5 Safe Dividend Stocks To Invest - October 2018 (Retirement Series)

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Includes: ABBV, BUD, ITW, MFC, WFC
by: Financially Free Investor

Summary

Even though the markets have been down recently, there are always some assets/stocks that are relatively cheaper than others and the broader market.

This article is part of our periodic series, where we highlight five companies that are large-cap, safe, dividend-paying companies and also offering relatively large discounts to their historical norms.

We go over the filtering process to select just five such stocks from over 7500 companies that are traded on the US exchanges, including Over-The-Counter (OTC) networks.

The selected five companies as a group would offer an average discount of 21% in the price and 27% more dividends compared to the beginning of 2018.

Besides trading cheap, the group has a solid dividend history and have been increasing dividends at 10% or higher.

Recently, the markets have been volatile and are down significantly from their all-time highs. However, they are not in the correction territory, at least as yet. We do not know if the current turmoil will develop into a full-blown correction or is it just a temporary blip on the market’s upward trajectory.

That said, we are on the constant lookout for companies that may be trading relatively cheap. In this periodic series, we usually highlight 5 stocks that may have temporary difficulties and lost favor with the market and offering deep discounts on a relative basis. We start with a fairly simple question. If we were to invest in five large-cap, relatively safe, and dividend-paying companies trading at cheap valuations, which companies would make the cut at the given moment? The objective here is to highlight and bring to the notice of the value-oriented readers, some of the DGI companies that may be offering juicy dividends due to a temporary decline in their share prices. The decline may be due to industry-wide decline or some kind of one-time setback like missing quarterly earnings expectations. We adopt a methodical approach to filter down the 7500+ companies into a small subset.

Note: Please notice that when we use the term “safe” regarding stocks, it should be interpreted as “relatively safe” because nothing is absolutely safe in investing. Also, in our opinion, for a well-diversified portfolio, one should have 15-20 stocks at a minimum.

Goals for the selection process

We want to emphasize our goals before we get to the actual selection process. Our primary goal is income, and the secondary goal is to grow the capital. These goals are by and large in alignment with most income investors as well as DGI investors. A balanced DGI portfolio should keep a mix of high-yield, low-growth stocks along with some high-growth but low-yield stocks. However, how you mix the two will depend upon your personal situation, income needs, and time horizon.

A well-diversified portfolio would normally consist of many more than just five stocks and preferably a few stocks from each sector of the economy. However, in this article, we are trying to shortlist and highlight just five stocks that may fit most income and DGI investors, but at the same time are trading at attractive valuations. However, as always, we recommend you do your due diligence before making any decision on them.

Selection Process

The S&P 500 yields less than 2%. If we are dividend investors, we should logically look for companies which pay yields that are at least higher than the S&P 500. Of course, higher the better, but at the same time, we should not try to chase high yield. If we try to filter for dividend stocks paying 2.0% plus dividend yield, there are more than 1500 such companies trading on US exchanges including OTC networks. If we further limit our choices to companies which have a market cap of at least $30 Billion and daily trading volume in excess of 100,000 shares, the number comes down to less than 200 companies.

We also want stocks that are trading at relatively cheap valuations, so we will apply an additional filter with a forward P/E of no more than 20. We may like to point out that a P/E of 20 is not essentially cheap. But that’s not all. In our quest for not paying too high a price, we add one more criterion that the close price is at least 15% below the 52-week high. After applying these additional criteria, we get a set of nearly 66 companies. However, we just keep the top 50 in our list for further analysis (sorted on the distance from 52-week high).

Out of a list of 50 companies, as a final step to narrow down the list to 5 companies, there can be several ways. One way is a subjective analysis based on further research on factors like dividend safety, growth prospects and economic-moat of the company. Another method could be to apply further filters like credit-rating and the dividend growth in the last 5 years.

Before we go into the discussion on the final step, here is the list of 50 companies that we have selected so far:

Criteria to Shortlist:

  • Market-cap >= 30 billion
  • Dividend yield >= 2.0%
  • Dividend growth past 5-years >= 0%
  • Forward P/E <= 20
  • Distance from 52-Week High < -15%.
  • Select only the first 50 companies (sorted on distance from 52-wk high).

Below is the complete list of 50 companies that we got by using the above criteria.

