International Business Machines (IBM) provides information technology (IT) products and services worldwide. I like this global technology juggernaut, the ability to consistently repurchase shares, raise dividends for 16 years and its vision to earn $20 per share by 2015. The company has increased dividends for 18 years in a row, and has managed to boost them by 18.80% per year over the past decade. Currently, the stock trades at 14 times earnings and yields 1.90%. Check my analysis of IBM.
Coca-Cola (KO), a beverage company, engages in the manufacture, marketing, and sale of nonalcoholic beverages worldwide. The company is a global drink giant, responsible for 1.8 billion drink servings to the world every single day. There is a strong brand name, a global distribution network and opportunity for growth in emerging markets. While I really like the company, I had not added to the stock for a while until 2012, which resulted in much lower allocation to this quality company. I am trying to rectify that, and if Coke ever sells at 15 times earnings, I would be a buyer. The company has increased dividends for 51 years in a row, and has managed to boost them by 9.80% per year over the past decade. Currently, the stock trades at 19.40 times 2013 earnings and yields 2.80%. Check my analysis of Coca-Cola.
McDonald’s (MCD) franchises and operates McDonald’s restaurants in the United States, Europe, the Asia/Pacific, the Middle East, Africa, Canada, and Latin America. The golden arches is another stock, which is priced attractively here today, and which can deliver plenty of value over the next 20 years. It is a globally recognized brand, has pricing power, and has continually managed to reinvent itself. With its “Plan to Win” strategy, the company targets 3-5% growth in annual sales and 6-7% growth in operating earnings. Add in a 3% yield, and a 2% reduction in stock through share repurchases, and you can easily expect very good results over time. The company has increased dividends for 36 years in a row, and has managed to boost them by 28.40% per year over the past decade. Currently, the stock trades at 18.20 times earnings and yields 3.10%. Check my analysis of McDonald’s.
Realty Income (O) is a publicly traded real estate investment trust. It invests in the real estate markets of the United States. I slightly overpayed for this REIT, since I locked in an entry yield below 5%. However, I believe that the company is well managed, and like the distributions which are paid monthly, and regularly increased. Existing management has a strong track record of acquiring quality assets, looks at developing expertise in areas where not many competitors are looking, and tries to increase profits for shareholders. The company has increased dividends for 19 years in a row, and has managed to boost them by 4.20% per year over the past decade. Currently, the REIT yields 4.90%. Check my analysis of Realty Income.
Target (TGT) operates general merchandise stores in the United States. I like the perceived quality of Target relative to Wal-Mart (WMT). The stores look more upscale than the Wal-Marts of the world, and target customers with higher incomes. In addition, the company is much smaller, and just starting to expand internationally. I view this as an opportunity. Management is trying to earn $8 per share by 2017, which would make shares purchased today even cheaper. The company has increased dividends for 46 years in a row, and has managed to boost them by 18.60% per year over the past decade. Currently, the stock trades at 16.80 times earnings and yields 2.40%. Check my analysis of Target.
Wells Fargo (WFC) provides retail, commercial, and corporate banking services. The bank cut dividends in 2009, after receiving $25 billion from U.S. Treasury. Since 2011 however, it has started increasing distributions, which are slightly less than the highs reached in 2008. When I last analyzed Wells-Fargo in May, I was not very happy about the company, because of near term weakness. However, I came to realize a few weeks later that I was deviating from my mantra of investing for the next 20 years, rather than for the next one. I sold some naked puts, and last week I initiated a small position in the bank. Currently, the stock trades at 11.80 times earnings and yields 2.80%. Check my analysis of Wells Fargo.
Wal-Mart (WMT) operates retail stores in various formats worldwide. This is the largest retailer in the world, which has a tremendous scale of operations and immense pricing power. The company’s bright spot include its international operations, which could easily reach domestic ones in 10 – 15 years. I like the low valuation, which is pricing very low growth in earnings per share over the next decade. The company has increased dividends for 39 years in a row, and has managed to boost them by 18.10%/year over the past decade. Currently, the stock trades at 15.40 times earnings and yields 2.40%. Check my analysis of Wal-Mart.
These shares are not purchased at the low valuations I took for granted up until the days of early 2013. However, most of the companies listed above are having some of the lowest valuations that you can find today. The positions in American Realty Capital Properties, Dr Pepper Snapple Group, and Wells Fargo have not raised dividends for at least ten years in a row, however I believe these franchises offer compelling long-term potential to achieve that. IBM does not yield much to fit my entry criteria, but has a low P/E, excellent growth and a consistent history of share repurchases.
Full Disclosure: Long AFL, ARCP, COP, DPS, IBM, KO, MCD, O, TGT, WFC, WMT, KMB, CL ,CVX