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?