Outlook For July 2014

 |  Includes: BNS, CNI, JNJ, MDT, NSC, PG, QCOM, RCI, UL, WTR
by: Roadmap2Retire

Summer is finally here! The stock market continues to hover around the all-time highs relentlessly. On the Fed front, the bond purchases are cut in July to a total of $19B per month. The schedule is available here. For the most part, it seems business as usual, as the anticipated summer sell-off never came. I am continuing to monitor closely, looking for buying opportunities, even though there aren't any great ones available.

My Holdings

Provided the right conditions, I intend to add to my positions in Johnson & Johnson (NYSE:JNJ), Medtronic (NYSE:MDT), Qualcomm (NASDAQ:QCOM) and/or Rogers Communications Inc. (RCI, RCI.B.TO)

Johnson & Johnson is a behemoth in the healthcare and consumer goods sectors. The double play on the two sectors makes this a great pick. JNJ is a dividend champion that has been raising dividends (JNJ announced a 6.1% dividend raise in April) consecutively for 52 years; has a 5-yr. DGR of 7.6% and a 10-yr. DGR of 10.8%.

Medtronic Inc. manufactures and sells device-based medical therapies worldwide. Medtronic is a dividend champion that has been raising dividends for 36 years; has a 5-yr. DGR of 11.6% and a 10-yr. DGR of 14.9%. The recent injunction against its CoreValve device has seen some weakness in the stock price - but MDT was able to appeal and meanwhile still able to sell the device.

Qualcomm designs, develops, manufactures and markets digital communications products and services based on CDMA, OFDMA and other technologies. QCOM is the leader in ARM-based processors, which are found in the bulk of Windows, BlackBerry and Android devices. QCOM has been raising dividends for 12 years, and has a 5-yr. DGR of 16.95%. Click here to read my full analysis of QCOM.

Rogers Communications Inc. is the largest wireless service provider in Canada, and is growing its business segments in cable and media aggressively. Rogers has been growing dividends for 10 years, and has a 5-yr. DGR of 11.13%. Click here to read about my analysis of the telecom providers in Canada.

Monthly Contributions: Every month, I add to my positions in the following stock and funds:

  • Claymore S&P US Dividend Growers ETF (CUD.TO) is an ETF of 83 dividend growers, and provides me with exposure to excellent corporations across all sectors. The ETF has a 1.8% yield, and pays distributions monthly.
  • iShares Canadian Financial Monthly Income Fund (FIE.A.TO) is an ETF of 24 Canadian financial equities (70%) and bonds (30%). The fund yields 6.5%, and pays distributions monthly.
  • Scotia Canadian Balanced Fund (mutual fund) is an index fund tracking the Canadian S&P/TSX Composite Index and the DEX Universe Bond Index. The fund yields 0.52%, and pays distributions quarterly.
  • The Bank of Nova Scotia (BNS, BNS.TO) is the third-largest of the Canadian banks by deposits and market cap. BNS is also the most international of the Canadian banks, with exposure in 55 countries outside Canada. BNS saw a pause in its dividend growth during the financial crisis. However, BNS has started raising dividends after the crisis, with a 5-yr. DGR of 5.03%. I have a DRIP plan in BNS, and invest monthly to this holding.

My Watchlist

I am also considering various stocks that are not currently in my portfolio, but the current high valuations do not provide many options.

  • Canadian National Railway Corp. (CNI, CNR.TO) engages in transportation of goods, including petroleum and chemicals, grain and fertilizers, coal, metals and minerals, forest products, intermodal and automotive products. The company operates 20,100 route miles of track that spans Canada and mid-America, connecting the three coasts of Atlantic, Pacific and Gulf of Mexico. CNR is a dividend contender that has been raising its dividends for 17 consecutive years, and has a 5-yr. DGR of 13.9% and a 10-yr. DGR of 17.4%.
  • Norfolk Southern (NYSE:NSC) engages in rail transportation of raw materials, intermediate and finished goods, operating approximately 20,000 router miles across the southern and eastern US. NSC and other railroads stand to benefit from the oil boom in continental US, and before permanent pipelines are put in place, railroads are the only option available to transport the huge supplies. NSC is a dividend contender, raising its dividends for 12 consecutive years, and has a 5-yr. DGR of 10.8% and a 10-yr. DGR of 21.1%.
  • Aqua America (NYSE:WTR) is a water utility company based in Pennsylvania, but also provides services in seven other states. WTR is a dividend contender, having raised dividends for 22 years consecutively. WTR has a 5-yr. DGR of 7.4% and a 10-yr. DGR of 7.9%. Water utilities are a great fit as an essential resource, and the company provides very agreeable dividend growth for the sector.
  • Procter & Gamble (NYSE:PG) and Unilever plc (NYSE:UL) are giants in the consumer packaged goods field. PG has five segments - beauty, grooming, healthcare, fabric care and home care. UL has four segments - personal care, foods, refreshment and home care. PG has been raising dividends for 57 years; has a 5-yr. DGR of 10.2% and a 10-yr. DGR of 10.8%. UL has been raising dividends for 25 years; has a 5-yr. DGR of 7.07%.
  • Index Funds - China ETF, Emerging Markets - I am considering adding a new index fund to my portfolio to track the Chinese market/economy. Read about my comparison of available China ETFs here. I am also considering using an emerging market ETF instead of a China-specific ETF, and need to weigh out the options available.
  • Global High Yield - In a global economy, it would be naive to ignore international equities as an investment target, especially when a plethora of foreign companies pay attractive dividends. I am considering adding international equities exposure via ETFs which yield approximately 6.5%. Click here for my list and analysis.
  • Income ETFs - I am also considering adding covered call ETFs to my portfolio as a more economical alternative to writing covered calls myself. The current environment is well-suited to taking advantage of this strategy, and should provide some good complementary income in my portfolio. Read about my review and analysis here.

What are your thoughts on the stocks mentioned here? Do you own them or are they on your watchlist?

Disclosure: My full list of holdings are available here.