Findependence Canada

Finding financial independence from scratch

Stocks we’re buying heading into – June, 2019 edition

With trade war issues in the forefront of the media, stocks are beginning to feel downward pressure. We’ve been using this time to focus more on individual US holdings and to really build up a nice foundation of dividend paying stocks that we love.

As a Canadian investor, these US stocks we’re buying will all be going into RRSP accounts so as to avoid the withholding tax you would experience if you had these in your TFSA or Unregistered accounts. For anyone who’s unaware, a Canadian buying US stocks outside of the RRSP accounts will face a 15% withholding tax!

Now onto the contestants :

1.AT&T (US market) – A great telecommunications company with 35 years of dividend growth, AT&T has a spot on the US dividend aristocrats and with a payout ratio in the 50’s it looks poised to maintain its modest dividend growth moving forward (dividend growth of 2.13% over the past 5 years). Couple a strong growth history with a juicy 6.35% starting yield and you’ve got yourself a very intriguing buy for someone who plans to fund their lifestyle off of dividends. A PE ratio of only 12.1 currently also indicates that AT&T is quite possibly undervalued right now.

Disclaimer: We are long AT&T and have just recently purchased shares at $31.40

2. MMM (US market) – With a dividend growth history of 60 years, a payout ratio of 55% and an average dividend growth of over 16% per year the past 5 years, MMM (or 3M) is a must watch for us. There have been concerns with a dividend cut coming, and maybe that will ultimately happen but it’s just not something that i’m buying at the moment. Companies that have run up dividend growth streaks like the one MMM has don’t give that up easily as it is a large part of who that company is to investors. If you look past the current media noise towards this company and focus on the numbers themselves you may be able to find yourself a great deal here, It is not that often that companies like this go on this kind of sale (52 week high of $219.75 now trading at 52 week lows) so this is a company we will definitely be watching closely over the coming months.

Disclaimer: We are long MMM and made a small entry position at $167 and will likely add more if the drop continues

3.PEP (US Market) – Pepsi, another great company that all readers will have heard of and see in stores daily. Despite a recent run up that’s seen the stock move up roughly 10% over the last 3 months we still see great upside within this company. Pepsi sports a solid 2.94% entry yield currently and when you couple that with a 46 year payout growth history and a 5 year average dividend growth rate of 9.88% it’s easy to see why dividend growth investors like us are interested in this soft drink/snack food giant.

So, there they are. Our top 3 picks moving into the month of June. As usual, there will always be a focus on trying to find value, even if it means we face a little downside potential in the short term. As Warren Buffett suggests “be greedy when others are fearful” – not always easy advice to follow but advice that can definitely pay off in the long run. We will be watching closely over the coming weeks and months and in our case will be hoping to see significant drops to really load up on great buying opportunities.

As always, thanks for reading. Leave any comments or questions below and we’ll be sure to get back to you.