Updating My Potential Buy List: April 2014

Good morning fellow dividend growth investors and personal finance enthusiasts!

Today I’m reviewing some of the stocks on my potential buy list. I recently got my tax refund back so it’s time to go shopping for stocks. 🙂

I’ve broken the list down into two parts, stocks that I already own and would like to add more to, and stocks that would be new additions to my portfolio.

First off, the stocks I currently own and would consider adding to.

Coca-Cola (KO)-As long as KO trades at less than $40 a share, I plan on continuing to dollar cost average using my commission free Loyal3 account.

General Electric (GE)-With a P/E of 17.3 I think GE is trading at fair value and I’d like to add more to position in the stock. With an increased focus on returning to its industrial roots and reducing the size and spinning off portions of its financial arm the company looks to be returning to its former dividend growth blue chip status.

McDonald’s (MCD)-Although shares have popped a little since my last purchase, I’d like to add more on a pullback as I have just a small position. While MCD doesn’t have as much of a margin of safety in the share price as I’d normally like, with a very long-term investing horizon, I feel comfortable paying up a little for a quality stock as I detailed here.

Philip Morris (PM)-Even though the price has rebounded a bit since my last Buy List post, the international tobacco giant continues to trade well below its 52 week highs and currently yields 4.5% at today’s levels.

Target (TGT)-This stock continues to be punished after a weak roll-out in Canada and the data breach during the last holiday shopping season. Like KO, I plan on continuing to dollar cost average into this stock using Loyal3.

Now for stocks that would be new additions to  my portfolio.

Aflac (AFL)-The insurance dividend champion continues to trade at an attractive valuation with a current P/E of just 9.1. With its strong dividend growth rates AFL should make a great long-term holding and also give me some exposure to the financial sector since I recently sold my shares in Powershares Financial Preferred ETF (PGF).

General Mills (GIS)-Man, I so wish I had just bought this when I was starting out and it was trading in the low 40’s. I’m still waiting for a slight pull back before initiating a position as the diversified food company continues to trade at a premium to its historic P/E but with a long-term investing horizon I may consider adding it if it dips below $50.

Kinder Morgan Management (KMR)-I recently purchased KMI in my Roth IRA last month. Rather than adding more to this position I was thinking of adding Kinder Morgan Management. KMR provides a similar yield to Kinder Morgan Partners (KMP), the master limited partnership, and issues stock dividends so you don’t have to worry about dealing with a K-1 come tax time. Once you decide to sell your position, you are given a 1099 just like with regular dividend growth stocks. Since it is structured as an LLC C-Corp it can be held in a retirement account so I’m thinking of adding this to my Roth to shield those future capital gains.

Visa (V)-Wait, what? Isn’t Visa a growth stock, I thought you were a dividend growth investor? 😉 With its low yield (currently less than 1%), it’s easy to look at V as only a growth stock and forget that it now has a 7 year history of raising dividends and a very impressive dividend growth rate as well. It currently sports dividend growth rates of: 40.4% for 1 year, 38.3% for 3 year, and 45.9% for its 5 year average. With shares pulling back below $200 a share recently, off from a 52 week high of $235, Visa looks attractively valued at today’s levels for starting a long-term position.

Full Disclosure: I am long KO, GE, KMI, MCD, PM, TGT, and may initiate long positions in AFL, GIS, KMR, and V over the coming weeks. For a full list of all my holding please visit my portfolio page. As always don’t take anything I post here as a buy or sell recommendation and I highly encourage you to do your own research before investing.

What do you think of these stocks? Do you hold any of these in your portfolio or looking to add them? Let me know in the comments! 🙂

14 comments

  1. Couldn’t agree more on all those positions. I am very strongly considering GE at the moment and might sneak a little more KMI into the portfolio even thought it is way out of line proportionately. TGT is also looking like a company that might get a few more bucks with my monthly Loyal3 investment.

    Thanks for the update SFZ!

    1. Yeah if I do add KMR this month, it will definitely make my portfolio unbalanced as well with the high energy exposure but it should all balance out in the coming months. Target continues to look attractive at current prices and I think like you I’ll be upping my contribution instead of focusing so much on KO in my Loyal3 account.

      Thanks for commenting w2r,

      SFZ

  2. Great list, SFZ.
    A couple of comments – why buy KMR while you already hold KMI? If you have a lot of faith in the company and dont mind the risk involved by investing in one company, then arent you better off just investing in KMI instead of splitting up your investment into KMI and KMR?
    If you are looking for diversification, what about investing in other pipelines?

    1. Thanks for commenting R2R! With KMR I would like to gain exposure to the higher yield of Kinder Morgan Partners, the actual MLP, without having to deal with the K-1. Also since this would be a purchase for my Roth which I’m trying to max out right now, this would also eliminate any future issues with unrelated business taxable income that I could potentially get down the road if I went with KMP. Since I drip all holdings in my Roth anyway, I figure KMR is a good choice since with its share dividends it effectively acts as its own drip while also historically trading at a discount to KMP which is what it bases its yield off of. With KMI I retain the option to selectively reinvest dividends into other stocks if I want to in the future. There are pros and cons to each. I’m not too worried about diversification right now, just focusing on adding companies trading at attractive valuations since I plan on continuing to make monthly purchases in other stocks.

      I may start adding other MLP’s after I do more research on them and K-1’s. I figured I’d start with the Kinder Morgan family of companies since it’s the largest and best of breed in the MLP sector. Do you recommend any others? I’ve just started looking at some of the others from the CCC lists so I’d welcome any suggestions.

      Have a great weekend,
      SFZ

      1. The only other pipeline I own is Inter Pipeline (IPL.TO) – also trades on the OTC in the US.

        Couple of other pipelines the I looked into were Enbridge (which stands to benefit a lot if the Keystone pipeline gets approved by the US government), OKS (I cant remember off the top of my head why I chose not to invest in it – I will have to revisit to figure it out). EPD seems to be a popular one – with the largest holding in AMLP ETF holding – I havent looked much into that one unfortunately.

        I ended up with KMI as it was attractively valued.

        best wishes

  3. That’s a great list SFZ. In fact all but one of them is on my list as well…..and I hold most of them. I have been trying to determine my buy price on Visa lately. It’s exactly the kind of ubiquitous brand I love to invest in. Especially because it’s just a processor……so the risks are low. We should get the chance to buy all of them at lower prices soon :o)
    -Bryan

    1. Visa being a processor as opposed to a company that actually issues credit like some of the other major card companies is the main reason I’d like to add it. As shown by their performance during the recession, their business model holds up great in poor economic times as well. I’m hoping the price continues to stay down for a little while longer so I can pick up some shares.

      Thanks for stopping by and commenting Bryan!

      Best wishes,
      SFZ

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