Stock Considerations – May 2015

December Dividend Stocks Watch List

Following on from my most recent value stocks watch list, I wanted to note down a few ideas for May stock purchase considerations. As you may have read, I recently sold my shares in the sports retail stock – JD Sports, so I have some extra capital to invest this month. The shares had appreciated over 50% in under one year, and along with their stingy dividend increases (despite having excellent results), I decided to sell.

Adding to Core Holdings is Important, but Boring

So, what is on my radar for this month? Well, there is the obvious increasing to my core dividend holdings such as National Grid and Unilever, but that would be a bit boring to talk to you about. I could also add to my Vodafone position, but that would also be boring – plus the stock is significantly higher than when I last purchased it, having recently increased several more percent this week due to their full year results being released.

BHP Biliton vs. Diageo

So what about new stocks to consider? Well, I have recently been looking at mining and beverages, namely BHP Biliton and Diageo respectively. I don’t really like the fundamentals on BHP Biliton – I know mining is very cyclical, but there isn’t a company in the sector that really ticks all my boxes. So I am leaning more towards Diageo right now. I do not have any exposure to this sector, and Diageo is one of those core dividend paying stocks that form the heart of many a British investor’s share portfolio. However, the yield is not my favourite at just a tad less than 3%. Now, that is not a bad yield for a strong, defensive stock like Diageo, but I am aiming to be closer to 4% in the majority of my dividend paying stocks.

Are Investment Trusts Worth Buying?

I have also been considering opening some positions in investment trusts. I particularly like the fact that they tend to smooth out the payments, and may pay quarterly, and a handful even pay monthly dividends. Somehow that seems kind of awesome and almost too good to be true, but I would be happy with quarterly dividends, and I wish more companies would adopt this model of payment frequency. However I have not really had time to do a proper investigation of investment trusts, so they will be back on the back burner for this month.

Completely Unrelated News

We are going on holiday next week, so I might not make a post. If I do, it will be a bonus – you lucky readers you! So wish us safe travels, and in the meantime, please comment on which stocks YOU are considering for this month… or if you have already bought some, share the details and the WHY of your purchase.

Cheers!

 

19 Comments

  1. Ciao M,
    This is Stalflare from Italy!

    I started following your blog since December last year, when I started walking the first steps into the dividend investing world… Seeing that you basically manage 6 portfolios at the same time makes me feel quite inadequate, but I felt like giving my contribution to the discussion… Diageo is a powerhouse in my view, they have very solid brands that are growing well in emerging markets (this is part of the reason why I have it in my PF). BHP on the other side is the biggest company out there for mining, and despite the fact that the stock is influenced by the prices of all minerals, I feel that it sat nicely in my PF for diversification purposes… Maybe now is not performing, but “it cannot always rain”.
    Keep up the great work,
    Ciao ciao
    Stalflare

    1. Stalflare, I think you are correct – it cannot always rain and ‘we should make hay whilst the sun shines’ i.e. buy stocks in the good times and hopefully they will be able to see us through the bad times… which is why I guess Diageo is such a great stock to own – people will always drink whether to drown their sorrows or to celebrate life!

      Please don’t feel inadequate! All our portfolios are very small compared to some of the other bloggers out there, but I enjoy managing them.

      Cheers

      1. Hi there TV,

        Sorry I actually realised only now that I made a double post last time! My bad. As to the “always drinking theory” I was talking to a professional advisor (a freelance, not one of those bankers), and he had a very interesting theory about spirits and generally alcohol stocks during recessions… They tend to perform really well as more people tend to drink to drive away problems and sorrow. It’s not poetic or anything, but it’s a fact. He was mentioning Campari stock who almost doubled value during the recent EU recession… that doesn’t mean that Diageo cannot fall badly, but they deal in a type of product that will be always on demand, and this is already a good reason to consider them.

  2. Hi TV, first post for me, I follow your blog, keep up the good work!

    I own Diageo and I agree with Dividend Drive up here, it’s quite similar to Unilever for the brands that it can bolster. Normally beverages companies perform better during recessions, but they cover almost all the world with their brand portfolio and some of the products have very good potential in emerging countries.

