Saturday, November 18, 2017

3 Stocks I Added to My Monthly Investment Plan

Just a few days ago, I expanded my Monthly Investment Plan to include Omnicom (OMC). Today, I found 3 more attractive stocks offering no-fee Direct Stock Purchase Plans (DSPPs) to add to my monthly investment plan for further diversification. Without further ado, my revised plan is as follows:
TickerRatingDGIShiller P/EYieldPayout ratioMonthly InvestSectorSector TotalSector Percent
NVSA1D17.423.24%0.56$200.00
Healthcare
$600.00
15.00%
SNYA2D19.883.68%0.73$200.00
BDXB+2A39.971.33%0.53$200.00
DPSA2C30.042.66%0.80$200.00
Staples
$400.00
10.00%
GISB1B20.283.65%0.74$200.00
XOMB+1A11.773.84%0.45$300.00Energy$300.007.50%
AFLDA16.742.15%0.36$400.00
Financial
$800.00
20.00%
RLIDA21.211.42%0.30$200.00
BMTCDC26.422.03%0.54$200.00
EMRA2A19.203.27%0.63$200.00
Industrial
$600.00
15.00%
UNPA2C26.952.32%0.62$200.00
VMIDD26.270.93%0.25$200.00
YORWDB45.901.82%0.83$200.00Utility$200.005.00%
AYIDD39.230.32%0.13$500.00
Discretionary
$700.00
17.50%
OMCB2C17.463.46%0.60$200.00
BMSB2A22.402.61%0.58$200.00
Material
$400.00
10.00%
SONC2A24.293.03%0.74$200.00
Total25.342.32%0.59   $4,000.00   $4,000.00100.00%
Rating$%DGI$%
A$1,00025%A   $1,700.0043%
B$1,10028%B      $400.0010%
C$2005%C      $800.0020%
D$1,70043%D   $1,100.0028%
Total$4,000100%Total   $4,000.00100%
Rating is based on Morningstar as follows:
A=Wide Moat; B=Narrow Moat; C=No Moat; D=Not rated by Morningstar
+=Exemplary; [blank]=Standard; -=Poor stewardship
1=Low; 2=Medium; 3=High; 4=Very High uncertainty
DGI (Dividend Growth investing) as follows:
A=25+ years of higher dividends;
B=10-24 years of higher dividends;
C=5-9 years of higher dividends;
D= less than 5 years of higher dividends.

New Stocks Added:
1. Acuity Brands (AYI). This is a wonderful growth stock with an annualized EPS growth of 22% over the past 5 years and 8% over the past 10 years. The dividend yield of only 0.32% is a great tax saving. Its 13% payout ratio is the lowest in my current portfolio. It has a healthy 17% ROE and 0.21 D/E. The Shiller P/E of 39 is a bit expensive, but the stock is selling at the 8th percentile of its 52-week range, so it seems a good time to buy. The minimum monthly recurrent investment is $500, which is why my allocation to this stock is higher than the others, not that I necessarily like it more than the others. This adds further diversification to my allocation to the Discretionary sector.

2. Bemis (BMS). This is a dividend aristocrat with 33 years of dividend growth. Its current yield of 2.61% and payout ratio of 58% are a bit higher for my taste, but I like its modest Shiller PE of 22, healthy ROE of 15%, and decreasing share count. Growth is somewhat slow, however. This adds some diversification to my allocation to the Material sector.

3. RLI (RLI). This is dividend champion with 40 years of dividend growth. Its current yield of 1.42% and payout ratio of 30% are awesome! I also like its modest Shiller PE of 21. Growth, however, has stalled, hopefully only temporarily. This adds further diversification to my allocation to the Financial sector.

Other Changes Implemented:
My monthly allocation to Aflac (AFL) is increased from $300 to $400. I did this mainly to make my overall monthly investment an even $4000. Aflac is one of my favorite stocks with a low 36% payout ratio, a dividend aristocrat with 34 years of dividend growth, low Shiller PE of only 16, despite a strong 8% EPS growth over the past 10 years (historically the growth was in the double digits), and consistently decreasing share count (a rare find in a financial stock).

