I have been preaching quite a bit recently regarding the importance of keeping a watchlist on hand for fire sales in the stock market. With rampant volatility run amok, being prepared with some stocks you’d like to own and knowing the prices you’d like to pay is critical to taking advantage of opportunities.
While I have already put +$8,000 to work in the past short while, I still have a fair amount left to invest. Having been saving quite a bit of cash for times like this, I am well prepared to deploy capital if I see some hot deals come my way.
Here’s what I’m not doing: Paying attention to what central bankers and market commentators are running off at the mouth about. If you’ve been following the business news whatsoever, you no doubt have heard Janet Yellen’s constant rhetoric about whether she will or will not raise interest rates. This is all just noise. The reality is that high quality businesses will survive high or low interest rates. They will survive another round of quantitative easing. They will survive pretty much anything the Federal Reserve can throw at them and still keep on trucking, paying rising dividends all the way along.
In any event, there is nothing I can do about interest rates. I am not going to fret over things outside of my control. What I can control is how much capital I put to use in the market to create a rising income stream for myself via dividends.
With that out of the way, I’d like to share three companies with you that I am interested in including to my portfolio:
Table of Contents
Utility
Fortis Inc. (FTS) is an electric and gas utility company. It has total assets of more than $26 billion. The company also owns some hotels and commercial real estate from Canada to the Caribbean.
FTS impressively holds the record for most consecutive dividend increases among public corporations in Canada. With 42 years and counting under its belt, FTS has demonstrated the reliability of its earnings streams and its willingness to share profits with stakeholders. The most recent increase for the dividend paid March 1 of this year was for a healthy 6.3%.
FTS currently yields ~3.75%. While I do not expect a huge dividend growth rate, the consistency of operations with FTS coupled with moderate dividend boosts is attractive to me. I will consider adding a stake as the company’s dividend yield approaches 4%.
Oil
I have covered the two companies in this section extensively in an article I commissioned earlier this year for Seeking Alpha.
Suncor Energy Inc. (SU) is the leading integrated energy company in Canada.
From the company’s Second Quarter 2015 report, CEO Steve Williams had this to say:
Suncor generated strong cash flows in excess of $2.1 billion during the second quarter of 2015, more than enough to fund our capital requirements and our dividend….
Accordingly, SU actually increased its dividend by a cent from $0.28 per quarter to $0.29. The company has been aggressively increasing its dividend over the past few years and this recent boost further demonstrates how well capitalized the company is amid a challenging operating environment in its industry.
Shares of SU have been bouncing like a yo-yo for the past year as the oil industry’s glut has left investors unnerved. Still, I believe there is value in SU at the right price. The dividend yield is ~3.35% at the moment which is somewhat lower than I would like for taking on risk in oil at this time and relative to the opportunity cost of investing elsewhere.
Imperial Oil Limited (IMO) is an integrated oil company operating in Canada. It is the only Canadian industrial company with a Standard & Poor’s rating of AAA.
IMO is majority owned by Exxon Mobil Corporation (XOM) which provides it with an incredibly strong financial backer with well diversified operations.
One of the reasons I have shied away from investing in IMO for many years is its rather low dividend yield. It is currently ~1.35% which means it would take years even with a high dividend growth rate to kick off significant cash flow. Capital gains may get baked in if the dividend continues to rise, but based on my Five Year Plan, I will need cash flow and not paper gains to finance my lifestyle. Still, I do not want to be too short sighted and pass up a quality company on the basis of yield alone.
As such, I will consider IMO with a yield around 1.5% if the opportunity presents.
Conclusion
Having a watchlist is one of the best strategies a long-term investor can employ for making the most of market volatility.
As you can see, the energy sector currently has my attention. Given the amount of investing I have done in financials and telecoms, I am now looking to diversify a bit further into oil and utilities at the right prices.
Thank you for reading.
– Ryan
Which stocks would you like to add to your portfolio in October?
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