    BHP is different (I own some share there too), I bought it because it’s the biggest company out there, minerals are always going to be needed, but the spin-offs and the fact that the mineral market affect the price a lot if casting a lot of doubts on wether to keep it or not. Dividend yield is not bad though…

    1. Ciao e benvenuto! I totally agree with everything you said. With regards to BHP, I am just really wary of them. However, since I have no exposure to mining in my NISA account, it may be time to start considering this in much more seriousness for the near future…

      Cheers

    1. I’m quite surprised you don’t already own Diageo… you have a great portfolio anyway, adding a nice touch of Guinness wouldn’t harm it 😉

      Cheers

  3. I could double my deo position. People will find reason to drink year round. I remember the alcohol department always produce more sales and profit at a company where I used to work for.

    For long term holding, you couldn’t go wrong with either.

    Goodluck decidimg!
    Cheers!

    1. Thanks Vivianne. I really agree with you that alcohol stocks are really solid all-round decent investments. I have no qualms about investing in booze, so I do hope that the Diageo price comes back down soon so that I cna buy in.

      Cheers

  4. Got me both Diageo and BHP in my accounts. The recent spinoff of South32 was a nice little bonus – BHP holding their dividend rate AND South32 paying a dividend on its own is bonus for me!

    Looking to add more Diageo. But the cash that becomes available is contending with Hershey’s, which I want to shovel piles and piles into the account.
    Kapitalust recently posted…Charlie Munger’s Secret Investing FormulaMy Profile

    1. Hey Steve,

      Interesting you should mention Hershey’s… I’ve started to see it cropping up on a few people’s sites of late. Who would ever sotp buying chocolate bars, eh? Seems like a decent, defensive stock.

      Cheers

    1. Hi Weenie,

      thanks for the holiday wishes, we had a great time! I am still considering Diageo, but have not taken the plunge yet. Now the price has shot up recently, so I might have to wait a bit longer. If it drops back to around £17.50 or below before it goes ex-div (mid-August), then I might buy some!

      Cheers

  5. I currently hold BHP Biliton and you may not be aware they are currently undertaking a demerger. A split off to be called South32. How this will affect the share price and what value the new shares will be I have no idea. Just thought it may be a consideration.

    1. Hi and thanks so much for stopping by. Yes, I am aware of the de-merger and that she’s make me think that I want the shares even less. At the end of the day, I am building up positions so slowly, that it’s not really essential to be massively diversified just yet, but I like to consider these things for the future.

      Cheers

  6. Diageo still looks pretty tempting at the moment even though the predicted forward yield is scarcely jumping beyond the 3%. As you say, be nicer if it was higher. But you may have to wait a while for that.

    BHP Billiton is an odd one. Things certainly don’t look great from a numerical point of view currently. But over the long term? Much better I think. I am happy to hold for now. I may add further if they continue to weaken.

    I recently–as you already probably know–added new positions in Legal & General and AstraZeneca. Have you thought about adding to GSK? They look good at current prices. I would add more if I was not so heavy in them at present.

    I must say, both National Grid and Unilever look pretty good as well. All sorts look tantalising!

    Anyway, enjoy your trip!
    Dividend Drive recently posted…BUY: Legal & General–Growth and Income Going for a Song?My Profile

    1. Hey D², thanks for visiting.

      All great points you make, especially about BHP… The numbers are somewhat scary so I’m just gonna leave off for a while I think on that one. I’m not that desperate to get into mining as I haven’t finished my investigating into mining just yet.

      Far more interesting is diageo, despite the yield, they just have so many support brands under their wing – truly impressive line up.

      GSK is looking tempting too as you say, at current prices it is somewhat attractive… But Unilever I think is pulling me a bit more, as I can average down quite nicely on that one.

      Decisions, decisions!

      1. I agree. Mining was originally a sector that I did not plan to invest in (for various reasons). But BHP greatly attracted me for its diversity. I must admit, now it has broken itself up (and, consequently, become less diverse in itself) I am not sure I would be as happy to invest in it “from fresh”. Don’t really know though.

        Diageo and Unilever should always be contenders really (and Reckitt Benckiser, though it is too rich for my tastes at present). Both are knocking out a forward yield of about 3% so either would be a good call, I think. Though Diageo is obviously trading on a lower PE at the moment.

        GSK is confusing as it is both defensive and risky at the same point. Clearly the dividend is under pressure as it is very poorly covered. However, the change in policy regarding the cash return was a very good choice. Safeguarding the ordinary yield until growth returns in that way–though not ideal–is encouraging to see.

        Good luck with your choice!
        Dividend Drive recently posted…BUY: Legal & General–Growth and Income Going for a Song?My Profile

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