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June’s Pick

  • Top pick

To be honest, we had a hard time settling on a stock pick this month. There was a couple of companies at the top but a couple of really tempting, slightly more risky options, too. If you’re looking for something with a little greater reward we still like Potash Corporation of Saskatchewan (TSE: POT) and you could also think about Williams Companies (NYSE: WMB). Beware though, with greater reward comes greater risk. Potash Corp did cut their dividend in April but they’re still paying an attractive 5.9%. Add to that the fact that we think the world will need fertilizer again in the future and this stock has room for growth. Since we started talking about them a few months ago, Williams Companies has risen from $11 to $21, an increase of about 90%. Not bad if we do say so ourselves. As the uncertainty caused by low oil prices levels out, their share price will continue to rise and they’re paying a juicy 12% dividend in the meantime. Remember that means even if the price was flat for a year you could sell it and walk away with a 12% return.

But enough avoiding the issue. The idea is to recommend a single stock each month, so let’s get to it. There’s something inherently uncomfortable about repeatedly recommending the same stock but one strength of our scoring system is its ability to remove subjective biases like that. That said, we’re suggesting General Motors Company (NYSE: GM) – again.

After we assigned the scores this month there was a three-way tie between General Motors, IBM (NYSE: IBM) and Gilead Sciences (NASDAQ: GILD). Although it scored high in other categories, GILD offers a dividend of only 1.9% which is well below our threshold of 3.5% so we eliminated it right away. If this feels a little like deja vu it’s because we had a tie between GM and IBM last month too. Our reasons for choosing GM again are going to read just like last month as well. The 4.7 P/E for GM is significantly better than IBM’s 11.5 which puts GM at a better price even though IBM produces more income per share with an EPS of 13.3 versus GM’s 6.7. The dividend return for GM is still nearly a full percentage point higher than for IBM (4.9% and 3.7%, respectively). Remember, this blog is still about dividend income so GM gets the nod once again.

Like we said last month, you can’t go wrong with either of these. Buy whichever you want – or both – and sleep at night.

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GM IBM picking a stock POT stock pick WMB
May 30, 2016 PDI

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