Dividend Champion Stocks – August 2014

1-Fullscreen capture 8172014 22409 PMTo start off this months post, I’d like to start by presenting a Year To Date chart (from Google Finance) of the S&P 500 (Large Cap), Wilshire 4500 (Small Cap), and MSCI EAFE (International Stocks).  When looking at the broader market this year, we can split the action up into 5 parts:

  1. January decline
  2. February recovery
  3. March – late May sideways action
  4. Late May – Early July rally
  5. July – August decline

In contrast to the popular “sell in may and go away” saying, investors were rewarded for staying in the market through June this summer, though those gains have been eroded by recent downward action July and early August.  The last weeks action shows an upward trend, but will it continue into September, or will we see another decline before the typically strong months of Oct, Nov, and Dec?  You can see from the chart above how much better the Large Cap stocks (TSP C Fund) are doing than the Small Caps (S Fund) and Internationals (I fund).  The action since July has shown much more of a downside to the Small and International stocks, with no more upside than the large caps have, thus they are leading by a fair margin.

When investing in individual stocks for the long term (10, 20, 30 years or more), the above action is not as important as you may think, as long as the long term (think decades) trend is up.  Sure, you could taper off your purchases after an extended multi-year rally as we are currently experiencing now, holding cash for “better prices.”  Or you could realize that you’re probably not a great fortune teller and that the best way to success in the market is through steady contributions into the best businesses out there…the ones better at making profit, and increasing it, year after year.  It may be true that the market as a whole is overvalued, but for the long-term investor, there is plenty of value to be had out there today.

Changes to the Series

As always, we will be starting with the list of dividend champions, contenders, and challengers, and try to highlight the ones with the best apparent valuation right now.  There are a few changes to the post this month. First, I’ve grouped the stocks in similar fashion to the CCC list where all of the data comes from, the three groups being:

  • Champions – 25 Years or more of annual dividend growth
  • Contenders – 10-24 Years or more of annual dividend growth
  • Challengers – 5-9 Years or more of annual dividend growth

Stocks with less than 5 years of annual dividend growth may be worth investing in (and in fact I already have invested in a few), but will not be included in this series.  I’m not sure why I didn’t do this before, I think it makes more sense.  Second, I have replaced the Tweed Factor and Chowder Rule with a “TI Ranking,” which is nothing more than an adjusted Tweed Ratio which factors in all four displayed values of Dividend Growth Rate rather than just the 5yr rate.  The calculation is:

Yield + Average (1,3,5,10 year DGR) – Earnings Per Share

This ranking will see some tweaks over the months and years (or however long I think this series is worthwhile) to try and capture a good quick comparative ranking of stocks without needing to get into too much detail to slow the process down.  Third, I will include all stocks listed as “good buys” and “waits” in one chart from here on out, with a line separating the buys and waits.  Placement of this line is subject to your investing style and goals…you may want to place it higher or lower than I do.  Regardless of where the line is, the intent of the charts is to show the best statistical investments at the top and the lesser ones near the bottom (I say lesser because every single one of these is in the top few % of stocks on the market, all ALL likely represent good long term investments).  The stocks at the top of the list show higher dividend growth and higher earnings per price you pay for the stock than all others.

The Champions

(25 years or more of annual dividend growth)

Aug 1Some comments about this months Champions:

