12 Morningstar Dividend Stocks; 3 Investment Ideas

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Includes: BMS, CAG, CL, CLX, DEO, GGG, MCD, MMC, NST, SYY, UPS, WM
by: Margin of Safety Investing

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 (NYSE:BMS)

- ConAgra Foods (NYSE:CAG)

- Colgate-Palmolive Company (NYSE:CL)

- Clorox Company (NYSE:CLX)

- Diageo PLC (NYSE:DEO)

- Graco Incorporated (NYSE:GGG)

- McDonald's Corporation (NYSE:MCD)

- Marsh & McLennan Companies (NYSE:MMC)

- Nstar (NYSE:NST)

- Sysco Corporation (NYSE:SYY)

- United Parcel Service (NYSE:UPS)

- Waste Management (NYSE: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

5 Year

% ROA

5 Year

%
Dividend
Yield TTM

Debt to Equity

Price/
Earnings
Trailing

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

Click to enlarge

Disclosure: No positions