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February’s Pick

It might seem as though choosing a stock is a tricky thing to do. It is. Every month we update the relevant financials for each stock we follow (all 194 of them), assign the scores and narrow the list down to two or three candidates. Anyone who’s been following this blog will recognize that we often have trouble settling on just one. We’ve committed to always choosing a single stock, so, sometimes with much hesitation, we force ourselves to make a single recommendation. Regular readers will also note that we often add “But, hey – any of these suggestions would be a great choice.” This month is no different…

Target (NYSE: TGT) came out on top once the scores had been assigned and that’s official choice. The stock has been beaten down from $78 to $63 the last three months and is currently 24% off their 52-week high. The decline seems to have stopped as the price has stabilized over the last month or so and that’s why we’re suggesting it now. The company hasn’t changed – they still still reasonably priced products that we all want. That’s a good thing. What’s changed is that we can now buy shares in the company at a price that seems to be a pretty deep discount. Target has EPS of 5.45 and a P/E of 11.7. That P/E puts them in the top 10 of all stocks we follow which means lots of people out there will soon discover this stock is underpriced and will want to buy it. That’s also good for us. The current dividend rate is 3.76% which is not stellar but for a $36 B company is pretty much a guarantee and sure to increase year over year. We are, after all, dividend investors so we can enjoy that dividend payment while we ride the share price up. The other thing we like about this purchase is that it’s in the retail sector so it increases the diversity of our portfolio.

In case you’re wondering, CIBC (TSE: CM, NYSE CM), General Motors (NYSE: GM) and Ford (NYSE: F) rounded out the top four picks this month in a very close race.

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December’s Pick

It’s hard to go wrong with banks. Especially Canadian banks. The banking industry in Canada is quite highly regulated and so bank stocks tend to avoid nearly all the risk that comes with owning some American banks. Also, let’s face it – when times are good banks make money and when times are bad banks make money. This month we’re recommending Canadian Imperial Bank of Commerce (TSE: CM) again (we recommended it back in October). GM, Ford and CIBC tied in our points system but it’s important to not have our exposure to any one industry too high so we passed on the two automakers.

CIBC is currently trading right at its 52-week high so it’s definitely not on sale and you might be thinking: “Don’t you always say to buy stocks on sale?” Yep, we do – usually. But price is only one thing to consider. CIBC is such an attractive stock that we are recommending it despite the fact that it is not on sale. We are, after all, dividend investors. That means we really like solid dividends and we really, REALLY like companies that increase their dividends regularly and often. Last time we recommended CIBC it was at $101 (3.7% below its, then, 52-week high) and it’s appreciated 8.7% since then. Not bad for a couple of months, right?

So, 52-week high isn’t everything. If a stock is well-priced it doesn’t really matter what the actual price is. Would we like to buy it for less? Of course! But we’re not going to pass on a great stock because it’s not on sale. We thought it was well-priced back then and we still think that. Why? The P/E is still an attractive 10.26 and the EPS is 10.71. For EPS, that puts CIBC 7th on the list of over 200 stocks we watch and the P/E is 14th on that list. All that and a 4.5% dividend! Did we mention the dividend announced for December offers a 3 cent increase (that’s a hike of 2.5%)?

If you’re not convinced on this pick, have a look at our October pick post (http://www.passivedividendincome.com/2016/10/01/octobers-pick/) for some more raving about CIBC.

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October’s Pick

This month’s pick is about diversification. Before we get to that, I have to be honest and say that General Motors Company (NYSE: GM), technically, earned the top score. If you own GM and want to increase your position, go for it! If for some reason you’ve ignored our past recommendations (it’s risen 9% since we suggested it back in March) and haven’t yet purchased GM, do it now. It’s still a good buy. It’s trading nearly 15% off the 52-week high with a spectacularly low P/E of 4 (in fact, the lowest on the S&P 100 except for Berkshire Hathaway) and strong EPS of 7.8. Not to mention the rock solid 4.8% dividend. Buying this stock is still a good choice.

That said, diversification is also good so this month our recommendation is Canadian Imperial Bank of Commerce (TSE: CM). One of Canada’s big banks, this stock offers the protection of a highly regulated and stable banking environment. The stock is currently only 3.7% below the 52-week high, which is not much of a sale, but the rest of the numbers are spectacular. At $101 a share, the P/E is in the single digits at 9.86 and the EPS is 10.32. That’s right – the EPS is higher than the P/E! Oh, did we mention the dividend yield of 4.8%?

 

Those EPS numbers put CIBC at 8th on our watchlist of over 200 stocks! The only companies with stronger earnings include Google, Blackrock, Biogen, and IBM. Of the eight, the next highest dividend return is IBM, offering 3.5% (another of our picks, by the way) and two of the eight offer no dividend at all.

The chart below shows the 5-year performance of CIBC. Notice anything about the dividend? Talk about a dividend growth stock! They’ve raised it every quarter in 2015 and 2016!

cibc_5_year

 

Needless to say, regardless of the 52-week high, CIBC is priced VERY well!

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