Ticker

Market-cap (Billions)

Dividend Yield(10/23)

Close-price 10/23/ 2018

52-WK High

Distance from 52-Wk High

Relative Price Change from S&P500

FWD. P/E (10/19)

Company Name

(AMAT)

34.4

2.39%

33.52

61.61

-45.59%

-34.91

8.3

Applied Materials, Inc.

(OTCPK:ISNPY)

37.4

10.52%

13.54

23.75

-42.99%

-32.51

8.47

Intesa Sanpaolo SpA

(OTCPK:BAYRY)

74.1

3.70%

20.1

35.21

-42.91%

-31.46

10.34

Bayer Aktiengesellschaft

(ING)

48.6

3.73%

11.88

20.57

-42.25%

-35.56

7.72

ING Group, N.V.

(STT)

30.1

2.70%

69.72

112.71

-38.14%

-19.9

10.21

State Street Corporation

(OTCQX:BASFY)

72.9

4.91%

19.27

30.01

-35.79%

-31.26

9.82

BASF SE

(OTCQX:BNPQY)

71.4

6.36%

27.37

42.6

-35.75%

-27.07

6.58

BNP Paribas SA

(F)

34.8

6.98%

8.59

13.23

-35.07%

-33.25

6.61

Ford Motor Company

(UBS)

55.1

4.77%

13.62

20.89

-34.80%

-26.05

8.21

UBS Group AG

(BUD)

141.7

5.81%

82.22

126.02

-34.76%

-28.59

16.74

Anheuser-Busch InBev SA/NV

(BLK)

65.7

3.23%

387.49

593.26

-34.68%

-23.7

13.98

BlackRock, Inc.

(LVS)

45.2

5.62%

53.37

81.27

-34.33%

-21.44

16.05

Las Vegas Sands Corp.

(OTCPK:SCGLY)

32.9

6.57%

7.77

11.72

-33.70%

-25.22

6.26

Societe Generale Group

(ABBV)

139.7

4.63%

82.96

123.21

-32.67%

-9.2

10.59

AbbVie Inc.

(KHC)

68.8

4.42%

56.6

81.92

-30.91%

-30.97

14.53

The Kraft Heinz Company

(GM)

45.0

4.73%

32.12

46.48

-30.90%

-25.86

5.62

General Motors Company

(BCS)

37.2

2.94%

8.62

12.45

-30.76%

-23.77

7.06

Barclays PLC

(CAT)

84.0

2.89%

118.98

170.89

-30.38%

-14.64

10.97

Caterpillar Inc.

(ITW)

44.3

3.16%

126.57

178.88

-29.24%

-24.7

16

Illinois Tool Works Inc.

(HSBC)

166.5

5.08%

39.4

55.62

-29.16%

-23.46

10.8

HSBC Holdings plc

(DWDP)

138.7

2.78%

54.68

77.02

-29.01%

-20.4

12.27

Dow Chemical Company

(ABB)

45.7

3.88%

20.78

28.6

-27.34%

-24.17

14

ABB Ltd

(MFC)

31.4

4.17%

16.05

21.99

-27.01%

-27.87

7.21

Manulife Financial Corp

(BMY)

96.3

3.16%

50.65

68.98

-26.57%

-8.52

14.95

Bristol-Myers Squibb Company

(PNC)

59.1

3.16%

120.3

162.45

-25.95%

-16.01

11.09

The PNC Financial Services

(LYB)

37.5

4.44%

90

121.49

-25.92%

-16.99

8.41

LyondellBasell Industries N.V.

(MMM)

119.0

2.83%

192.55

258.63

-25.55%

-17.94

18.14

3M Company

(CNQ)

34.9

3.62%

28.12

37.5

-25.01%

-23.69

9.37

Canadian Natural Resources

(PRU)

41.6

3.79%

95.08

126.02

-24.55%

-17.48

7.64

Prudential Financial, Inc.

(TEF)

41.5

5.82%

7.97

10.55

-24.45%

-21.35

8.33

Telefonica SA

(MS)

82.3

2.70%

44.52

58.91

-24.43%

-14.4

9.24

Morgan Stanley

(MET)

44.4

3.95%

42.54

55.73

-23.67%

-15.93

8.11

MetLife, Inc.

