The Best Deals In My Universe: 6 Stocks To Study

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Includes: AAPL, CMI, CSCO, QCOM, RY, TD
by: Dividend Sleuth

Summary

How large is your stock universe?

Using F.A.S.T. Graphs and other resources for a quick valuation check.

Portfolio Update.

How large is your stock universe?

Some investors may choose to operate within the Value Line 1700 universe of companies. If that's too many, or too few, Value Line provides other options, such as the Value Line 600.

The Standard & Poor's 500 has become the preferred universe for some investors and a key market benchmark for many analysts. It is gradually replacing the 30 Dow Jones Industrials as the key market barometer for individual investors. A popular universe for many dividend investors is the S&P Dividend Aristocrats, a sub-group of the S&P 500 that have raised their dividend for at least 25 consecutive years.

Many Seeking Alpha dividend investors choose to operate within David Fish's universe of Dividend Champions (25+ years), Contenders (10+ years) and Dividend Challengers (5+ years).

Mike Nadel has given us the Dividend Growth 50. There's also the RoseNose 85. When my wife began investing in dividend stocks, she created a universe by sifting through David Fish's Dividend Champions and the portfolios of Mike Nadel, RoseNose, David Van Knapp, Bob Wells, Chowder, Adam Aloisi, Factoids, David Crosetti, Integrator, Eddie Herring, Nicholas Ward and Regarded Solutions.

That's quite a brain trust. She did her homework in late 2013 and early 2014 by identifying her universe and picking her stocks. She then forgot about Mr. Market and departed for a 6-month thru-hike of the Appalachian Trail.

My 31-Stock Universe

There are 31 "c-corporation" stocks in my portfolio. In addition to these, the portfolio holds four partnerships and two real estate investment trusts. These 37 individual equities are complemented by 4 exchange traded funds, 8 preferred stocks, 2 "baby bonds," and 6 closed-end funds. I'll say more about those later. Here are the 31 stocks in my universe and the percentage of each in the portfolio:

Company Ticker %Portfolio Price Dividend Yield
Johnson & Johnson JNJ 3.2% 118.25 3.20 2.7%
Microsoft MSFT 3.1% 57.25 1.44 2.5%
General Electric GE 2.8% 29.68 0.92 3.1%
Apple AAPL 3.1% 114.92 2.28 2.0%
Wal-Mart WMT 3.0% 72.87 2.00 2.7%
Automatic Data ADP 2.3% 86.77 2.12 2.4%
Pfizer PFE 2.5% 33.94 1.20 3.5%
Merck MRK 2.5% 62.28 1.84 3.0%
Procter & Gamble PG 2.4% 88.05 2.68 3.0%
3M Company MMM 2.4% 175.06 4.44 2.5%
Coca-Cola KO 2.0% 42.14 1.40 3.3%
WW Grainger GWW 2.0% 216.23 4.88 2.3%
International Bus IBM 2.1% 153.84 5.60 3.6%
Cisco CSCO 2.1% 30.84 1.04 3.4%
Royal Bank of Can RY 2.0% 61.11 US 2.46 US 4.0%
Colgate Palmolive CL 1.6% 71.96 1.56 2.2%
Toronto Dominion TD 1.5% 43.28 US 1.67 US 3.9%
Qualcomm QCOM 1.7% 62.99 2.12 3.4%
Texas Instruments TXN 1.5% 69.36 1.52 2.2%
Cummins CMI 1.6% 119.56 4.10 3.4%
Dover Corp DOV 0.9% 67.94 1.76 2.6%
Genuine Parts GPC 1.1% 97.15 2.63 2.7%
Emerson EMR 1.4% 51.09 1.90 3.7%
PepsiCo PEP 1.4% 105.28 3.01 2.9%
Archer Daniels Mid ADM 1.1% 42.03 1.20 2.9%
Southern Co SO 1.4% 51.97 2.24 4.3%
CenterPoint Energy CNP 1.2% 23.05 1.03 4.5%
Duke Energy DUK 1.1% 79.61 3.30 4.1%
Avangrid AGR 1.1% 41.20 1.73 4.2%
Pattern Energy PEGI 1.2% 23.09 1.52 6.6%
WEC Energy WEC 0.8% 60.79 1.98 3.3%

From this universe, the six stocks that have the most favorable F.A.S.T. Graphs are QCOM, RY, TD, CSCO, AAPL and CMI.

Qualcomm (NASDAQ:QCOM)

QCOM has an A+ S&P credit rating. It has raised the dividend for 14 consecutive years. The PE ratio is 14.6. Debt is 23% of capitalization. The high yield for 2011-2015 was 3.5% in 2015. The current yield is 3.4%.

For another look at QCOM, here's an information sheet provided by Morningstar via BetterInvesting.org:

Royal Bank of Canada (NYSE:RY)

RY has an AA- S&P credit rating. It has raised the dividend for 5 consecutive years. The PE ratio is 11.9. F.A.S.T. Graphs shows debt is 0% of capitalization. Better Investing shows debt at 12.4%. The current yield is 4.0% in US dollars (The exchange rate is C$ 1.00 = US$.76).

