At this time of year our thoughts usually turn to the holiday festivities, family gatherings and such. While no different for me, I usually have one more activity at this time of year that puts me in the Christmas spirit, the creation of an investing wish list.
Making an investment wish list, in this case a Christmas wish list is a great investment activity. Its like investment practice, or studying for an exam. With such a list at hand when an opportunity presents itself you will be ready to pounce. The list does not need to be detailed but should at least have the investment, the reason to own it, and most importantly the price you would be willing to establish a position.
With that short intro here are the first 5 investments on my wish list. I don’t think you will be surprised that they are all individual stocks that pay dividends. Here they are;
1. MO, Altria: this is maybe the greatest stock in history. I’m not kidding. As of the early 2000s it was the highest returning stock in the history of the SP500. And it continues to perform. It has a virtual monopoly in the tobacco business. Barriers to entry for competitors are extremely high. It pays out most of its earnings via dividends and grows the dividend every year. This would be a must add for me at 20 to 22 a share.
2. NLY, Annaly Mortgage: a dividend stock that most dividend investors tell you to avoid. Why? Because their dividend fluctuates with the economic cycle. When mortgage spreads are high the dividend is high. When mortgage spreads are low their dividends are low. As long as you understand this and focus on total return over the long term this a great investment. Any time this stock trades at or below 1.1 times book value its a great time to buy. Currently it is just above this and has a 15% dividend yield.
3. FFH.TO, Fairfax Financial. Maybe all I need to says is that these guys are the Berkshire Hathaway’ of Canada, except 10 times less in size. Since 1986, when the current CEO Prem Watsa took over, book value has grown at 25% a year. This is what I call a stealth dividend stock. It pays a meager dividend on the surface but inside the company their investment portfolio pays significant dividends. This is a long term keeper and currently trades just above book.value. any entry at or near book value is a great investment.
4. EPD, Enterprise Products: probably the best performing MLP today in terms of operations. They operate a predominantly fee based business with a huge network of pipelines and other gas processing infrastructure. They bought out their general partner recently making them even more competitive. Only problem is that investors have caught on and the shares have become a bit expensive. Wait for a 7% yield or greater.
5. KMP, Kinder Morgan: probably the MLP with the most diversified and stable asset base. Amazing historical performance record and extremely share holder friendly. My wish here is for a higher yield, of 8%, and resolution of a couple of issues; the high general partner splits and the KMR share discount.
Well, those are the first 5 stocks on my wish list for his holiday season. Let me know what you think and any alternatives you may have. I have at least 5 more on my wish list which I will post on soon.
Also, this is the first post I have done from my Droid X phone. Its an amazing device. My apologies for any formatting errors.
Disclosure: long EPD, KMP, FFH.TO