(JCI)

31.3

3.19%

32.58

42.41

-23.18%

-15.44

9.96

Johnson Controls Int’l

(CAJ)

34.4

4.65%

30.93

40.22

-23.10%

-19.79

14.14

Canon, Inc.

(TRP)

36.8

5.44%

39.13

50.53

-22.56%

-21.28

14.57

TransCanada Corporation

(IBM)

122.4

4.79%

131.21

169.12

-22.42%

-16.84

9.46

Int’l Business Machines

(INTC)

214.7

2.70%

44.5

57.08

-22.04%

-5.38

10.8

Intel Corporation

(WFC)

265.6

3.34%

51.56

65.93

-21.80%

-14.57

10.6

Wells Fargo & Company

(ENB)

55.9

6.34%

32.33

41.3

-21.72%

-21.13

18.49

Enbridge Inc

(PM)

131.4

5.15%

88.5

112.65

-21.44%

-23.83

15.98

Philip Morris Int’l

(BK)

49.1

2.42%

46.28

58.42

-20.78%

-13.15

11.02

Bank of New York Mellon

(CCL)

31.1

3.49%

57.23

71.94

-20.45%

-15.4

12.56

Carnival Corporation

(AVGO)

98.1

3.06%

229.05

284.62

-19.52%

-12.14

11.03

Broadcom Limited

(ADI)

31.7

2.32%

82.65

102.1

-19.05%

-8.87

14.58

Analog Devices, Inc.

(OTCPK:NSANY)

35.1

5.47%

17.75

21.9

-18.95%

-14.18

6.98

Nissan Motor Co.

(CB)

58.6

2.30%

126.75

156.15

-18.83%

-17.2

11.42

Chubb Limited

(BNS)

68.3

4.82%

54.04

66.49

-18.72%

-18.19

9.62

Bank of Nova Scotia

(CL)

55.1

2.65%

63.4

77.5

-18.19%

-19.84

20.1

Colgate-Palmolive Co

(OTCPK:AZSEY)

93.3

4.55%

20.91

25.47

-17.90%

-12.2

9.63

Allianz SE

(BCE)

35.8

5.67%

40.48

48.91

-17.24%

-20.98

14.22

BCE, Inc.

Narrowing Down to 5 Companies:

The last step in this selection process ( choosing five companies out of 50) can be subjective, and the readers could apply their own methods and criteria based on their own goals and preferences.

However, for the purpose of our article this month, we will go a step further in our selection process and apply some additional criteria to filter the list. So, we add a couple of columns to our selected companies, for instance, the S&P credit-rating, and the previous 5-year dividend growth rate. Then we sort the 50 companies on these additional criteria as below:

  • We select companies that have a credit rating of “A-“ or better, and discard the rest.
  • The 5-year Dividend Growth-rate to be equal or greater than 10% and discard the rest. We want to select companies that are growing their dividends at a fast clip.
  • Then sort on the current Dividend-yield. From this sorted list, select the top 5 companies.
  • However, select only one company from a single industry segment.

TABLE-2: List of 50 with Credit-Rating and Dividend Growth

Ticker

Market-cap (Billions)

Dividend Yield(10/23)

Close-price

10/23/ 2018

52-WK High

Distance from 52-Wk High

Relative Price Change from S&P500

FWD. P/E (10/19)

5-YR Div Growth

S&P Credit-Rating

(AMAT)

34.4

2.39%

33.52

61.61

-45.59%

-34.91

8.3

2.80%

A-

(OTCPK:ISNPY)

37.4

10.52%

13.54

23.75

-42.99%

-32.51

8.47

21.40%

BBB

(OTCPK:BAYRY)

74.1

3.70%

20.1

35.21

-42.91%

-31.46

10.34

10.10%

BBB

(ING)

48.6

3.73%

11.88

20.57

-42.25%

-35.56

7.72

NA

A-

(STT)

30.1

2.70%

69.72

112.71

-38.14%

-19.9

10.21

11.00%

A

(OTCQX:BASFY)

72.9

4.91%

19.27

30.01

-35.79%

-31.26

9.82

3.70%

A

(OTCQX:BNPQY)

71.4

6.36%

27.37

42.6

-35.75%

-27.07

6.58

16.50%

A

(F)

34.8

6.98%

8.59

13.23

-35.07%

-33.25

6.61

21.80%

BBB

(UBS)

