I've deposited another 1.200 euros to initiate a new position. However, since markets are at all-time highs it's getting harder to find decent valued companies which fit the bill. Right now my watchlist consists of the following stocks: Microsoft, Aflac, Visa and Acomo.
- Microsoft (MSFT): decent yield (2.6%), great dividend growth rate (15-20%) and low payout ratio (42%). The balance sheet looks good, with a debt/equity ratio of only 0.26. MSFT would be my 2nd technology stock, after Intel. Although revenue growth slowed down in recent years, Microsoft's cloud computing market share shot up 154% in 2013. Based on a P/E-ratio of 15, MSFT looks somewhat overvalued, considering that its 5 year average P/E-ratio is 13.
- Aflac: dividend characteristics are comparable to MSFT. Decent yield (2.4%), good DGR (15% the last decade) and low pay-out ratio (10% of free cash flow, 20% of earnings). Revenue and operating earnings have grown consistently the last years. Currency fluctuations have impacted results: the USD.JPY rate is important since most of the income comes from customers in Japan. The company seems cheap at 9 times earnings (historic 5 year average is 11) and has lagged the market 6% in the last 12 months.
- Visa: low yield (0.75%) but spectacular dividend growth rate (around 40-50% annually in the last few years). Pay-out ratio is under 20% and projected revenue growth is solid. It would take a few years of dividend growth to overcome the low yield. Margins are high at 60% and the balance sheet is pristine with no debt. P/E-ratio is 25, but the 1yr-forward P/E-ratio looks better at around 20. Warren Buffet's quote comes to mind: "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
- Amsterdam Commodities N.V. (Acomo) is an international group of companies with its principal business the trade and distribution of agricultural products. It yields 4.5% (semi-annual payments) and DGR is around 10% over the last decade or so. It's one of the few Dutch companies with dividend growth features. Dividend pay-out ratio is somewhat high at 65%, but revenues have consistently grown the last 10 years. P/E-ratio is 14 which seems reasonable. This purchase would strengthen my Euro-based income stream.
What do you think about these picks? Do you have any suggestions for my next purchases?
I like AFL from this list. Its attractively valued, a great dividend play and has a great future prospect. If rates rise in a year or two, banking and insurance companies are probably the only ones that will be least affected.
ReplyDeleteBest wishes
R2R
Yeah I like Aflas as well. I read a recent article on Seeking Alpha by Tim McAleenan which sums it up pretty nicely:
ReplyDelete"A good investment opportunity usually arises when you can find these four things simultaneously: the ability to benefit from an increasing P/E ratio, the ability to benefit from rising earnings per share, the ability to benefit from stock buybacks, and the ability to receive rising dividends. Aflac is one of the few companies that can check off each of those boxes."
Acomo just paid the bigger semi-annual dividend, and I am not too sure about the low yield from Visa. Right now I am leaning toward purchasing Aflac later this week.
For me it's all about AFL. These days it is so hard to find any decent value anywhere in the market. AFL seems to have the best of many worlds, with low PE, decent dividend and amazing dividend growth.
ReplyDeleteHi Keith, thanks for your opinion on Aflac. It's good to hear you are positive about a possible investment in this company!
DeleteDuring markets at all time highs, would you consider buying stocks via put options? You may actually be buying cheaper.
ReplyDeleteHi Martin, that would be nice, however the put options are for 100 stocks. Currently I don't have this liquidity nor do I wish to buy on margin with such a trade.
DeleteHey Dividend Dream,
ReplyDeleteI also like AFL, but I am waiting to see if the price will come down a little more before I buy shares. I also like MSFT and if I were smart I would have purchased them when they were at the $32 mark. Instead I bought SNE which was a mistake but I think they well rebound in a year. I wish VISA has a higher Dividend considering all the money they make. Thanks for sharing!