Mmm! Got To Love These Dips - New Position

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Includes: BCE, JNJ, MMM, PEP, SJR, TU
by: PassiveCanadianIncome
Summary

One of the things I want to improve on is focusing on beefing up our lowest sectors of the portfolio.

Communication services used to be one of my higher sectors, but the sale of Shaw crippled that sector.

3M is such a solid company and one of the best dividend growth stocks to hold on to.

Hey everyone!

Hope you all are doing fantastic. I had a rain day today, so had the day off. Of course, that means cleaning up the house and all that fun stuff. It also means I had some time to write up this post and spend some money.

After the recent car purchase, I felt a little crappy yet again selling a nice chunk of stocks and had a little bit to pay towards that line of credit. That has been paid off now and we are free to buy stocks again… Ah, feels good.

I have been doing a lot of bad touches lately… Selling too many stocks and positions in our portfolio. I feel our portfolio looks a lot better these days and is better positioned towards dividend growth stocks. The fat has been cut for the most part. I plan on not touching things anymore… ha ha!

FOCUS/BALANCE

One of the things I want to improve on is focusing on beefing up our lowest sectors of the portfolio. Certain sectors have been running away from me, as I keep throwing cash into them... Cough Cough *Those Canadian Banks!*

I used to do this and decided to get back to what I used to do. Each buy should be in one of our 4 lowest sectors. Currently, these 4 are:

  • Industrials - 7.1% of our portfolio
  • Health Care - 7.1%
  • Communication Services - 3.5%
  • Basic Materials - 0%

Communication services used to be one of my higher sectors, but the sale of Shaw (NYSE:SJR) crippled that sector. I'm sure I'll be topping that up with Bell (NYSE:BCE) or TELUS (NYSE:TU) in the coming month, though (before their ex dividend dates).

Another goal of mine was to slowly initiate a position in PepsiCo (NASDAQ:PEP), 3M (NYSE:MMM) or Johnson & Johnson (NYSE:JNJ). 3 solid dividend growth stocks with a huge history of increasing their dividend.

Unfortunately, their prices have been climbing and climbing. I started putting money into USD with the plan to buy JNJ before their ex dividend date next month. But then yesterday morning Yahoo Finance decided to send me a notification that 3M missed analysts' expectations by a large margin and the stock tanked.

Yeah, it is fair to say it tanked. The stock dropped 12.8% in one day. Someone mentioned this is the biggest one-day drop for 3M since October 1987. Was the stock overvalued? Yeah I think so, but this market is full of overvalued stocks at the moment.

THE WORLD WORKS IN CRAZY WAYS

Was this a sign? Probably not… ha ha. But come on what timing!

Now the question I was debating was to either put a small chunk of change to work now or keep stacking cash before the ex dividend date (around may 15th). I hope it stays at this price or drops more. There's a bunch of people who say it will drop even more, no rush to buy it today. I've even seen people starting to compare 3M to General Electric (NYSE:GE) in Facebook groups... crazy!

To me, though, 3M is such a solid company and one of the best dividend growth stocks to hold on to. I feel there are so little buys out there at the moment. People will pounce on the opportunity to buy 3M on this dip. It is a dividend king, having raised its dividend for over 60 years. Will I be wrong? Who knows, but in 20 years, will it matter? I think I'll be glad I bought them.

WHO IS 3M?

3M Company (ticker symbol MMM) is a technology company. It operates through five segments. The Industrial segment serves a range of markets, such as automotive original equipment manufacturer and automotive aftermarket, appliance, paper and printing, packaging, food and beverage and construction. The Safety and Graphics segment serves a range of markets for the safety, security and productivity of people, facilities and systems. The Health Care segment serves markets that include medical clinics and hospitals, pharmaceuticals, health information systems and food manufacturing and testing. The Consumer segment serves markets that include consumer retail, office business to business, home improvement, drug and pharmacy retail, and other markets (source: RBC Direct Investing).

3M ain't just Post-it notes and tape.

Well, I watched the ticker for a bit and it was trending upwards... Ah screw it. Take My Money!

THE BUY

Arg, this exchange rate makes me sick... but I've read numerous articles how our dollar could get even shittier. Some people even mentioning low 60s... Ah, well, suck it up, it's good to invest in the US stock market.

After the recent dip, 3M has a P/E ratio just over 20x. 20.4 to be exact. Their dividend has surpassed that 3% mark, though, which is nice to see. I don't think the stock is an absolute steal at these levels, but you got to pay a premium for a king.

They have a 52-week high of $219.75 and a 52-week low of $176.87, so we are closer to the low than the high.

I didn't have a tonne of cash sitting around as we just paid that line of credit off, but had about US$1,200 including cash in the account from dividends. We bought... 6 shares... damn! It feels weird to get only 6 shares for $1,145.00. The order closed at $190.96 per share. I guess it is my most expensive stock on a per share basis, though.

Man, that 1,100.00 would only be like .6 of an Amazon (NASDAQ:AMZN) stock. That would be crazy...

This buy adds US$34.56 to our forward dividend income.

FINALE

This is a stock I have wanted to add to the portfolio for a long time now. It sucks it's only 6 shares, but I'll be sure to pump those numbers up. This is the 2nd dividend king I own now, and love that I have yet another company tossing me some US dollars to play with.

What are your thoughts on 3M? They lowered their future guidance, but is it just a hiccup or something more? Are you buying or waiting for it to fall lower? If so what's your price point?

Cheers!

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.