55.1

4.77%

13.62

20.89

-34.80%

-26.05

8.21

NA

A-

(BUD)

141.7

5.81%

82.22

126.02

-34.76%

-28.59

16.74

22.60%

A-

(BLK)

65.7

3.23%

387.49

593.26

-34.68%

-23.7

13.98

10.90%

AA-

(LVS)

45.2

5.62%

53.37

81.27

-34.33%

-21.44

16.05

24.90%

BBB-

(OTCPK:SCGLY)

32.9

6.57%

7.77

11.72

-33.70%

-25.22

6.26

NA

A

(ABBV)

139.7

4.63%

82.96

123.21

-32.67%

-9.2

10.59

15.50%

A-

(KHC)

68.8

4.42%

56.6

81.92

-30.91%

-30.97

14.53

NA

BBB

(GM)

45.0

4.73%

32.12

46.48

-30.90%

-25.86

5.62

8.20%

BBB

(BCS)

37.2

2.94%

8.62

12.45

-30.76%

-23.77

7.06

-10.70%

A

(CAT)

84.0

2.89%

118.98

170.89

-30.38%

-14.64

10.97

12.60%

A

(ITW)

44.3

3.16%

126.57

178.88

-29.24%

-24.7

16

14.20%

A+

(HSBC)

166.5

5.08%

39.4

55.62

-29.16%

-23.46

10.8

9.70%

A

(DWDP)

138.7

2.78%

54.68

77.02

-29.01%

-20.4

12.27

9.20%

BBB

(ABB)

45.7

3.88%

20.78

28.6

-27.34%

-24.17

14

2.70%

A

(MFC)

31.4

4.17%

16.05

21.99

-27.01%

-27.87

7.21

10.50%

A

(BMY)

96.3

3.16%

50.65

68.98

-26.57%

-8.52

14.95

2.80%

A+

(PNC)

59.1

3.16%

120.3

162.45

-25.95%

-16.01

11.09

9.80%

A-

(LYB)

37.5

4.44%

90

121.49

-25.92%

-16.99

8.41

19.10%

BBB+

(MMM)

119.0

2.83%

192.55

258.63

-25.55%

-17.94

18.14

16.40%

AA-

(CNQ)

34.9

3.62%

28.12

37.5

-25.01%

-23.69

9.37

19.80%

BBB+

(PRU)

41.6

3.79%

95.08

126.02

-24.55%

-17.48

7.64

14.40%

A

(NYSE:TEF)

41.5

5.82%

7.97

10.55

-24.45%

-21.35

8.33

2.80%

BBB

(MS)

82.3

2.70%

44.52

58.91

-24.43%

-14.4

9.24

39.80%

BBB+

(MET)

44.4

3.95%

42.54

55.73

-23.67%

-15.93

8.11

16.30%

A-

(JCI)

31.3

3.19%

32.58

42.41

-23.18%

-15.44

9.96

9.20%

BBB+

(CAJ)

34.4

4.65%

30.93

40.22

-23.10%

-19.79

14.14

4.50%

AA-

(TRP)

36.8

5.44%

39.13

50.53

-22.56%

-21.28

14.57

7.30%

BBB+

(IBM)

122.4

4.79%

131.21

169.12

-22.42%

-16.84

9.46

12.90%

A+

(INTC)

214.7

2.70%

44.5

57.08

-22.04%

-5.38

10.8

4.60%

A+

(WFC)

265.6

3.34%

51.56

65.93

-21.80%

-14.57

10.6

13.10%

A-

(ENB)

55.9

6.34%

32.33

41.3

-21.72%

-21.13

18.49

17.50%

BBB+

(PM)

131.4

5.15%

88.5

112.65

-21.44%

-23.83

15.98

5.20%

A

(BK)

49.1

2.42%

46.28

58.42

-20.78%

-13.15

11.02

9.60%

AA-

(CCL)

31.1

3.49%

57.23

71.94

-20.45%

-15.4

12.56

10.00%

A-

(AVGO)

98.1

3.06%

229.05

284.62

-19.52%

-12.14

11.03

44.60%

BBB-

(ADI)

31.7

2.32%

82.65

102.1

-19.05%

-8.87

14.58

8.70%

BBB

(OTCPK:NSANY)

