In talking to my father the other day, he mentioned he had a large CD that was about to mature, and wanted to build a portfolio of stocks to beat the interest rate he was getting. There are two nice things about this portfolio.
- We get to start from scratch with a clean slate and pick whatever stocks we want to.
- We have a clear goal to work towards. (Beat 4% interest)
We have a little bit of time before the CD matures, so I started doing research and came up with a list of stocks with high yields, and a few not-so-high, but with a history of raising their dividend every year.
I tried to pull a few names from every industry to that we can have some diversification in the portfolio. I also borrowed from some of the quality research at Dividend Tree.
So here is what we came up with:
Altria (MO) yield = 7.5%
AT&T (T) yield = 6.1%
Verizon (VZ) yield = 6.1%
Sysco (SYY) yield = 3.7%
Banco Santander (STD) yield = 5%
Emerson Electric (EMR) yield = 3.7%
Honeywell (HON) yield = 3.1%
3M (MMM) yield = 2.76%
Pfizer (PFE) yield = 3.9%
Merck (MRK) yield = 4.6%
Eli Lilly (LLY) yield = 6%
Bristol Myers (BMY) yield = 5.5%
Permian Basin Trust (PBT) yield = 7.3%
Kinder Morgan partners (KMP) yield = 7.8%
Heinz (HNZ) yield = 4.2%
Kraft (KFT) yield = 4.4%
Duke energy (DUK) yield = 6.2%
Dominion (D) yield = 5.3%
Con Ed (ED) yield = 5.9%
PG&E (PCG) yield = 4.2%
So that’s what we have to work with. Have some suggestions for us to consider? Let me know. Want to help us to decide, tell us in the comments. We’ll be building the portfolio within the next few weeks.
{ 12 comments… read them below or add one }
Mike,
In general, you have good list of stocks and many of the dividend fanatics like me would like this list. I own quite of these too. You may want to consider your reason for holding PFE and KFT. I would be concerned about sustainability of their dividends. PBT and KMP are master limited partnership which most likely gives return of capital (and not dividends). Depending upon quarterly ROC, it could take10+ years before you see any actual earning dividends.
Best Wishes,
Mike,
In general, you have good list of stocks and many of the dividend fanatics like me would like this list. I own quite of these too. You may want to consider your reason for holding PFE and KFT. I would be concerned about sustainability of their dividends. PBT and KMP are master limited partnership which most likely gives return of capital (and not dividends). Depending upon quarterly ROC, it could take10+ years before you see any actual earning dividends.
Best Wishes,
I think this is a pretty good list, it does seem like you are a bit overweighted in drug stocks but I am not a big fan of them so I have some bias.
Besides yield, I look at dividend growth, earnings coverage, debt, and capex needs. Companies with good earnings coverage, low debt and low cap ex needs are good because they give you greater confidence that the dividend will not be cut.
However I think dividend growth is often underestimated by investors. If you plan to hold the stock for the long term, the company that can grow their dividends 7-10% per year will catch up and pass higher yielding stock that offers little or no growth. On top of that, the underlying stock value will probably have grown more.
Several of your stocks, such as SYY and EMR definitely fall into the good dividend growth category. A couple of others to consider are CLX and ADP, and perhaps an oil like CVX or TOT.
I think this is a pretty good list, it does seem like you are a bit overweighted in drug stocks but I am not a big fan of them so I have some bias.
Besides yield, I look at dividend growth, earnings coverage, debt, and capex needs. Companies with good earnings coverage, low debt and low cap ex needs are good because they give you greater confidence that the dividend will not be cut.
However I think dividend growth is often underestimated by investors. If you plan to hold the stock for the long term, the company that can grow their dividends 7-10% per year will catch up and pass higher yielding stock that offers little or no growth. On top of that, the underlying stock value will probably have grown more.
Several of your stocks, such as SYY and EMR definitely fall into the good dividend growth category. A couple of others to consider are CLX and ADP, and perhaps an oil like CVX or TOT.
Thanks for those suggestions. I’ll add them to the research list. The end goal of the portfolio is to have 1 stock per industry. So even though I have a few drug companies listed, I’d only pick 1 for the portfolio.
Thanks for those suggestions. I’ll add them to the research list. The end goal of the portfolio is to have 1 stock per industry. So even though I have a few drug companies listed, I’d only pick 1 for the portfolio.
stay away from PFE – the sustainability of their dividends is questionable.
also look at NLY – should be good until the FED raises the interest rates which are not likely for next 6 months.
stay away from PFE – the sustainability of their dividends is questionable.
also look at NLY – should be good until the FED raises the interest rates which are not likely for next 6 months.
Thanks for the suggestion on NLY. PFE is one that my father keeps bringing up, but when doing the research it looks like their are better yields in the sector, PLUS the sustainability that you mentioned.
Thanks for the suggestion on NLY. PFE is one that my father keeps bringing up, but when doing the research it looks like their are better yields in the sector, PLUS the sustainability that you mentioned.
What about PM, Phillip Morris International? Dividend is about 4.5% and it seems like they have good growth potential in Asia, etc.
I really like PM. But it’s also had a good run lately, so i’d love to get it cheaper.