Tag Archives: POT

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June’s 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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May’s Pick

It’s time to announce the results of our stock analysis for May and there won’t be any surprises this month. We actually had a tie between two stocks we previously recommended: General Motors Company (NYSE: GM) and International Business Machines (NYSE: IBM). After assigning all the points, both earned a final score of 13. If you’re the type of person that wants a little investment advice but also likes some choice, you’ll be happy with our post this month. In fact, there were some other companies that also scored very well but we like to minimize risk so we’re not recommending those ones. Potash Corporation of Saskatchewan (TSE: POT) also scored 13 and is currently trading 46% off their 52-week high while paying an attractive 5.8% dividend. If you don’t mind a little short term uncertainty, buying or increasing a position in POT would be a good move.

Every month we try to simplify things as much as possible so we feel compelled to actually choose a winner in the tie this month. We’re going with GM and here’s why. GM is 17.4% off their 52-week high and IBM is 17.1% off theirs so nothing notable there. We do see a difference in the P/E ratio, however. GM is at 4.8 while IBM is at 11 so, while they’re both similarly depressed from the 52-week high, GM is at a much better price overall, considering the P/E. In other words, their 52-week high should be higher so, technically, they’re on sale at a better price right now. IBM is more profitable on an EPS basis (13 versus 7 for GM) but we’re more interested in looking for a good price on a good company than current profitability. Finally, this is a blog about dividend income so the dividend difference between the two was the most important factor in our decision. The dividend for GM is currently 4.7% while that from IBM is 3.8 – almost a full percentage point difference!

To be honest, we feel both of these are great choices. If you previously bought IBM when we recommended them, it makes sense to buy more shares of that company to increase your DRIP (or compounding) potential. The same could be said for GM if you previously bought them. If you’d like to increase the diversity in your portfolio, buy the one you don’t already own. It’s really a no lose situation so whichever you choose you can sleep at night.

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April’s Pick

If you made a purchase based on our pick last month, you’ll be happy to hear we’re recommending General Motors Company (NYSE: GM) again this month. We bought GM last month at $29.05, earning just over 3% for the month and, because of lucky timing, a dividend payment. Of course, we’re not interested in a month-to-month return but it never hurts to see the price of a recommended stock increase since recommending it.

So why GM again? When the scores had all been assigned, GM came out on top with a total score of 13. The stock is only 16.8% below the 52-week high (a score of 2) which is not a great sale but stocks have generally been recovering lately so there are fewer bargain basement prices available. Mind you, that discount is nothing to scoff at. Basically, if the stock recovers within a year (a reasonable expectation), we’ll have realized a tidy little profit of 16.8%. Nice! Their $0.38 dividend is a yield of 5.1%, earning another 4 points. The P/E is an exceptional 5.19 but the EPS is only 6, for scores of 5 and 2, respectively. So that’s it. GM comes out on top again.

We should mention that Potash Corporation of Saskatchewan (NYSE and TSE: POT) technically beat GM with a score of 14 but it’s not included in the S&P 100 so we won’t recommend it. The recent closure of the Picadilly mine in Sussex, New Brunswick has allowed the company to remain profitable in spite of depressed global potash prices. The stock is currently nearly 50% off the 52-week high and still offering a dividend yield of over 6%. If you’re comfortable with a little more risk, this is definitely a stock to look at. I added it to my personal portfolio back in December.

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March’s Pick

It’s time to announce our stock pick for March and there’s a good chance you’ll be happy to hear we’re not suggesting IBM (NYSE: IBM) again. To be clear, if IBM came out on top after assigning the scores, we’d have no problem recommending it for a fourth month in a row – but it’s not. This is about choosing the best stock, not about diversifying for no good reason. Like last month, we’re going to offer some choice. Our pick from the S&P 100 is General Motors Company (NYSE: GM) but we’re also watching Potash Corp of Saskatchewan (TSE: POT) which, while not on the S&P 100, still represents a good opportunity. To be sure, the buyer’s market continues. With markets still a little off, more than 30 companies on the S&P 100 are trading at least 25% below their 52-week high so there are lots of bargains to choose from if you want capital growth.

Let’s look first at GM. This well-known american company is trading 24% below the 52-week high which is a good sale price and makes the $0.38 dividend a 5.15% return. That return is outstanding for a big, blue-chip stock when we compare it to companies such as Apple (2.11%), Wal Mart (3.01%), Johnson and Johnson (2.82%), and McDonald’s (3.00%). With a P/E of 4.92, General Motors represents great value at this time and the $6 EPS indicates strong earnings. We added GM to our portfolio on March 1.

So what’s happening with Potash Corp? Since we mentioned them back on January 29, the price has moved up 8% which is a decent gain for a month if you had purchased them then and sold them now. That’s great for a quick fix but our strategy is to buy value and hold it. Despite that recent gain, they’re still 49% off the 52-week high which is a significant sale. The 11.17 P/E is attractive but the $2.05 EPS is less than ideal (in fact, an EPS that low doesn’t even score on our system) but the depressed worldwide potash price is to blame for that. The company is still profitable and continues to pay that juicy 6.1% dividend. If you’re comfortable straying a little from our core system, POT is a great buy!

Finally, we wouldn’t feel right if we didn’t at least give a little update on IBM. To be fair, it’s still an attractive stock. They’re trading 24% below the 52-week high which is a good sale. With a P/E of 9.82 and EPS of over $13 they are very well-priced for their earnings. The dividend yield is not outstanding but 3.89% is nothing to scoff at. If you previously purchased IBM and are looking to increase your position, it’s still a good time.

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