. The company has managed to increase dividends for 32 years in a row. In the past decade, this dividend champion has managed to boost distributions by 9.20%/year, and earnings per share by 15%/year. Currently, the stock is selling at 12.80 times forward earnings and yields 2.10%.

Aflac Incorporated (NYSE:AFL), through its subsidiary, American Family Life Assurance Company of Columbus, provides supplemental health and life insurance products. The company has managed to increase dividends for 31 years in a row. In the past decade, this dividend champion has managed to boost distributions by 16.80%/year, and earnings per share by 16.10%/year. Currently, the stock is selling at 10.20 times forward earnings and yields 2.40%.

Accenture plc (NYSE:ACN) provides management consulting, technology, and business process outsourcing services worldwide. The company has managed to increase dividends for 9 years in a row. In the past five years, this dividend company has managed to boost distributions by 28.40%/year, while in the past decade earnings per share have risen by 16%/year. Currently, the stock is selling at 18.50 times forward earnings and yields 2.20%.

Of course, this is all subject to changes, given the fact that valuations chance. If companies like ConocoPhillips keep going higher without any break, I might have to put the money into the next best ideas. For example, I had Family Dollar on the list when I initially wrote the article in late May, but given recent actions by activist investors, I dropped it due to increase in price. I am also hesitant on adding Target to my Roth IRA, since I already have a plan of investing there in one of my regular taxable accounts already, so that all the stock is in one place. In addition, if other companies drop suddenly, I would consider them instead.

The companies I don't own, that could also be included for consideration include:

General Electric Company (NYSE:GE) operates as an infrastructure and financial services company worldwide. The company has managed to increase dividends for years in a row. In the past decade, this former dividend champion has managed to deliver negative earnings per share and dividends per share. Currently, the stock is selling at 16.10 times forward earnings and an yield of 3.30%.

Baxter International Inc. (NYSE:BAX) develops, manufactures, and markets products for people with hemophilia, immune disorders, infectious diseases, kidney diseases, trauma, and other chronic and acute medical conditions. The company has managed to increase dividends for 8 years in a row. In the past decade, this former dividend champion has managed to boost distributions by 12.40%/year, and earnings per share by 9.20%/year. Currently, the stock is selling at 14.30 times forward earnings and an yield of 2.80%.

Again, in my purchases I am looking for good entry price today, coupled with good growth opportunities. The resulting compounding effect would do the heavy lifting for my capital and dividend incomes.

I plan on making the contribution sometime in the next month or so. After that, my contributions for tax-deferred accounts such as 401 , SEP IRA and Roth IRA would be complete for 2014. I would only have to rebuild my cash reserves after maxing out those contributions and paying out another steep tax bill in April. Going forward, I continue to view my taxable accounts as a place to purchase out-of-favor securities on dips, while viewing my tax-deferred accounts as the place to put money to work on a more regular basis.

Source: Companies I Am Considering For My Roth IRA