  • As before, purple indicates stocks that we own in our Roth IRA.  We recently added KMB and GIS after pullbacks below their 200-day Moving Average as seen below for KMB.  History shows that these stocks don’t stay below their 200-day MA for very long before recovering, so it seemed like an opportune time to buy.  Blue stocks were previous “waits” for one reason or another, but that distinction is getting eliminated as it changes every month, and I don’t know how helpful it was anyway.  You can see how many previous “waits” not appear near the top of the chart.1-Fullscreen capture 8172014 25635 PM
  • HP remains on the top of the list due to their recent large dividend increases.  This trend will not continue for ever, and will level off at a more realistic growth rate within the next few years, likely.  I’m still trying to work out how to better place them in the chart.
  • Keep an eye on the MR% Inc (most recent dividend increase %).  If it is much lower than the 1 yr and 3 yr DGR (Dividend Growth Rate), that that stock will need a big increase next time to maintain their growth rates.  Example: WMT, CLX, and KMB all had recent increases much lower than anticipated.  Look for the next increase to be than much higher than average, or it may be a sign that growth is slowing.
  • This month the black line appears between PEP and KO, representing the “best buys” above and “not as good of a buy(s)” below.  There really is no magic to the placement of the line…as the differences between the stocks is small.  Stocks below the black line are ones I would wait for better entry points on, for the most part, and ones above are in consideration to be bought today.

 

The Contenders

(10-24 years or more of annual dividend growth)

Aug 2

Thoughts:

  • Lots of good companies with fantastic DGRs here: many near the top of the chart have 10 year growth rates in the 20-30% range.  How many other places in life are you going to increase your income by 20-30% over 10 years?
  • As with the Champions above, stocks with Yields below 2%, P/E higher than 24, and DGRs below 6% have been cut from the list.  These stocks represent the best of the best here.
  • The black line appears near the bottom, as I couldn’t find a worthy discriminator that showed a good break point, aside from the bottom three being slightly overvalued for the growth rates that you are getting.  The others appear to be good long term buys right now.
  • Take a look at the Yield and DGR columns.  This chart shows that they are not exclusive all the time.  In fact, you can see that we currently own 3 companies near the top of the list that demonstrate both high yield 3%+ and high DGRs.  You don’t always have to sacrifice yields (often times around 2%) for higher growth rates.

The Challengers

(5-9 years or more of annual dividend growth)

Aug 3Challengers are companies that are (relatively) new to the dividend growth world.  As such, they are often smaller, newer companies with more room for growth, but also more room for failure to continue that growth.  It would be wise to fill your portfolio with companies from the above two groups (champions and contenders) and sprinkle in a few higher risk investments from this group.  You can see that we have done that very thing with DPS, CCE, and SDRL from this group.  Each has some thing unique going for it that made it a worthy purchase over one of the champions or contenders from the same industry:

  • DPS and CCE represent investments in the soda/beverage industry, but at higher growth rates (dividend and stock price) than KO and PEP.
  • SDRL is a high yielding stock (more than 10% at the time of our purchase) that also show high dividend growth.  This combination is not available in the largest oil/gas companies (XOM, COP, CVX, BP, RDS.B (which we own already anyway)).

Remember, the less you know about a company (and the less of a track record of dividend growth), the more research you need to do before buying.  If a new investor told me they hadn’t done too much research, but were thinking about investing in XOM, JNJ, WMT, and KO, I’d probably say “that sounds like a very solid plan.”  These are some of the largest companies in the world with many decades of proven earnings and dividend growth- pretty safe investments wouldn’t you say?  On the other hand, if they said they were thinking about investing in CPA, FAF, and CPA becuase they have fantastic DGRs, I would caution them to make sure they understood the companies, how they make money, and how they plan to increase profits for decades to come.

Looking to the Future

So far this (tax) year, we’ve invested in 8 companies.  You can see the details of our purchases on the Portfolio page.  In the coming months, I’ll be looking to commit $5,500 to our second Roth IRA before the end of the year.  Purchases will either be in $1,000 increments for new stocks, or $500 increments to supplement existing positions.  The goal is to target $1,000 positions in 30-40 companies before we begin to grow existing positions in earnest.

With only $5,500 allowed per year and so many quality companies out there, deciding which companies to invest in will not be easy.  Then again, if we follow what the numbers above are telling us, we should be giving ourselves the best possible chance for good outcomes, and solid long term investments.

Until next time.

