Dividend Kings - 10 More Shares

Summary

• Personally, our portfolio is down about 6k this week (and we are pretty utility-heavy).
• 3M currently projects earnings to be between $9.30-9.75 per share in 2020. Using the lower end of guidance of $9.30 and a $147.58 share price, the forward P/E ratio is 15.86.
• Overall these purchases in our RRSP accounts added $64.68 to our forward passive income.

Here we go, the most red we have seen in the market in a while. Some people are calling for a massive crash, others say it's almost over, a bunch are complaining about their losses and some are going to extremes bulking up on rice and essentials. Who knows what will happen. It's pretty safe to say the market will still be around in 20 years though and these dips will continue to happen.

Honestly, it is a little bit of a shock to read people complaining about their losses though. This has been a 5-10% pullback and could be a lot worse. I have really gotten my mindset engaged in the long-term aspect of investing and I highly suggest you do as well. Personally, our portfolio is down about 6k this week (and we are pretty utility-heavy). But stocks that went up in value so much and I couldn't drip, have fallen back down to drip levels.

Being a dividend investor is quite a bit different than a growth stock investor. Lower prices equal a higher starting yield and stocks can drip for cheaper. 2 huge bonuses and something to consider moving forward. Some dividend kings have grown their dividends for over 60 years straight. Remember SARS? The wars? The 2009 financial crisis? Yup, they continued raising their dividend when everyone thought it was the end of the world.

That's my plan moving forward in these red days. Stick with the dividend kings and aristocrats or possibly Disney (DIS). Haha.

MMM

Previously I had a small position in 3M (MMM) and it was one of my lowest holdings. The company has steadily been on a downward spiral with all these China issues. Next quarter may also be a big hit to earnings because of this virus but things may also start turning around. Supposedly, those 3M masks are sold out everywhere! They also are laying off 1,500 people and restructuring the company into 4 divisions. There are some risks here for sure, but the stock is cheap.

3M currently projects earnings to be between $9.30-9.75 per share in 2020. Using the lower end of guidance of $9.30 and a $147.58 share price, the forward P/E ratio is 15.86. Quite a bit lower than the broader market.

At the moment MMM has a payout ratio of 61.5% of free cash flow. They recently raised their dividend by 2%. A really weak raise for sure, but it's to be expected as they navigate this restructuring and aim to lower that payout ratio. (This raise marks 62 years of dividend raises, incredible stuff) Looking back though, they have had a pretty solid dividend growth rate boosting that dividend an average of 11% annually over the last 10 years.

All of this helped make my decision easier and deciding to add another 10 shares to the portfolio. I bought them yesterday at $147.58 per share. Will the stock keep dropping who knows? But I'm pretty sure that dividend is safe and will continue to grow moving forward.

This purchase adds $58.80 to our forward income and offers a solid 3.98% starting yield.

XAW ETF

One of our goals for 2020 is to continue funding our ETF holding. We decided to start a position in XAW ETF because of its range of stocks that are all ex-Canada. We already have a lot of Canadian stocks in our TFSAs and resp. Our goal was to contribute 250 a month but I bumped that up to be able to purchase 10 shares.

So we bought 10 shares at about 27.50 per share adding a whopping 5.88 to our forward income.

Conclusion

Red days aren't all that bad. It is unfortunate if you don't have any cash sitting around though. We need to take advantage of these lower prices and cheaper dividend kings. Overall these purchases in our RRSP accounts added $64.68 to our forward passive income. Dividend Portfolio has been updated. Slowly but surely.

Let's see how the next couple of weeks go; could be red, could be green. Just stick to your plan and focus on growing that income.

keep stacking those dividends.

Original Post

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

Comments

[InDivGrowthWeTrust]

Like the author, I bought some MMM on Tuesday at its 52-week lows, as well as last week.

These last few days are the only time I've ever added to my original MMM investment, which I've owned for more than a decade.

Not the most exciting stock of late. Going thru a funky period. But 62 consecutive years of dividend growth, and on sale with a 4% dividend, a nice safe addition to my retirement income. And I am retired, so I try to limit my speculative investing at this stage of my life.

[Dividend Latitude]

"They recently raised their dividend by 2%. A really weak raise for sure"

Agreed.

3M is not the excellent DGI name it once was. Share price underperforms the SPY, and there are other stocks that both yield more and give bigger raises. For example, TD and PM.

Thank you for writing.

[PassiveCanadianIncome]

Time will tell. Td is solid and one of my largest holdings. Pm and mo are great but let's be honest smokers r declining. Will vapes make up for it?

I dunno it's not a space I'm betting on.

[Dividend Latitude]

Well, I had a lengthy rebuttal written and then damn SA website glitched and lost it all.

So I will just say that MO and PM are two different animals entirely, which is why I did not recommend MO.

I am long both, but will never add more MO. I will add PM on big price drops.

[InDivGrowthWeTrust]

@Dividend Latitude

I don't disagree, and I own MMM, MO and PM (but not TD).

Will confess, I was mildly surprised when I did a quick 10-year Fastgraphs look at all 4 names mentioned.

As of today, a look on Fastgraphs -
MMM, PM and TD have all UNDERPERFORMED the SP500 since 2010.

MO outperformed. The numbers are not overwhelming either under or over, I was just surprised. Although, since the spinoff, MO has doubled in price, while PM has gone up about 66%. (Recall they were priced at about 50 for PM and 20 for MO)

MO won the dividend race of the 4 names for the past 10 years, and that accounts for their overall 1st place finish.

Last 10 years is meaningless I understand, because we're investing today and looking out the next 10 - 20 years.

I've added MMM at its 52-week low level and now sporting a 4% yield. I'm maxed out on all tobacco stocks, so won't be adding any unless some unusual news/event makes it a compelling case to do so.

Time will tell if MMM can regain its mojo. Sometimes companies go thru a funk period. As for tobacco, well smokers have been in decline for 70 years and the tobacco companies just keep on growing profits.

ironic, tobacco has become taboo, but Pot is now cool. I'm sure they'll all still be in the smoking business in the future, just packing a different Weed in the paper.

Long: BTI, IMBBY, MMM, MO and PM

[Diamond-Hands]

Great perspective! Keep it going.