The final "stock considerations" post of 2016 is finally at hand. At the beginning of the year, it's sometimes hard to imagine what the next 12 months will have in store for us as we outline our dividend income goals, future buys and more. What is certain is that no one can accurately predict the future, no matter what their credentials may state. All you can do with certainty is be consistent with your dividend investments, seek out relative good value and sustainable yield and not panic when the market declines and your portfolio bleeds red. Do that, have patience and everything else will fall into place. It just takes time. After all, to look back at 2016 and call the market performance we have seen a roller coaster ride would be a huge understatement.
If you recall, 2016 was one of the worst starts of the year ever for the markets. The "smart" talking heads and financial headlines all spoke of doom as the impending crash we have all been waiting for was finally at hand. Headlines like "Stock market's terrible start to 2016 just got worse," "Ouch. 93% of investors lost money in January," and "U.S. stocks post worst 10-day start to a year in history," among many, many more. Just seeing these headlines is enough to make one panic, sell everything and "ride out the storm."
Of course, looking back we know that after the brutal start to 2016, stocks climbed back up and started to look "frothy" once again. Sure, valuations for many stocks did not make sense, the bull market was "long in the tooth" and the Fed was running out of dry powder to help prop up the market with its bond buying activity and maintenance of low historical rates, but the market kept climbing higher bit by bit - nothing too dramatic. Succumbing to the media panic would not have been wise.
Then, the dreaded date, June 23, 2016 - the United Kingdom European Union membership referendum, aka Brexit, was to take place. Again, the "smart" talking heads and financial headlines all predicted a certain "No" vote to prevail, as the U.K. was sure to remain a part of the European Union. The pollsters and markets all anticipated this result, and shock and steep market declines eventually prevailed as news came in that the U.K. did indeed vote "Yes" to cede membership in the European Union. Once again, global stocks were in free fall and headlines looked quite scary as we read "Brexit Roils Wall Street, Stocks Extend Global Selloff."
Over the course of the next few weeks and months, those scary Brexit headlines were replaced by "Here's why the majority of Brexit polls were wrong," and "Here's why pollsters and pundits got Brexit wrong," as the market roared back in the summer and financial experts were left scratching their heads. Not to be outdone by the terrible stock market start of 2016 and the historic Brexit vote which took place, the financial media began to turn their sights on another potentially devastating event which could trigger a financial meltdown: the U.S. presidential elections. Oh my!
Here we go again... "Donald Trump Victory Would Send Stocks Plummeting 10 To 15 Percent," and "Stock Markets Are Starting to Freak Out About a Donald Trump Victory," among many other equally negative and scary headlines. And again, "How did pollsters get Trump, Clinton election so wrong?"
Today, we sit at all-time record highs in every major market index as financial experts again are scratching their heads and wondering what happened. Media outlets make their money with scary and outlandish headlines. After all, bad/scary news sells, it draws us in and keeps us reading and watching longer. And so, with one month left in 2016, I am left with deciding which stock(s) I should consider adding to my portfolio, while knowing at the back of my head that the Dow (NYSEARCA:DIA) may hit 20K or more this year or crash and burn to 15K or less. I don't know - no one knows. That's a fact. Accept it, and your investing career will be that much easier to manage.
Many seasoned dividend investors already know that the market and even individual stock prices are highly unpredictable and often trade irrationally in the short and mid-term. All you can really do it stay diversified, buy stocks, sectors and commodities when they are trading at good value. Make sure, if buying dividend-paying stocks, that payout ratios are manageable in order to keep that passive income rolling in, whether the market is in record territory or deep in correction mode. With that being said, let's take a look my December 2016 stock considerations.
Going into the last month of the year, my focus will be on the staples, health and REIT sectors.
My first consideration in the staples/discretionary space is V.F. Corporation (NYSE:VFC). A dividend stalwart by every measure, this name has hit several recent headwinds, not least of which is a strong U.S. dollar that has brought this stock down in recent months and is now yielding around 3%.
In the same staples space, I am also considering another dividend stalwart, Kimberly-Clark Corporation (NYSE:KMB). KMB has come down quite a bit from its recent highs several months ago to offer a juicy yield well north of 3% and better value.
Finally, coming out of the U.K. are two names I am considering for December: Unilever PLC (NYSE:UL) and Diageo plc (NYSE:DEO). I still like UL stock under $40, as the yield and value being offered is much more enticing when compared to just a few months ago, and the same is true for DEO at around $100.
In the health sector, Johnson & Johnson (NYSE:JNJ) and AbbVie Inc. (NYSE:ABBV) are both well off their summertime highs and offering much better value and yield as a result. It's been a very long time since I added to my JNJ position, and I would welcome the chance to add to this long-term holding of mine.
In the REIT space, I'm looking at beaten-down health REITs specifically that are all trading way off their summertime highs and sporting some really juicy yields. Stocks I am considering in this sector include HCP, Inc. (NYSE:HCP) and Welltower Inc. (NYSE:HCN), both sporting yields well above 5% after their recent sell-off. For "fun," I am also considering a new position in a long-time watch list favorite, Omega Healthcare Investors Inc. (NYSE:OHI).
There you have it. My December stock considerations. As you already know, I usually end these "considerations" posts with the caveat that Mr. Market makes all the rules, and names that are not mentioned above may suddenly become attractive to accumulate.
What are some of the stocks you are considering for your December purchases? Are any of the above names on your monthly watch list? Please let me know below.
Disclosure: Long VFC, KMB, UL, DEO, JNJ, ABBV, HCP, HCN.