I tried to focus on stocks with moats as rated by Morningstar and dividend growth stocks. Currently, over half (53%) of my monthly investment goes to stocks with some kind of moat per Morningstar rating. Only 5% goes to stock without moat (SON) according to Morningstar, and even that I may quibble with given SON's strong financial metrics. The rest (43%) are not rated by Morningstar mostly due to low market caps, many of which I would argue have some kind of moats.

The majority of my allocation (72%) goes to Dividend Growth stocks with at least 5 years of increasing dividends. A healthy 43% goes to Dividend Champions with over 25 years of increasing dividends. Only 28% goes to 4 non-DG stocks, two of which (SNY and NVS) are foreign stocks with different dividend policies than U.S. stocks and two of which (VMI and AYI) are low yield growth stocks with very low payout ratios that are current reinvesting earnings for future growth and have a lot of room to grow dividends in the future, so essentially they are in line with the spirit of DG investing as well.

Overall investment level is now at an all-time high of $4000/month, a $1000 (33.3%) increase from the last update, but my current income is more than adequate to support that. The number of stocks increased from 14 to 17. Portfolio yield decreased (6.1%) from 2.47% to 2.32%. Shiller PE, however, increased slightly (4.0%) from 24.37 to 25.34. This is a good tradeoff overall, as the payout ratio has decreased from 60% to 59%. 

Wednesday, November 15, 2017

Adding Omnicom (OMC) to My Monthly Investment Plan

It has been seven months since I last modified my monthly investment plan. Today, I found another investable stock offering a no-fee direct stock purchase plan (DSPP): Omnicom (OMC). Ever since loyal3 closed shop, my monthly investment plan has been pared significantly. With this new addition, my current monthly investment now totals $3000. OMC provides additional diversification to my portfolio by adding a new sector and limits the max allocation to any sector to 20%.
TickerRatingDGIShiller P/EYieldPayout ratioMonthly InvestSectorSector TotalSector Percent
NVSA1D17.350.00%0.00$200.00
Healthcare
$600.00
20.00%
SNYA2D23.093.67%0.85$200.00
BDXB+2A40.561.33%0.54$200.00
DPSA2C32.152.65%0.85$200.00
Staples
$400.00
13.33%
GISB1B21.683.72%0.81$200.00
XOMB+1A11.173.78%0.42$300.00Energy$300.0010.00%
AFLDA16.862.13%0.36$300.00
Financial
$500.00
16.67%
BMTCDC27.982.04%0.57$200.00
EMRA2A19.463.26%0.63$200.00
Industrial
$600.00
20.00%
UNPA2C29.402.10%0.62$200.00
VMIDD26.100.94%0.25$200.00
YORWDB44.791.86%0.83$200.00Utility$200.006.67%
OMCB2C16.883.57%0.60$200.00Discretionary$200.006.67%
SONC2A24.083.06%0.74$200.00Material$200.006.67%
Total24.372.47%0.60   $3,000.00   $3,000.00100.00%
Rating$%DGI$%
A$1,00033%A$1,20040%
B$1,20040%B$80027%
C$2007%C$80027%
D$60020%D$2007%
Total$3,000100%Total$3,000100%
Rating is based on Morningstar as follows:
A=Wide Moat; B=Narrow Moat; C=No Moat; D=Not rated by Morningstar
+=Exemplary; [blank]=Standard; -=Poor stewardship
1=Low; 2=Medium; 3=High; 4=Very High uncertainty
DGI (Dividend Growth investing) as follows:
A=25+ years of higher dividends;
B=10-24 years of higher dividends;
C=5-9 years of higher dividends;
D= less than 5 years of higher dividends.

The overall plan portfolio's P/E 10 is now 24.38, equivalent to an earnings yield of 4.10%, which is a little expensive. The overall yield of 2.69% is also a bit high, giving a payout ratio of 66%, which leaves little room for growth, though it is at least sustainable. I will continue to look for stocks with lower payout ratios to replace the high payout offenders such as those in the Staples and Utility sectors.