One of the difficult things about dividend investing (and investing in general) is finding which companies to actually put my capital to work for. And that’s not for a lack of options, but rather because of an overabundance of choices! There are so many wonderful companies that I would love to have a stake in, but with a finite and modest amount of capital available to deploy every month, I often find myself scratching my head, wondering where to put it. There are well over two dozen companies that I am enamored with, and I just wish I could inject a few thousand dollars into each of them right now! First world problems, I know.
In any case, today I’ll share my thoughts on 5 companies (in no particular order) that I am following especially closely at this time and that I hope to invest in at some point this year. Let’s dive in!
Lockheed Martin is a global defense, security and aerospace company primarily engaged in the research, design, development, manufacture, and integration of advanced technology systems, products and services. It is the U.S. Government’s largest contractor of IT services, systems integration, and training, and the majority of the company’s business is conducted with the U.S. Department of Defense, as well as other U.S. federal government agencies such as the Department of Energy, the Department of Agriculture, the CIA, the FBI, the NSA, the IRS, and even the Post Office. The rest of Lockheed Martin’s dealings are with various international governments, and even include some commercial sales of certain products and platforms.
Basically, Lockheed Martin creates big-ass missiles, plasma guns, sentinel beams, virtual reality training simulation systems, satellites that shoot lasers, Banshees, Death Stars and other such technological superweapons taken right out of the Halo and Star Wars universes. And then it sells them to governments. Yay!
Look, it is unfortunate that conflict and warfare will probably exist forever, but it does give a company like Lockheed Martin a lot of appeal for the long-term investor. With an unparalleled global presence, a massive economic moat, and a virtually unchallenged position in a market with huge barriers to entry, Lockheed Martin ticks all the right boxes. Throw in a fat yield of 3% into the mix and you’ve got a damn near perfect dividend stock.
Waste Management, as its name indicates, is a waste management company. It’s definitely not the sexiest of companies out there, but it does provide services that are pretty much recession/armageddon-proof. I’m fairly certain that as long as humans live together in societies, there will be no shortage of waste production. And that waste will need to be collected, recycled, and disposed of, lest civilization quickly devolve into a marvelously putrid landscape of disease and pestilence.
The company is the largest and leading provider of environmental solutions in North America, serving more than 20 million customers in the U.S. and Canada, both at the commercial and residential level. According to Wikipedia, Waste Management’s network includes 367 collection operations, 355 transfer stations, 273 active landfill disposal sites, 16 waste-to-energy plants, 134 recycling plants, 111 beneficial-use landfill gas projects and six independent power production plants. In other words, if you are American or Canadian, there is a very good chance that Waste Management is the one who collects and disposes of your morning dump and other solid refuse that you produce on a daily basis.
As the provider of services that are unequivocally necessary to the functioning of civilization, and with an attractive yield of 2.8%, Waste Management makes for a pretty stinkin’ good dividend stock (pun 100% intended).
Big Blue is the epitome of the boring, blue chip stock. The multinational tech giant has been around for more than 100 years and has weathered many a storm, including half a dozen recessions, two world wars, and an ever-changing technological landscape.
IBM has been paying out dividends without interruption since 1916 (that’s right, 1916!), and it has been increasing its dividend consistently since 1999. There have been concerns as of late regarding IBM’s future since a huge part of the company’s revenue lies in its high-end computing hardware business, where it manufactures sophisticated mainframe computers and power systems, which could be threatened by today’s fast-growing cloud computing technology.
The stock’s price has tanked to absurdly low levels following IBM’s decision to sell off its chipmaking business back in October 2014, providing a rare opportunity for investors to get in on the tech giant at a huge bargain. The bears can say all they want, I personally feel quite bullish regarding IBM’s future. In my opinion, its decision to refocus itself as a leader in the cloud and mobile sectors is a smart one; this will be an important transition period for the company, much like the one fellow tech giant Microsoft is currently going through, and I have no doubt that IBM will weather this storm like it has done many times before in the past.
And with a sizable 2.8% yield, especially for the tech sector, you really can’t go wrong with the Big Blue.
Deere & Company
Deere & Company is synonymous with agricultural equipment. The company manufactures and produces a variety of farm equipment, construction and forestry machinery, and lawn care products (both at the commercial and consumer level). It generates over 60% of its revenue in North America, with the remaining revenue more or less evenly split between Central/South America and Western Europe.
This is definitely a cyclical stock, as it tends to sway according to the state of the economy at any given time. For the long-term investor, though, this isn’t a huge concern. Furthermore, the company has been doing very well over the last decade or so. Its revenue almost doubled between 2004 and 2014, jumping from $20 billion to nearly $38 billion. The company has also been consistently increasing its dividend over that same time span, with an aggressive 10-year dividend growth rate just north of 16%. Lastly, it currently sports a solid yield of 2.73%, which is definitely nothing to scoff at.
And most importantly, Deere & Company has a cool logo of a leaping yellow deer on a green background, which in and of itself is a good enough reason to invest in it. Because deer are awesome.
Caterpillar is the world’s largest construction and mining equipment manufacturer, and the largest or second-largest manufacturer of literally every product it sells. The company controls nearly 20% of the entire global new construction equipment market, which is quite a remarkable feat.
Like Deere & Company, this is another cyclical stock, and one that has been taking a beating as of late due to the oil shenanigans, which have acted as headwinds for Caterpillar’s energy and transportation segment. With the decline in oil production, demand for Caterpillar’s turbines, pumps, and other oil-related equipment has fallen, as has demand for construction projects in oil-producing regions.
Here again though, I don’t think these issues will prove to be a big deal for the long-term investor, and at its current valuation, Caterpillar offers a nice opportunity to get in on it at a discounted price. The company currently offers a juicy yield of 3.5%, and it has been paying dividends since 1933 while increasing them for the past 22 consecutive years.
All in all, I don’t foresee any real long-term threats for this dividend stalwart, and as long as humans exist, there will be a demand for mining stuff and building shit.
There you have it. Five wonderful dividend stocks that I think belong in any dividend investor’s portfolio, or that at the very least deserve some serious consideration, especially given the prices some of these are currently trading at. These companies are hot on my radar and there is a very good chance that I will be initiating positions in some, if not all of these, at one point or another in the coming months.
What about you? Which dividend stocks do you have your sights set on for 2015? Feel free to share your thoughts in the comments!