It’s that time of the month again to prepare my little shopping list for the upcoming month. And honestly, I’m happy that March is behind us because COVID and this stuff in Ukraine have distracted me a lot from looking forward and investing. Having said that, fingers crossed that the Ukrainian forces will be able to continue to push back and send the invaders home!
And I know it sounds cruel and surreal, but the world keeps on turning and it stays important for me to stick to my plan. I feel I can’t afford to lose another few months of not dollar-cost-averaging into the stock market.
Actually, this is one of my biggest learnings which matters even more today. There is currently a lot of uncertainty in the world which might easily trigger our thinking into postponing some investments by anticipating better opportunities.
I’ve been a strong victim of this because I thought the stock market was in heavily overvalued territory back in 2015 and 2016. I was continuously waiting for a pullback because I wanted to get maximum value out of my hard-earned money.
Unfortunately, that time never came and that’s how I lost opportunities to buy for instance Johnson & Johnson at 100 USD.
This is not to say that this time isn’t different. Of course, we might see a severe market crash coming up this year and several well-respected investors like Ray Dalio are cautioning about this.
But this is where conviction is needed. I re-evaluate my portfolio on a regular basis and I believe that most of my top 10 dividend-paying stocks are safe. This is not to say that their share prices can’t get hammered. I just don’t foresee strong dividend cuts within my top 10 (see below).
Having said all of this, I think it’s fair to say that time in the market beats timing the market.
So let’s get started!
Top 10 stocks in my portfolio by absolute dividend income:
- Shell PLC
- AbbVie Inc
- Omega Healthcare Investors Inc
- Exxon Mobil Corp
- Unilever plc
- Koninklijke Ahold Delhaize NV
- Danone SA
- Chesnara Plc
- BASF SE
- 3M Co
I guess the stock I would doubt most about during a severe economic downturn would be Omega Healthcare Investors. It had already so much to suffer over the last few years so I don’t know if it could face another strong pressure on its tenants.
CareTrust REIT, Inc.
I would straight away like to start with a big unknown to me and this is CareTrust REIT ($CTRE). It’s a stock that popped up on my dividend stock screener because it effectively ticks all the boxes. Besides that, it’s a Real Estate Investment Trust and I’m currently underweight in this sector.
Hence, I’ve been eagerly looking for some REITs to diversify a bit away from only having Realty Income and Omega Healthcare. And it isn’t without success, because not too long ago I was able to initiate a position in Castellum at 200 SEK per share. Castellum became even more interesting right now because recently they decided to change their dividend payout policy from bi-annual to quarterly 💪
But let’s get back to CareTrust REIT. CareTrust is a REIT engaged in the ownership, acquisition, development, and leasing of skilled nursing, seniors housing and other healthcare-related properties.
So effectively this means that this REIT is positioned to benefit from boomers getting older and their growing needs for high-quality senior care facilities. This makes this company also a bit of a risky play because skilled nursing facilities have been under pressure in the last year due to the risk of further regulation and changes in reimbursement policies. In other words, high risk with a potentially high reward.
If this triggers your curiosity, I would suggest reading their investor presentation as they can explain their business and performance much better than I can at this moment in time.
One of the things that you will see there is their performance among their peers. They claim to have a 15% compounded annual growth rate from a stock price point of view and to have the second-best 5-year total return of their entire cohort of HealthCare REITs. And this includes Omega Healthcare Investors which is one of my largest dividend payers in absolute terms.
I also like this company as a dividend payer. It currently yields 5.65% with a 5-year CAGR of 8,25%. This is a lot of growth during a period where there was a lot of governmental pressure and a horrible pandemic. Maybe that’s also the reason why their latest dividend hike was a meager 3.77%?
However, it seems that we don’t need to worry yet from a dividend payout point of view. CareTrust REIT is paying out 73% of forward FFO based on analyst estimates. This also gives it a relatively low forward FFO/Price multiple of 13.3 which is one of the lowest among its peers.
Though, I wouldn’t be able to say yet whether their dividend is safe or not. For that, I would still need to do further research.
Maybe that’s where you might be able to help me out before we go to the next stock on this watchlist? Does anyone of you know more about CareTrust? Does anyone of you own some shares in it?
I don’t think Siemens needs a lot of introduction if you follow me already for a bit longer. It’s one of those iconic engineering companies that almost every European citizen recognizes.
And it’s hard to ignore Siemens, because most of us might see the brand on a daily basis. As an example, it might be the train you sit in that brings you to work or the windmills you see when you’re going to work by car or bike.
In that regards it’s probably a stock that would fit an investor like Peter Lynch. In his book One up on Wall Street, he writes about buying stocks that you know and are familiar to you. It allows you to better understand their business and to judge whether their products are of high quality.
Of course, it has to be at the right price, and that is where Peter explains some basic metrics like the P/E and PEG ratio which includes the growth component.