35.1

5.47%

17.75

21.9

-18.95%

-14.18

6.98

16.70%

A

(CB)

58.6

2.30%

126.75

156.15

-18.83%

-17.2

11.42

7.10%

AA-

(BNS)

68.3

4.82%

54.04

66.49

-18.72%

-18.19

9.62

6.70%

A+

(CL)

55.1

2.65%

63.4

77.5

-18.19%

-19.84

20.1

5.40%

AA-

(OTCPK:AZSEY)

93.3

4.55%

20.91

25.47

-17.90%

-12.2

9.63

13.20%

AA

(BCE)

35.8

5.67%

40.48

48.91

-17.24%

-20.98

14.22

5.30%

BBB+

Table 3- Companies with Credit-rating of “A-“ or Higher (table sorted on credit-rating):

We still get 33 companies with “A-“ or higher credit-rating. You may also notice from the table below, that the finance and insurance companies will get over-represented because of higher credit-rating. But since we will only select one company from a single industry segment, so it is not going to matter.

Ticker

Market-cap

(Billions)

Dividend Yield(10/23)

Close-Price

10/23/2018

52-Wk Hiigh

Distance from 52-Wk High

Relative Price Change from S&P500

FWD. P/E (10/19)

5-YR Div Growth

S&P Rating

AZSEY

93.3

4.55%

20.91

25.47

-17.90%

-12.2

9.63

13.20%

AA

ITW

44.3

3.16%

126.57

178.88

-29.24%

-24.7

16

14.20%

A+

BMY

96.3

3.16%

50.65

68.98

-26.57%

-8.52

14.95

2.80%

A+

IBM

122.4

4.79%

131.21

169.12

-22.42%

-16.84

9.46

12.90%

A+

INTC

214.7

2.70%

44.5

57.08

-22.04%

-5.38

10.8

4.60%

A+

BNS

68.3

4.82%

54.04

66.49

-18.72%

-18.19

9.62

6.70%

A+

BLK

65.7

3.23%

387.49

593.26

-34.68%

-23.7

13.98

10.90%

AA-

MMM

119.0

2.83%

192.55

258.63

-25.55%

-17.94

18.14

16.40%

AA-

CAJ

34.4

4.65%

30.93

40.22

-23.10%

-19.79

14.14

4.50%

AA-

BK

49.1

2.42%

46.28

58.42

-20.78%

-13.15

11.02

9.60%

AA-

CB

58.6

2.30%

126.75

156.15

-18.83%

-17.2

11.42

7.10%

AA-

CL

55.1

2.65%

63.4

77.5

-18.19%

-19.84

20.1

5.40%

AA-

STT

30.1

2.70%

69.72

112.71

-38.14%

-19.9

10.21

11.00%

A

BASFY

72.9

4.91%

19.27

30.01

-35.79%

-31.26

9.82

3.70%

A

BNPQY

71.4

6.36%

27.37

42.6

-35.75%

-27.07

6.58

16.50%

A

SCGLY

32.9

6.57%

7.77

11.72

-33.70%

-25.22

6.26

A

BCS

37.2

2.94%

8.62

12.45

-30.76%

-23.77

7.06

-10.70%

A

CAT

84.0

2.89%

118.98

170.89

-30.38%

-14.64

10.97

12.60%

A

HSBC

166.5

5.08%

39.4

55.62

-29.16%

-23.46

10.8

9.70%

A

ABB

45.7

3.88%

20.78

28.6

-27.34%

-24.17

14

2.70%

A

MFC

31.4

4.17%

16.05

21.99

-27.01%

-27.87

7.21

10.50%

A

PRU

41.6

3.79%

95.08

126.02

-24.55%

-17.48

7.64

14.40%

A

PM

131.4

5.15%

88.5

112.65

-21.44%

-23.83

15.98

5.20%

A

NSANY

35.1

5.47%

17.75

21.9

-18.95%

-14.18

6.98

16.70%

A