 

 

Beer Camp Review: Torpedo Pilsner and Maillard’s Odyssey

As promised in the Intro and Unboxing Post, we’re going to review our way though “Beer Camp,” the collaborative 12 pack by Sierra Nevada and 12 other breweries, released in mid to late July.  If you haven’t seen the intro, check it out.  The individual reviews will be linked there as they are completed, so they can be accessed from one location.  I don’t plan on doing a full review on each, as that would likely take too long given my schedule, and what can I say, in the craft beer world, fall is looming, and pumpkin ales wait for no man…  But rather a more concise review similar to the format of Thirsty Thoughts.  I will be attempting to rank all 12 beers from best to worst, which will be tricky, as they will be reviewed over the course of several weeks.  Why bother?  2 reasons- it’s a fun mental exercise to try and catalog and compare 12 beers over time, and more importantly, though this collaborative 12 pack is supposed to be a “one time thing,” I imagine if any of the beers are home-runs, we’ll see them again.  It would be nice to know what the best ones are.

Selection of the beers for review will be completely random.  First up is:

Torpedo Pilsner “Hoppy Pilsner” – Sierra Nevada / Firestone Walker

1-DSC_0935

Torpedo Pilsner is a hop-forward take on the crisp classic lager. We and the folks at Firestone Walker share a passion for New Zealand hop varietals, so we loaded our legendary Hop Torpedo with southern hemisphere hops for a fruity, floral twist on the pilsner style.

Just down the road from us in California’s Central Coast wine country, this rock star brewery has earned “Mid-size Brewery of the Year” at the World Beer Cup four times. Like us, Firestone is passionate about hops. Their skill with the ingredient shines in their Pale Series and elsewhere in a long beer lineup driven by a premier brewing team.

The pour begins with bright, clear, golden color, as you would expect from it’s pilsner style.  The carbonation appears massive- so much so that I had to wait a bit to finish pouring the remainder of the bottle into the glass.  The bubbles rising from the bottom range from very tiny to huge, and as the head recedes it reveals huge foamy bubbles and more lacing than I expected.  I don’t drink pilsners very often, but I must admit, this does look good and refreshing.

1-DSC_0939Aroma is reminiscent of Southern Tier Eutotrash Pilz (not reviewed), it’s grainy and full of cereal with a toasty quality, and honestly carries the smell of cut/dried grass.  I should note that 10 minutes after the pour, a solid quarter to third of an inch of head still remains…impressive.  The hops are there- mostly floral in nature- I don’t get much of the citrus or pine aromas.

The taste is in line with the aroma, with a significant bitter edge.  There’s honestly not as much going on flavor-wise as I expected.  At 5.2% ABV, the flavor is “sharper” and a bit stronger than you get from an average pilsner, and you can almost taste the alcohol, which is surprising, but not a bad thing for me.  As with the smell, the hops are there, but not as much as I expected from the name and description.  Then again, as I sit here and think about it, and (more importantly) as the beer warms up, I start to notice more and more of a citrusy and tangy flavor…the New Zealand hops are finally coming through.

1-DSC_0940I can see this beer doing quite well with the beer reviewing public, who generally seem to prefer beers on the hoppier and bitter end of the spectrum.  Let’s face it, there isn’t a lot of competition for craft beers in the pilsner genre is there?  I will say that you should be prepared for a significant amount of bitterness- if that’s your thing I imagine you’ll like this quite a bit.

And now for something completely different.  The blind fridge grab reveals…

Maillard’s Odyssey “Imperial Dark Ale” – Sierra Nevada / Bell’s Brewery

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Rich, dark, and roasty. That was the concept Bell’s beer guru John Mallett aimed for and, true to John’s vision, Maillard’s Odyssey is exactly that. Its name honors the Maillard reaction—the “browning” of sugars and amino acids—that creates the wonderful caramelized toffee-like and roasted flavors so abundant in this beer.

