Month: April 2018

Ever since I started investing - back in early 2015 - I’ve had this mental Postit note reminding me to buy one of the most venerable dividend stocks out there.

With the price of this stock coming down pretty dramatically this month, I decided to finally act on this yellow sticky reminder.

On April 24 I bought 5 shares of 3M Company (MMM) for a total of $1,014.

In this post I explain the reasons why I made these additions to my portfolio and what this means for my forward dividend income. 

3M Company operates as a diversified technology company worldwide.

The company’s Industrial segment offers tapes; coated, non-woven, and bonded abrasives; adhesives; ceramics; sealants; specialty materials; purification products; closure systems for personal hygiene products; acoustic systems products; automotive components; and abrasion-resistant films, and paint finishing and detailing products.

Its Safety and Graphics Business segment provides personal protection products, transportation safety products, commercial graphics systems, commercial cleaning and protection products, floor matting, roofing granules for asphalt shingles, and fall protection products.

The company’s Health Care segment offers medical and surgical supplies, skin health and infection prevention products, inhalation and transdermal drug delivery systems, dental and orthodontic products, health information systems, and food safety products.

Its Electronics and Energy segment provides optical films; packaging and interconnection devices; insulating and splicing solutions; touch screens and touch monitors; renewable energy component solutions; and infrastructure protection products.

The company’s Consumer segment offers sponges, scouring pads, high-performance cloths, repositionable notes, indexing systems, home improvement and care products, and protective materials; and consumer and office tapes and adhesives. It serves automotive, electronics and automotive electrification, appliance, paper and printing, packaging, food and beverage, construction, medical clinics and hospitals, pharmaceuticals, dental and orthodontic practitioners, health information systems, food manufacturing and testing, consumer and office retail, office business to business, home improvement, drug and pharmacy retail, and other markets directly, as well as through wholesalers, retailers, jobbers, distributors, and dealers.

The company was founded in 1902 and is headquartered in St. Paul, Minnesota.

MMM’s current dividend yield is 2.70% – below the average 3.5% yield I strive for in building my portfolio.

The company is featured on David Fish’s list of Dividends Champions, Contenders and Challengers - boasting a 60 (!) year streak of growing dividend pay-outs.

The 5 year dividend growth is quite good, 16.45% - with last year’s dividend growth coming in at 15.74%.

It’s Current Trailing Dividend Payout Ratio however is rather high, and sits at 81%.

KMB‘s Earnings per Share (EPS) over the last five years shows a modest 4.64%  increase. Projected EPS growth for the next 3-5 years is 9.30%.

The trailing 12 months Price/Earnings (P/E) is 29.84, which is higher than  it’s 5 year average of 21.91. It is also higher than the industry’s 5 year average of 28.07.

EVA Dimensions (an equity research firm) states in their  April 25 report that MMM‘s Performance Risk Valuation score (PRVit) score is at the 29th percentile of all firms in its industry, which leads to a recommendation to Underweight.

It adds that MMM is less attractively priced in relation to its true value
than well over half of the stocks in its industry.

Ford Equity Research projects that  MMM will outperform the market over the next 6 to 12 months. This projection is based on our analysis of three key factors that influence common stock performance: earnings strength, relative valuation, and recent price movement.

The research firm has 52-Week Price Range between $191.50 - $258.63.

Finally - Jefferson Research states that MMM is showing strong Earnings Quality, Cash Flow Quality, Operating Efficiency and Balance Sheet Quality, and Valuation suggests a lower amount of price risk. When combined, MMM deserves a BUY rating.

Given MMM‘s annual dividend of $5.44 per share this purchase increased my forward annual dividend income by $27.20.

One of my favorite Buffet quotes is the following:

“Long ago, Ben Graham taught me that ‘Price is what you pay; value is what you get.’ Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.”

With the market wild gyrations continuing, I spotted some quality merchandise with a marked down price. Since this company is pretty much all you want in a dividend growth stock, I decided to pull the trigger.

On April 16 I bought 8 (additional) shares of Johnson & Johnson (JNJ) for a total of $1,017.

In this post I will cover some key features of this company, why I liked the stock enough to add it to my portfolio and what this purchase means for my forward dividend income.

Johnson & Johnson, together with its subsidiaries, researches and develops, manufactures, and sells various products in the health care field worldwide.

Its Consumer segment offers baby care products under the JOHNSON’S brand; oral care products under the LISTERINE brand; beauty products under the AVEENO, CLEAN & CLEAR, DABAO, JOHNSON’S Adult, LE PETITE MARSEILLAIS, NEUTROGENA, RoC, and OGX brands; over-the-counter medicines, including acetaminophen products under the TYLENOL brand; cold, flu, and allergy products under the SUDAFED brand; allergy products under the BENADRYL and ZYRTEC brands; ibuprofen products under the MOTRIN IB brand; and acid reflux products under the PEPCID brand. This segment also provides women’s health products, such as sanitary pads under the STAYFREE and CAREFREE brands, and tampons under the o.b. brand; wound care products comprising adhesive bandages under the BAND-AID brand and first aid products under the NEOSPORIN brand.

The company’s Pharmaceutical segment offers various products in the areas of immunology, infectious diseases and vaccines, neuroscience, oncology, cardiovascular and metabolic, and pulmonary hypertension diseases. Its Medical Devices segment provides orthopedic products; general surgery, biosurgical, endomechanical, and energy products; electrophysiology products to treat cardiovascular disease; sterilization and disinfection products to reduce surgical infection; diabetes care products that include blood glucose monitoring; and vision care products, such as disposable contact lenses and ophthalmic products related to cataract and laser refractive surgery.

The company markets its products to general public, retail outlets and distributors, wholesalers, hospitals, and health care professionals for prescription use, as well as for use in the professional fields by physicians, nurses, hospitals, eye care professionals, and clinics.

Johnson & Johnson was founded in 1885 and is based in New Brunswick, New Jersey.

JNJ’s current dividend yield is 2.57% – below the average 3.5% yield I strive for in building my portfolio.

However, the company is featured on David Fish’s list of Dividends Champions, Contenders and Challengers - with an incredible 55  year streak of growing dividend pay-outs.

JNJ’s 5 year dividend growth is 6.61% - with last year’s dividend growth coming in at 5%, leveling off a bit.

The Trailing Dividend Payout Ratio is 54%, leaving room for future dividend growth.

JNJ’s Earnings per Share (EPS) over the last five years shows an -34.37%  decrease. The forward EPS Long Term Growth (3-5 Yrs) looks better with a projection of +7.66% growth.

EVA Dimensions (an equity research firm) states in their April 18 report that JNJ’s Performance Risk Valuation (PRVit) is at the 68th percentile of all firms in its industry, which leads to a recommendation to Overweight.

It adds that JNJ is more attractively priced in relation to its true value than than well over half of the stocks in its industry.

Ford Equity Research recommends a ‘Hold‘ with a 52-week price range of $121.37 - $148.14.

Jefferson Research concludes that JNJ is showing strong Earnings Quality, Cash Flow Quality and Balance Sheet Quality, but Valuation suggests a higher amount of price risk, and Operating Efficiency is weak. When combined, JNJ deserves a HOLD rating.

Given JNJ’s annual dividend of $3.36 per share, this latest increased my forward annual dividend income by $26.88.