AMAT

34.4

2.39%

33.52

61.61

-45.59%

-34.91

8.3

2.80%

A-

ING

48.6

3.73%

11.88

20.57

-42.25%

-35.56

7.72

NA

A-

UBS

55.1

4.77%

13.62

20.89

-34.80%

-26.05

8.21

NA

A-

BUD

141.7

5.81%

82.22

126.02

-34.76%

-28.59

16.74

22.60%

A-

ABBV

139.7

4.63%

82.96

123.21

-32.67%

-9.2

10.59

15.50%

A-

PNC

59.1

3.16%

120.3

162.45

-25.95%

-16.01

11.09

9.80%

A-

MET

44.4

3.95%

42.54

55.73

-23.67%

-15.93

8.11

16.30%

A-

WFC

265.6

3.34%

51.56

65.93

-21.80%

-14.57

10.6

13.10%

A-

CCL

31.1

3.49%

57.23

71.94

-20.45%

-15.4

12.56

10.00%

A-

TABLE-4: Companies from Table-3 with >= 10% Dividend-growth:

We discard any company that has less than 10% growth in the last five years.

Ticker

Market-cap (Billions)

Dividend Yield(10/23)

Close-price 10/23/2018

52-WK High

Distance from 52-Wk High

Relative Price Change from S&P500

FWD. P/E (10/19)

5-YR Div Growth

S&P Rating

AZSEY

93.3

4.55%

20.91

25.47

-17.90%

-12.2

9.63

13.20%

AA

ITW

44.3

3.16%

126.57

178.88

-29.24%

-24.7

16

14.20%

A+

IBM

122.4

4.79%

131.21

169.12

-22.42%

-16.84

9.46

12.90%

A+

BLK

65.7

3.23%

387.49

593.26

-34.68%

-23.7

13.98

10.90%

AA-

MMM

119.0

2.83%

192.55

258.63

-25.55%

-17.94

18.14

16.40%

AA-

STT

30.1

2.70%

69.72

112.71

-38.14%

-19.9

10.21

11.00%

A

BNPQY

71.4

6.36%

27.37

42.6

-35.75%

-27.07

6.58

16.50%

A

CAT

84.0

2.89%

118.98

170.89

-30.38%

-14.64

10.97

12.60%

A

MFC

31.4

4.17%

16.05

21.99

-27.01%

-27.87

7.21

10.50%

A

PRU

41.6

3.79%

95.08

126.02

-24.55%

-17.48

7.64

14.40%

A

NSANY

35.1

5.47%

17.75

21.9

-18.95%

-14.18

6.98

16.70%

A

BUD

141.7

5.81%

82.22

126.02

-34.76%

-28.59

16.74

22.60%

A-

ABBV

139.7

4.63%

82.96

123.21

-32.67%

-9.2

10.59

15.50%

A-

MET

44.4

3.95%

42.54

55.73

-23.67%

-15.93

8.11

16.30%

A-

WFC

265.6

3.34%

51.56

65.93

-21.80%

-14.57

10.6

13.10%

A-

CCL

31.1

3.49%

57.23

71.94

-20.45%

-15.4

12.56

10.00%

A-

TABLE-5: Companies from Table-4 Sorted By Forward-Dividend-Yield:

The rows highlighted in “BOLD” are the ones we finally select from different industry segment. Please note that some of the companies (like BNPQY and NSANY) were not selected because they lacked 10-yr dividend growth history. Companies like IBM were ignored due to too many negatives and uncertainties in spite of it meeting all the criteria.

Ticker

Market-cap (Billions)

Dividend Yield(10/23)

Close-price 10/23/2018

52-WK High

Distance from 52-Wk High

Relative Price Change from S&P500

FWD. P/E (10/19)