Bell’s has done a lot to raise the Midwest’s craft beer bona fides. They are masters of many beer styles from their portfolio of top-notch American stouts all the way through to the alpha acid assault of their Hopslam Ale. Bell’s constantly reinvents beer styles and refines recipes with artful mastery and an oddball slant.

The pour results in a massive, creamy, yellowish/brownish/white head, perfectly even in it’s consistency.  After 10 minutes of pictures, uploads, and writing, about a third of the initial 1.5″ still remains.  I can’t really see  into the glass very much, but I can see tiny size bubbles rising on the edges.  As the head compacts, it gets darker, and begins to hint at chocolate and stout-like carbonation.  The color is, well, extremely dark…even held up to bright light, I can’t discern any sort of tint in the sea of black.

1-DSC_0952The aroma is all things dark.  Bitter chocolate, coffee, dark roasted and smoky malt, nuttiness and bitterness at the same time, like almond skins (I know, weird).  You can smell hoppiness, and you can definitely smell the high alcohol.  I have a feeling, if this is sweet, that there will be the typical tangy/sweet dark fruit flavors like plums, prunes, dates, etc, though there is so much going on that they aren’t very apparent in the aroma.  There is a sort of “dust” smell.  Musty isn’t quite the right word, as that implies other undesirable smells.  It’s more the smell you get when you breathe in a lot of dust.  Sounds bad, but it’s not in this case, the other aromas definitely dominate.

1-DSC_0946How something can be so intense, and yet not overpowering, is puzzling.  The same flavors from the aroma are there, with one notable difference: the “buttery” flavor (perhaps most prominent in things like Fat Jack Double Pumpkin).  It’s hard to describe, but I think it’s a combination of savory flavors with just enough sweetness to dull a lot of the bitter, but not take it over to the sweet side.  You would think that something of this caliber might be heavy, and possibly difficult to drink, but I have to say, it’s not.  The combination of aroma, flavor, and texture are more reminiscent of strong ales than stouts and porters.  I’d like to once again point out that the classifications on the two popular reviewing sites disagree, and once again, I agree with RB (American Strong Ale) over BA (American Porter).  I guess it’s close, but this just doesn’t come across as heavy as a porter to me in terms of mouthfeel.

1-DSC_0948I’m going to straight up agree with the brewer’s vision for this collaboration ale: rich, dark, and roasty, but I’d like to add “well balanced” and “surprisingly drinkable.”  The dark flavors, the smokiness, the bitter balanced just enough by sweet, and even the alcohol…nothing seems to overwhelm anything else.  I’ve got to say, this is exactly what I was hoping to experience in a 12 pack such as this, beer that was different than anything I had ever had, and from a brewer(y) that I had never had.  Oh, and that tastes good.  This delivers on all three.

I’m only 2 beers into Beer Camp, but I feel like I may have already found one of the top brews.  We’ll see!  Stay tuned.

 

Thirsty Thoughts – Abita, Shipyard, DuClaw

Thirsty Thoughts is a series where I informally review several beers, and sometimes talk about whatever else is on my mind.  The last post (and the first of the series) is here.  In this series, I focus on simple ratings: was it good, bad, or ok?  Would I buy it again?  The resulting answers determine the smiley (or frowney).

1-IMG_2568Abita Strawberry Harvest Lager  :)

The visual begins with soda pop carbonation- huge bubbles forming at the bottom of the glass and racing to the top.  It ends in a mostly clear, just slightly orange yellow color.  The aroma is very sweet and fruity…with very little typical beer aroma at all.  It could almost pass for Strawberry soda.  I would describe it as strawberries covered in dark brown sugar.  It’s intoxicating, if not overly sweet.  Most fruit beers smell pretty good, but can quickly go downhill from this point forward…lets see if the sweetness carries forward into the taste.