Toronto-Dominion Bank (NYSE:TD)

TD has an AA- S&P credit rating. It has raised the dividend for 5 consecutive years. The PE ratio is 11.8. Debt is 0% of capitalization. Better Investing shows debt at 11.4%. The current yield is 3.9%.

Cisco Systems (NASDAQ:CSCO)

CSCO has an AA- S&P credit rating. It has raised the dividend for 6 consecutive years. The PE ratio is 13.0. Debt is 26% of capitalization. The high yield for 2011-2015 was 4.2% in 2015. The current yield is 3.4%.

Apple (NASDAQ:AAPL)

AAPL has an AA+ S&P credit rating. It has raised the dividend for 5 consecutive years. The PE ratio is 13.9. Debt is 32% of capitalization. The high yield for 2011-2015 was 3.0% in 2013. The current yield is 2.0%.

Cummins (NYSE:CMI)

CMI has an A+ S&P credit rating. It has raised the dividend for 10 consecutive years. The PE ratio is 14.2. Debt is 17% of capitalization. The high yield for 2011-2015 was 4.1% in 2015. The current yield is 3.4%.

Other Portfolio Holdings

The portfolio includes four partnerships that total 4.6% of the portfolio:

  • Enterprise Products Partners (NYSE:EPD)
  • Brookfield Infrastructure Partners (NYSE:BIP)
  • Brookfield Renewable Partners (NYSE:BEP)
  • Enviva Partners (NYSE:EVA).

The portfolio includes two REITs that total 3.0% of the portfolio:

  • WP Carey (NYSE:WPC)
  • Hannon Armstrong Sustainable Infrastructure (NYSE:HASI).

The portfolio includes eight preferred stocks that total 13.0% of the portfolio:

  • Charles Schwab (SCHW.D)
  • CHS Inc (NASDAQ:CHSCM)
  • Federal Agriculture Mortgage Corp (NYSE:AGM.C)
  • KKR & Company LP (KKR.A)
  • Public Storage (PSA.B)
  • State Street Corporation (STT.G)
  • Tri-Continental Corporation (TY.P)
  • Wells Fargo (WFC.Q).

The portfolio includes two "baby bonds" that total 2.8% of the portfolio:

  • Entergy New Orleans 1st Mortgage Bond (ENO)
  • NextEra Energy Capital Holdings Jr Sub Deb (NEE.K).

The portfolio includes six closed-end funds that total 6.0% of the portfolio:

  • BlackRock Utility & Infrastructure (NYSE:BUI)
  • Boulder Growth & Income Fund (NYSE:BIF)
  • Cohen & Steers Total Return Fund (NYSE:RFI)
  • Eaton Vance Risk Managed Dividend Equity Fund (NYSE:ETJ)
  • Eaton Vance Tax Managed Dividend Equity Income Fund (NYSE:ETY)
  • Tekla World Healthcare Fund (NYSE:THW).

The portfolio includes four exchange traded funds that total 7.2% of the portfolio:

  • Vanguard FTSE Developed Markets ETF (NYSEARCA:VEA)
  • Vanguard FTSE Emerging Markets ETF (NYSEARCA:VWO)
  • Vanguard REIT ETF (NYSEARCA:VNQ)
  • Vanguard Utilities ETF (NYSEARCA:VPU).

Portfolio Update

My most recent article was "Blending Individual Equities and ETFs" on September 12, 2016. Since that article was published, I trimmed TXN at $69.19 and CSCO at $31.34. I closed the BlackRock International Growth & Income Trust (NYSE:BGY) position at $5.82 and I closed the Brookfield Property Partners (NYSE:BPY) position at $23.05. I added five shares of GWW at $217.81.

My goal is to add three new ETF positions, as outlined in the September 12 article:

  • Vanguard Total Stock Market ETF (NYSEARCA:VTI)
  • Vanguard High Dividend Yield Index ETF (NYSEARCA:VYM)
  • Vanguard Mid-Cap Value Index ETF (NYSEARCA:VOE).

The portfolio value as of September 16, 2016 was $369,603. The cash position was $19,329, or 5.2%. The average monthly income produced by the portfolio was $1193, for a yield of 3.9%.

I'm not advocating the purchase or sale of any security. I offer this update as the journal of my effort to design and build a retirement portfolio that puts a priority on relative safety, a history of dividend growth and solid future prospects. Your goals and risk tolerance may differ, so please do your own due diligence.

Disclosure: I am/we are long JNJ, MSFT, GE, AAPL, WMT, ADP, PFE, MRK, PG, MMM, KO, GWW, IBM, CSCO, RY, CL, TD, QCOM, TXN, CMI, DOV, GPC, EMR, PEP, ADM, SO, CNP, DUK, EPD, BIP, AGR, BEP, PEGI, HASI, EVA, WPC, WEC, VEA, VWO, VNQ, VPU, SCHW.D, CHSCM, ENO, AGM.C, KKR.A, NEE.K, PSA.B, STT.G, TY.P, WFC.Q, RFI, BUI, THW, ETY, ETJ, BIF.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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