5-YR Div Growth

S&P Rating

BNPQY

71.4

6.36%

27.37

42.6

-35.75%

-27.07

6.58

16.50%

A

BUD

141.7

5.81%

82.22

126.02

-34.76%

-28.59

16.74

22.60%

A-

NSANY

35.1

5.47%

17.75

21.9

-18.95%

-14.18

6.98

16.70%

A

IBM

122.4

4.79%

131.21

169.12

-22.42%

-16.84

9.46

12.90%

A+

ABBV

139.7

4.63%

82.96

123.21

-32.67%

-9.2

10.59

15.50%

A-

AZSEY

93.3

4.55%

20.91

25.47

-17.90%

-12.2

9.63

13.20%

AA

MFC

31.4

4.17%

16.05

21.99

-27.01%

-27.87

7.21

10.50%

A

MET

44.4

3.95%

42.54

55.73

-23.67%

-15.93

8.11

16.30%

A-

PRU

41.6

3.79%

95.08

126.02

-24.55%

-17.48

7.64

14.40%

A

CCL

31.1

3.49%

57.23

71.94

-20.45%

-15.4

12.56

10.00%

A-

WFC

265.6

3.34%

51.56

65.93

-21.80%

-14.57

10.6

13.10%

A-

BLK

65.7

3.23%

387.49

593.26

-34.68%

-23.7

13.98

10.90%

AA-

ITW

44.3

3.16%

126.57

178.88

-29.24%

-24.7

16

14.20%

A+

CAT

84.0

2.89%

118.98

170.89

-30.38%

-14.64

10.97

12.60%

A

MMM

119.0

2.83%

192.55

258.63

-25.55%

-17.94

18.14

16.40%

AA-

STT

30.1

2.70%

69.72

112.71

-38.14%

-19.9

10.21

11.00%

A

We selected five companies from different sectors/industries. Though, as always, each company comes with certain risks and concerns, but we think they are temporary. We think these companies would form a solid dividend group that would be appealing to income-seeking investors or anyone above 50 years of age. They all have “A-“ or better debt-rating, at least 10% dividend growth in the last 5 years, have at least 10 years of dividend history and trading on an average of -21% from their 52-week highs. Their average dividend at this time is 4.22%. As we get closer to retirement, our focus changes from the growth of capital to income. Though we selected five stocks, however, there are other stocks on the list of 50 that may be equally appealing.

Below is a snapshot of the 5 companies, showing their current discount and dividend yield compared to January 1 st, 2018.

Industry Segment

Close Price on 10/23/2018

Close price on 1/2/2018

Difference

(BUD)

Beverages

82.22

112.42

-26.86%

(ABBV)

Healthcare

82.96

98.41

-15.70%

(MFC)

Insurance

16.05

20.85

-23.02%

(WFC)

Financial/Banking

51.56

61.09

-15.60%

(ITW)

Industrial

126.57

165.27

-23.42%

Average

71.872

91.61

-20.92%

Headquarters

Dividend Yield on 10/23/2018

Dividend Yield on 1/2/2018

Difference

BUD

Belgium (Europe)

5.81%

4.25%

36.73%

ABBV

USA

4.63%

3.90%

18.62%

MFC

Canada

4.17%

3.21%

29.91%

WFC

USA

3.34%

2.82%

18.48%

ITW

USA

3.16%

2.42%

30.58%

Average

4.22%

3.32%

+26.86%

Conclusion:

As of January 2018, the average dividend yield of these five stocks was 3.32%. However, if you were to buy these five companies today at much lower prices and invest equal amounts, you would get roughly 4.22% dividend, nearly 27% gain. Again, not much has changed with regards to the quality of these companies. In spite of the recent downtrend in the broader market, it is still trading very close to the record highs. What has changed with these companies is the market perception. So we think that we should take advantage of lower prices. These five companies as a group, since the beginning of the year, the average yield is up by 27% to 4.22%, and the average price is lower by 21%. If you think the markets have further to fall, and it is entirely possible, you could wait some more and keep these stocks in your watchlist to use at an opportunistic time.

Disclaimer: The information presented in this article is for informational purposes only and in no way should be construed as financial advice or recommendation to buy or sell any stock. Please always do further research and do your own due diligence before making any investments. Every effort has been made to present the data/information accurately; however, the author does not claim 100% accuracy. Any stock portfolio or strategy presented here is only for demonstration purposes.

Disclosure: I am/we are long ABT, ABBV, JNJ, PFE, NVS, NVO, CL, CLX, GIS, UL, NSRGY, PG, KHC, ADM, MO, PM, BUD, KO, PEP, D, DEA, DEO, ENB, MCD, WMT, WBA, CVS, LOW, CSCO, MSFT, INTC, T, VZ, VOD, CVX, XOM, VLO, ABB, ITW, MMM, HCP, HTA, O, OHI, VTR, NNN, STAG, WPC, MAIN, NLY, ARCC, DNP, GOF, PCI, PDI, PFF, RFI, RNP, STK, UTF, EVT, FFC, HQH, KYN, NMZ, NBB, JPS, JPC, TLT.

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.