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As we approach the end of the year there is a big uncertainty in the air. We are approaching what is being referred to as the Fiscal Cliff. Unless the United States Congress can compromise and get a solution in place, there will be tax increases across the board for US citizens and massive amounts of spending cuts. Many experts believe that unless a solution is in place, the country will go over the Fiscal Cliff and bring about another economic recession. You might want to check out my article about the Fiscal Cliff or another good article written by FI Fighter called Dividend Growth Investing and the Fiscal Cliff.
What if we crash over the Fiscal Cliff?
As a dividend growth investor, I look towards the upcoming Fiscal Cliff as opportunity. If the US does begin to spiral into another recession and the stock markets start to plummet, you can bet I will be on the sidelines trying to buy up as many companies as I can. There are quite a few companies that I would love to own but have usually been priced at a premium in the stock market. If prices on these companies come down, I will be eagerly buying as much as I can because I know in the long run the economy will recover. The Fiscal Cliff merely will offer up a great opportunity to buy some of the world’s best companies at prices you normally can’t come close to getting.
Companies I Would Love to Buy
Below you’ll find the companies I would love to add to my portfolio. These are some of my most coveted stocks but I haven’t had the opportunity to buy them in the past because I believe they have been valued with too high a premium. If prices come down, I will be loading up on them. Most of these companies trade with a P/E (price to earnings ratio) above 20. I typically don’t like to pay more than 15 or 16 times earnings for the companies I add to my portfolio.
- Procter & Gamble (PG) – PG is a consumer products company that has increased their dividends for 56 years in a row. Currently they trade at a P/E of 22.9 and a dividend yield of 3.18%.
- Johnson & Johnson (JNJ) - JNJ is a pharmaceutical and health products company that has increased their dividend for 50 years in a row. They currently trade at a P/E of 23.2 and a dividend yield of 3.44%.
- Coca Cola (KO)- Coke is a beverage company that has grown their dividend every year for the past 50 years. Coke currently trades at a P/E of 19.6 and a current dividend yield of 2.71%. I already have some shares of KO in my portfolio but I’d love a good buying opportunity to add some more shares.
- Colgate Palmolive (CL) - Colgate Palmolive is another consumer products company that I’d absolutely love to include in my portfolio. Colgate has been increasing their dividend payment for the past 49 years. Currently they trade at a P/E of 20.8 and a dividend yield of 2.32%.
- Kimberly-Clark (KMB) - KMB is a consumer products company with many great brands such as Huggies and Kleenex. KMB has increased dividends for 40 years in a row. They currently trade at an 18.1 P/E ratio with a dividend yield of 3.46%.
- PepsiCo (PEP) - Pepsi is the other beverage giant that I’d like to add to my portfolio along with Coke. Pepsi also has a nice history of dividend increases going back 40 years in a row. Pepsi trades with a P/E of 18.7 and a dividend yield of 3.06%.
- Unilever (UN) or (UL) - Unilever is another multi brand consumer products company with a history of increasing dividends 12 years in a row. Unilever trades for P/E around 20 and a dividend yield around 3.9%.
- Visa (V) – Visa is the credit card company. They have been increasing dividends for the past 6 years. I believe credit cards are going to be around for a long time and Visa is one of the leading companies. Unfortunately Visa is priced at a really high P/E of 78.9. I really want this company but will never be able to get myself to pay such a high P/E for any company. Another issue with V is the low dividend yield of 0.89%. If a recession hit and Visa’s share price suffered, I would keep an eye on it in case the opportunity comes to get this high growth company at a great discount.
The above are 8 companies I would love to add to my dividend growth stock portfolio. However, because these companies are so great they demand a premium price in the market. If the Fiscal Cliff comes to fruition and we delve back into recession, I will be keeping an eye on these companies with the intent of adding some gems to my investment portfolio.
What are some companies you would like to own but have been priced too high lately? What companies would you be adding to your portfolio if the market took a downturn?
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