I was recently reading the latest (November) edition of Morningstar’s Dividend Investor newsletter, which gave me a number of investment ideas to add to my list of stock reviews to perform.
The 12 stocks I put down from the “Builder portfolio”, as well as some other stocks in the newsletter, are:
- Bemis Company (BMS)
- ConAgra Foods (CAG)
- Colgate-Palmolive Company (CL)
- Clorox Company (CLX)
- Diageo PLC (DEO)
- Graco Incorporated (GGG)
- McDonald's Corporation (MCD)
- Marsh & McLennan Companies (MMC)
- Nstar (NST)
- Sysco Corporation (SYY)
- United Parcel Service (UPS)
- Waste Management (WM)
You can find the stocks and the key financial metrics I usually analyze for my stock reviews in this Google Doc.
In order to decide among those twelve stocks, which ones I should further investigate, I have used a few filters to sort stocks along the three risk categories I usually review:
1- Business risk
Using a 5-year average ROE > 12% and 5-year average ROA >9%, the subset is reduced to 7 companies.
2- Balance sheet risk
Using a 1.5x Debt/Equity criteria the number of stock shrinks to 5.
3- Valuation risk
Finally, using a price to earnings (trailing) of less than 20 leaves us with 3 investment ideas: Colgate, McDonald’s, and Sysco Corporation.
Name | Ticker | % ROE | % ROA | % | Debt to Equity | Price/ |
Colgate-Palmolive | CL | 109.65 | 17.87 | 2.63 | 1.32 | 18.05 |
McDonald's | MCD | 23.95 | 11.93 | 2.83 | 0.78 | 17.73 |
Sysco | SYY | 31.47 | 10.78 | 3.39 | 0.61 | 14.81 |
Disclosure: No positions