And this is also where Siemens is becoming attractive again because by its nature it’s a rather cyclical stock. Just 4 months ago it was still trading in the 150s and since then it dropped all the way to 122 Euro right now.
This price drop means that Siemens currently trades at a P/E multiple of 15.46 and a PEG ratio of 1.62 which is not too bad for us. And from a dividend point of view, it also starts to become attractive again, because it pays 4 Euro in annual dividends. This translates into a 3.28% dividend yield and a payout ratio of 63%.
The question is if now is the right time to buy the stock? So to help you out there, my fair value estimate is 116.16 Euro for Siemens based on a discounted cash flow analysis.
But to be honest, this doesn’t answer the full story. The fact is that Siemens is a cyclical stock. This means that the price is likely to drop much further during a severe market crash.
However, the question I ask myself lately more often is: do I want to buy companies like Siemens at the bottom of a cycle?
The answer to that right now is NO. I decided that I want to buy companies like Nike, Microsoft, Apple, and Johnson & Johnson during a severe stock market crash.
That’s also why Siemens is on the watchlist today. The company is near my fair value target and that means that I wouldn’t mind increasing my position in the stock a bit further. Psychologically I can deal with a 30% further share price decline.
I’m in it for the growing dividends and the high-quality fundamentals of the business.
Check out my full Siemens stock analysis if you are curious to learn more about my thoughts and conclusions (video from Dec 2021):
It’s hard for me to ignore Viatris right now. I also did a video about this stock not too long ago and since then the price dropped quite a bit after their latest earnings report. The general narrative in the market was about their poor guidance, but I believe it was also due to the headlines in the report.
Those headlines looked really poor on the earnings, because of non-cash expenses of approximately 1.3 billion (875mln restructuring & integration, 264mln EpiPen settlement, and 226mln product-related cost).
On top of that, they also decided to sell their biosimilars portfolio to Biocon Biologics, but in my opinion with very attractive terms. In a nutshell, they will get a good price for the business and they get a 12.9% stake in Biocon which means that they will still benefit from the upside of the biosimilars portfolio.
This is a lot of course, but the restructuring costs really shouldn’t come as a surprise. I guess we just wanted to see those a bit lower so that we get this stuff behind us.
Though, the good news is that the cash flow numbers were very strong again. This is also where the attractiveness of the stock lies. Yes, the overall revenue is expected to slightly decline over the next few years, because most of these products are established products and off-patent.
But sometimes these kind of companies can make very good investments. As an example, it currently trades at a Free Cash Flow per share multiple of 6.7 and a forward P/E of 2.9. This is extremely low, even for a business that might struggle to grow.
At the same time, the company is very committed to paying a growing dividend and I see no reason why they shouldn’t be able to do that in the upcoming years. The stock currently yields 4.5% with a payout ratio of 30% based on Free Cash Flow.
This gives them enough room to continue to pay off debt and increase their balance sheet strength. Unfortunately, this is how it often goes when a blue-chip company spins off a line of business. They usually add a lot of debt to it so that they can clean up their own balance sheet.
Hence, as investors, we want to keep a very close eye on this and we want to see that management continues to pay off debt first, before doing anything else.
In the meanwhile, I will slowly build this tier-4 position out over the next few months. I’m not in hurry and it will never be a large part of my portfolio. For that, it’s simply lacking some quality to ever become a foundational stock.
ASR Nederland & T Rowe Price Group
Last but not least, ASR NL and T Rowe Price Group are also on this list, but I think it’s better to just check out my thoughts in the most recent videos on YouTube if you haven’t done so yet:
That’s it from my side! April doesn’t seem to be the month where we will get to benefit from steep market declines. Hence, the ultimate Tier-1 stocks are not on sale yet and are neither trading at reasonable values right now.
That’s why I continue to build out my positions in Tier-3 and Tier-4 designated stocks at this moment in time. They typically offer increased dividend yields, but it comes a bit at the cost of quality.
Though, that’s probably not entirely true, because T Rowe Price group and Siemens are definitely high-quality companies!
Having said that, these are some of the stocks that I’m currently looking at.
I would now love to hear from you as well in the comment section below:🙏
- What are your thoughts about CareTrust REIT?
- What are the stocks on your watchlist in April?
- Any suggestions for me to look at?
Wishing all of you ever-increasing dividends and lots of dividend reinvestment in April. Let’s pump that amazing snowball! 💪
European Dividend Growth Investor
I’m not a certified financial planner/advisor nor a certified financial analyst nor an economist nor a CPA nor an accountant nor a lawyer. I’m not a finance professional through formal education. I’m a person who believes and takes pride in a sense of freedom, satisfaction, fulfillment and empowerment that I get from being financially competent and being conscious managing my personal money. The contents on this blog are for informational and entertainment purposes only and does not constitute financial, accounting, or legal advice. I can’t promise that the information shared on my blog is appropriate for you or anyone else. By reading this blog, you agree to hold me harmless from any ramifications, financial or otherwise, that occur to you as a result of acting on information provided on this blog.