In my last entry I discussed building a foundation with a moat around it. One of my “foundation” companies listed was Disney. While Disney is a strong, proven company, the more I think about the low, annual dividend the more heartburn I have with the idea of making DIS a cornerstone of my foundation. I’d still like Disney to find a home in my portfolio someday but I’m leaning towards moving DIS from my foundation and replacing it with PG. PG pays quarterly and is currently yielding 3.2%. With that said I am not saying “goodbye” to DIS but I am saying “see you later”. Hopefully, I see DIS before Star Wars VII hits theaters in December 2015.
I’ve been researching stocks/ETFs where I’d like to invest money within my Roth IRA and there are a lot of appealing stocks and ETFs out there from which to choose. Some stocks are already a small part of my current portfolio while others are on my ever-growing watchlist.
Lately, I’ve been watching several Warren Buffett and Charlie Munger interviews on YouTube and it is amazing how much free advice is out there just by listening to these investing gurus. They’re investing strategy seems to boil down to a handful of basic tenets:
1. Find a company that is understandable to you
2. Find a company with a lasting competitive advantage (or as Buffett puts it, companies with “moats” around them)
3. Find a company with talented and trustworthy leaders
4. Find a company that is well-priced
I’m quite certain that besides these four factors, Buffett and Munger employ other detailed analysis but these factors provide an initial basis for selecting investments. For an average person, knowing a company’s managers or if a stock is well-priced may not be easy. I do think the first two tenets can be applied by almost any investor although none of these are foolproof.
I also heard Buffett talking about finding 6 good investments and that investors which are too diversified are better off sticking to index funds. Based on this, I’m looking for some solid stocks in which to build my portfolio upon. I’d still like to pick some interesting stocks beyond my foundation but my portfolio’s core will be stocks that I feel are safe, solid, long-term performers with dividends.
To start, I have my sights set on three stalwarts that I feel are historically proven leaders in their respective industries. The first three building blocks of my foundation will the following:
1. McDonald’s (MCD)
2. Coke (KO)
3. Disney (DIS)
These aren’t very exciting like Apple or Google but they’ve withstood the test of time. MCD and KO have been steady quarterly dividend payers for decades with ~3% yields. DIS isn’t a strong dividend payer with a yield around 1% and only an annual payout. However, I feel confident in Disney and the moves they’ve made to grow beyond Mickey Mouse and princess movies.
For me, MCD, KO, and DIS are safe choices but I still need to research another 2-3 companies to finish the foundation of my Roth IRA. Some of the candidates are already on my watchlist or are small parts of my current portfolio. More research is needed but PG, CLX, JNJ, and KRFT are on the short list. I’d like to possibly add in an energy company such as CVX or COP but I haven’t made up mind on those yet. More to come.
My initial dividend returns are not very impressive but I’m just starting out and expect this to increase over time. Here’s what I received in dividends during the first 4 months of 2014.
This is a GRAND TOTAL of $0.41. This is measly but it is only a start. I’m looking forward to watching this grow.
Here’s a quick list of my dividend paying investments (stocks & ETFs). Not all of these consistently pay dividends and some of these I invested in prior to my love of dividends.
– Disney (DIS)
– Hasbro (HAS)
– Coca-Cola (KO)
– Nike (NKE)
– Starbucks (SBUX)
– Apple (AAPL)
– Wal-Mart (WMT)
– Microsoft (MSFT)
– Anheuser-Busch (BUD)
– Intel (INTC)
Roth IRA Account
– Activision/Blizzard (ATVI)
– Apple (AAPL)
– Direxion Mid Cap Bull 3x Shares (MIDU)
– J.C. Penney (JCP)
– Procter & Gamble (PG)
– ETRACS Monthly Pay 2x Leveraged Mortgage REIT (MORL)
In the future I plan on investing more in stocks/ETFs that have consistent quarterly or monthly dividend payouts.