I’d say the taste is a pretty good balance of 3 main flavors: strawberry, sugars, and grainy lager.  A lot of people might be turned off by the amount of sweetness (and this could very well be a big reason for the low ratings on the big 2), but as I’ve said before, I expect fruit beers to carry the amount of sweetness that the ripe fruit would naturally.  Strawberries can (and should) be very sweet, and also a bit tangy, and this beer follows course with both.  There’s not really too much else there- little bitterness, little aftertaste, just strawberries and sugar.  Or sugar covered strawberries…so delicious.

I wouldn’t hesitate to recommend it if you know what you are getting in to- then again, you should pretty much expect something like this when buying a fruit beer, shouldn’t you?  It’s light, easy to drink, and would substitute well for (or pair) with dessert!  It’s not to the level of Hell or High Watermelon, which I recently reviewed and enjoyed so much that I went out searching for more.  But it was a very enjoyable drink.


1-DSC_0942Shipyard Melonhead   :|

Appearance is clear, brown-yellow in color.  Massive even sized carbonation, medium in size, so much of it that the head was maintained for 5 min plus.  Aroma- pink cotton candy (whatever flavor pink is), sugary strawberry (much like the above coincidentally), not much melon to speak of though.

Flavor is sweet, sweet, sweet.  I really feel like the pink cotton candy is fitting- it’s mostly just sweet, with a touch of fruit flavor.  The overall palate approaches that of soda- it’s that sweet.  After all of the sugary fruity flavors in your face (blueberry, strawberry), the melon flavors appear behind them.  Is it more cantaloupe or watermelon?  It’s hard to say….maybe it’s just both.  The finish carries many of the same flavors as Sam Adams Bluberry Hill Lager (which I enjoyed a lot, but I feel like that flavor was more natural and straight up blueberry).

1-DSC_0943So there you have it.  While there is nothing particularly bad flavor-wise (though many would claim that it tastes too artificial likely), this is probably too sweet for many people, and might be more appropriately titled “mixed berry pie lager” or “cotton candy ale.”  It really has nothing in common with Hell or High Watermelon, which was unmistakably beer with a well balanced watermelon flavor.  This…is fun to try, but I don’t really see wanting to buy more of it anytime soon.


1-IMG_2606DuClaw Funk “Blueberry Citrus Wheat”   :)

I’ve always had a thing for Blueberry ales.  Well, ever since my first experience with them at Pub Dog in Baltimore many years ago.  I haven’t seen too many lately though.  I had the Blueberry Lager that comes in the Sam Adams summer sampler, and thought it was really good.  I’ve got a Sea Dog Blueberry in the fridge right now awaiting review.  And that’s about it for Blueberry ales/beers that I have been able to find.  And of course, Funk.

DuClaw does good beer, there’s not normally much argument about that.  I happen to think that they’ve strayed too far away from what has made them great, trying to much to transform themselves into a gastro-pub type restaraunt…so I haven’t been there much in the last few years.  But that aside, their beer stands on it’s own, and is worth the trip.  I was next to the Bel Air location yesterday so I decided to grab a growler of this while I had the chance.

1-IMG_2602Let’s keep this review simple.  This beer is good.  The lemons and blueberries referenced in the description both come through excellently.  The palate is sweet enough to counteract the majority of the bitter/tart flavors, with just a bit of tart lemon coming through (I for one appreciate the sweeter blueberries in the bunch, don’t you?).  The wheat serves as a solid base, but remains in the background.  Hops remain in the background and bitterness is like a 1 or 2 out of 10.

If I was doing a full review I would probably knock it for it’s Lite beer appearance, and for an aroma which is…kind of a jumble of things mildly reminiscent of fruit.  But this isn’t a full review, so I won’t worry about it.  I see that the reviews on BA and RB are not that great (79/42), but that’s pretty much par-for-the-course for anything with fruit flavors.  I wouldn’t worry about it.  This would stand up to almost any shandy or summer ale that you could throw at it.

But it won’t be around much longer (so said the bartender), so get it while you can!