Long term investments I've got my eye on
Joel is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
In my previous post I went over my goal, plan, etc. See -> http://beta.fool.com/joelstiller/2012/10/24/beginning-journey-investing/15162/
I also went over what I purchased, and why I purchased it in follow-up posts. When I chose to diversify my portfolio I also had to choose HOW diverse to make it. Paying a 6.95 fee per trade, 8 trades is an instant 1.1% loss. My goal was to keep it under 1.5% of the invested amount. So keeping that math in mind, I limited myself to 8 buys. So here I'd like to talk about a few companies that didn't make the cut, and why. Keep in mind when you read this, I believe these are all quality companies for long term investment...just not yet.
Automatic Data Processing (NASDAQ: ADP)
With 36 years of consecutive dividend increases, and a 5 year dividend growth average of 11% this is definitely a great long term investment choice. The current yield was too low for my liking at 2.72%. With a 5 year average dividend of 3.1% I think watching, and waiting is the right move on this one. If it jumps up to 3.5%+ I would recommend adding a few shares of this company to your portfolio.
General Electric (NYSE: GE)
Not a bad buy right now, but it could be better. Current Yield 3.22%, 5 year average 4.4%. They don't always increase dividend payments, but they have been paying them for over 100 years. I'll be looking to pick this up somewhere near the average 4.4% in the future.
3M (NYSE: MMM)
53 straight years of consecutive increase is a nice number, but at only 2.68% yield I didn't feel is was the best place for my money. If it jumps up to 3.5% I'll consider it though. If you're ok with that low of a yield, 2.7% is their 5 year average. So it's not a terrible time to pick some up.
Coca Cola (NYSE: KO)
49 years of consecutive increases, with a 5 year 8.5% average dividend growth rate. They have an average 5 year dividend yield of 3.0%, and the current yield is 2.75%. So while again, a solid company the yield isn't quite where I'd like it. Having said that, next time I add funds to my portfolio if this stock is at 3.0% or above I'll buy some.
You could make the argument that these are great companies, and you could bank on their growth to make up the difference. Dividend Yield after all is a debated statistic. In truth both factors matter. Why not try to get the best of both worlds? The goal with dividend investment is to get your money in with a good rate, and let it work. So while these are all good long term investments in my opinion, there are some better options right now to get your money in on.
Examples:
Lockheed Martin (NYSE: LMT) you can get 4.95% yield, 9 years of consecutive increases, 23.72% 5 year average dividend growth rate.
Waste Management (NYSE: WM) you can get 4.36% yield, 8 years of consecutive increases, 8.39% average dividend growth rate. Their 5 year dividend average is 3.8%, and they are a prime example of what I'm talking about here. Almost the same average growth rate as Coca Cola (NYSE: KO) , but a much better yield. At .56% better than their average yield, great time to pick up some of this company.
joelstiller owns shares in Lockheed Martin, and Waste Management. The Motley Fool owns shares of General Electric Company, Lockheed Martin, and Waste Management. Motley Fool newsletter services recommend Automatic Data Processing, The Coca-Cola Company, 3M Company, and Waste Management. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
