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August’s Pick

For those of you who like variety, you’ll be happy with this month’s pick. The bottom line is Metlife Inc (NYSE: MET) again because it comes out with the top score, but we have a couple other options for you. Metlife is still trading nearly 25% off the 52-week high and pays a 3.7% dividend. Really, not much has changed since last month so we’re recommending them again. But we promised some variety… While not the top pick (nor our official recommendation) there are a couple of stocks that are worth taking a look at.

First, Canadian Imperial Bank of Commerce (TSE: CM, NYSE: CM). Canadian banks are strictly regulated and so make for very stable choices for investors. For example, here’s the performance of CIBC over the last 5 years. Notice the number of times they’ve raised their dividend! From $0.90 to $1.21 is a 34% increase in five years. Impressive. That dividend currently sits at 4.9% by the way.

CIBC

So why not recommend CIBC you might be wondering? One reason only: they are trading at just 5% below their 52-week high so Metlife offers greater potential for capital appreciation. CIBC would be a great purchase too, though, and that’s why we’re mentioning it.

Second, Capital One Financial (NYSE: COF). With a dividend of under 3.5% (currently, 2.5%), this company does not make our cut but I’m mentioning it here because it’s currently on sale and offers some capital appreciation potential. The stock is nearly 32% under its 52-week high which is a great discount for a solid company. With a P/E of only 9.16 and EPS of 6.87 it’s an attractive option. Our portfolio is a dividend income one so we wouldn’t purchase COF but you might want to allocate a small amount of your portfolio to it to reap the reward of the expected (inevitable?) price increase.

There you have it. Three interesting options for you this month. Happy investing!

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July’s Pick

Well, it ain’t GM. After recommending General Motors Company (NYSE: GM) for each of the last four months, we’re offering something different for July’s stock choice. Before we do, it’s important to be completely transparent and let you know that GM was actually tied again this month with another stock at 14 points each. If you’ve already built a position in GM based on our suggestions, go ahead and add to your holdings this month. It’s still a great-looking stock scoring 14 out of a possible 20 points. More on that later.

Our choice this month is MetLife, Inc (NYSE: MET). MetLife is paying a dividend of 4.05%, considerably less than the 5.26% you’ll get from GM. The P/E ratio for MetLife is 8.46 which is nearly double GM’s 4.33, meaning GM could be viewed as being a little better-priced. GM is also more profitable as measured by their EPS of 6.68 compared to 4.67 of MetLife. Ok, you might be wondering, “Ummm, then why are you going with MetLife instead of GM?” One main reason: MetLife is 32% off their 52-week high while GM is only 22% off theirs. That means MetLife is at a better sale price compared to what people were willing to pay over the last year. Put another way, the price of MetLife stock could appreciate more compared to that of GM in the next several months. We think that possibility will compensate for the lower dividend yield. To be clear, we don’t advocate buying a stock just because you think it might increase in value. That sounds an awful lot like acting on a ‘hot stock tip.’ That’s not the case here. We’re simply trying to choose between two solid, reliable companies and we’re using potential capital appreciation to break a tie. It’s worth noting that another minor advantage to buying MetLife this month is that it increases the diversity in our portfolio by adding an insurance company to the mix.

Honestly, we don’t think you could go wrong with either one of these companies. If you prefer the higher dividend yield of GM then buy them instead. Either way, you can sleep at night and that’s a really nice spot for investors like us to be.

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