Sep
14
What Besides Banks?
September 14, 2007 | 1 Comment
You can poison yourself on too much of a good thing. Those who know me are aware I love to invest on banks: great dividends, good growth in an economy that depends on them, and a great business model that has proven itself over centuries. However, being invested on a single sector is risky, especially when the news say so many negative things about it and it gets reflected on the stock price. Thats is when you remind yourself of diversification: and not just different stocks, but different sectors, and even different instruments.
I took the market climb yesterday as an opportunity to close some of my positions in banks. I want to keep my bank between 20 to 30% of my portfolio, and I am happy at the level I was able to trim it. I still want dividends. I use them as my steady source of income. It is what gives me money even if I am not contracting/consulting or trading. But I do not want all of it to come from banks. Where do I look? At a stock screener it is. My search criteria you want?
- Dividend Yield > 4%
- Price to Earnings / Growth < 1.5
- Market Capitalization of 25 Billion Dollars or More
This narrows down my search to 16 companies, and even shows some of my chosen banks. But since I am not looking for banks I will point out the things I liked: British Telecom (BT), National Grid (NGG), Dow Chemical (DOW), Southern Copper (PCU). Good options that I may watch today to see if I can grab a few.
However, the issue with high yield stocks is that they are slow to climb: they do not invest too much in their own growth. If I go for high yield stocks, I must complement my portfolio with a good selection of high growth stocks (technology mostly). However, if I try to find steady workhorses that provide a good dividend and still have space to grow I can find a fairly stable, well balanced selection of stocks. You can try the same idea of the screen, but reducing the dividend yield, maybe allowing for less market cap, and assuring that they have a good growth projections in the next few months.
Today I decided to add to my portfolio the following dividend paying companies (500 of each):
| Company | Symbol | Yield |
| ATT | T | 3.6% |
| British Telecom | BT | 4.70% |
| Southern Copper | PCU | 5.90% |
| Procter And Gamble | PG | 2.10% |
This puts gives me a more balanced exposure to telecommunications (a sector on which I believe) and on companies that depend on global growth (like metals, industrials, and foreign telecommunications).
I feel happier now with my dividend paying portfolio, increased its yield by about 25%, and I am already making money on my picks (given the purchase price at the bottom of this morning’s market).
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What do you think of pfe?
It pays a great yield and I think it has definite room to grow over the long term. I like the fact that there has been a lot of negative talk about pfe’s future pipeline…but it has been majorly overblown and they are putting alot of R&D into america;s obesity problems…Some new drugs will be right around the corner.
the yield has been supporting this stock around 24-25 for several years. I think it will doublie in value in the next 3-4 years (with dividend reinvestment…your thoughts?