The Best Stocks To Buy Now

The Best Stocks To Buy Now
I like to buy Canadian Common Stocks with a growing yield and a long term record of increasing that dividend. I then hold for the long term. When you buy a stock and what you pay for it will go a long way in determining your future cash flow. We want to buy good quality blue chip dividend paying companies when they go on sale or when they are cheaper than most other high yielding stocks. A lower yield is usually an indication that it’s dividend is safe, the higher the yield the more risk and also the market doesn’t believe there is much growth left so caution is warranted.

I read the daily financial columns of Rob Carrick and John Heinzl of The Globe and Mail and the musings of Tom Connolly from Dividend Growth a newsletter I also subscribe to. The book that has influenced me the most when it comes to Dividend Growth Investing is ‘The Investment Zoo’ by Stephen Jarislowsky. You can read what others are saying about it here



Dividend Growth investing is so simple it’s no wonder that most people ignore it. They would rather be dazzled by complicated investor speak from a professional money manager. Think of this, don’t leave your money in the bank where they pay you nothing for the privilege or purchase their high priced in house mutual funds. Instead buy their common stock and hang on to it forever. All the banks are steady dividend payers with a track record of increasing it on a regular basis. Every time they do that you are getting a raise. Now that’s how you build wealth.

That being said, what are the best stocks to buy now?

The Canadian Buy List


Stock

Price (as of 9 Dec 2016)

Yield

Home Capital Group – HCG

$30.04

3.50%

Power Corp – PWO

$30.70

4.4%

Ensign Energy – ESI

$9.49

5.10%

National Bank – NA

$54.69

4.10%

Bank of Montreal – BMO

$96.20

3.7%

Bank of Nova Scotia – BNS

$76.87

3.9%

Great West Life – GWO

$35.53

3.9%

CIBC – CM

$112.00

4.4%

Toronto Dominion Bank –  TD

$65.75

3.3%

Royal Bank –  RY

$90.30

3.7%

Total Yield = 4%

Now compare this dividend yield with the yield we would get with a higher price higher cost Dividend ETF that I talked about here.



US Stock Buy List


I’m just an amateur DIY investor that scours the internet for information to help build my wealth. I suspect there are lots of people out there doing this and have a passion for it like myself.

Have you ever heard of the Dogs of the Dow trading strategy? If not here it is from Wikipedia – “an investment strategy popularized by Michael B. O’Higgins in 1991, which proposes that an investor annually select for investment the ten Dow Jones Industrial Average (DJIA) stocks whose dividend is the fraction of their price”.

Being Canadian I never know what to buy when it comes to US stocks so I often refer to this strategy and list for my US investments. Year to date, if you would have bought all ten stocks comprising this index you would be up 19% not including dividends. That’s a great 1 year return! Here is the current Dogs List for the benefit of those who don’t know.

  1. CSCO – Cisco Systems
  2. WMT – Wal-Mart
  3. PG – Proctor & Gamble
  4. MRK – Merck
  5. PFE – Pfizer
  6. XOM Exxon Mobil
  7. IBM – International Business Machines
  8. CAT – Caterpillar
  9. CVX – Chevron
  10. VZ – Verizon

The worst performer of the year but still up slightly is PFE – Pfizer. I would start my US stock buy list based on the Dogs of the Dow with buying Pfizer. It comes with a nice dividend of 3.8%. There is a lot of rumblings from the new prez to drive down drug costs and this might impact Pfizer going forward. Thing is, nobody knows for sure and this could all be political bluster on his part and after the dust settles these health care, drug related stocks could take off after a severe beating in 2016.

I would then go out and buy PG – Proctor & Gamble which is only up 7% on the year. Pays a 3% dividend and just spits out cash with an almost 20% return on equity. This consumer staples stock should also benefit under the new administration with the changes to taxes and a move to fairer trade policies. Besides all that, I want to have a global diversified player in my US stock portfolio. I am going to hold this forever, it’s not a trading stock for me but rather a CORE holding.

My next purchase would be CSCO – Cisco Systems. Up 10.4% year to date and comes with a 3.5% dividend. It’s still very cheap to buy in my opinion. It’s old tech but for me that’s precisely why it’s still around. It works.

Next up VZ – Verizon. Only up 12% YTD. Pays a 4.5% dividend and compared to a lot of other Dow components is dirt cheap on a price to earnings basis of 15 times forward earnings. It has a 79% return on equity and for my money you always want to own a Telco in your portfolio somewhere. Telcos have become the new pipeline stocks. A pipeline for voice, data and messaging services that the world is always going to need.

…and that would be all I’d be willing to buy at this point in time.

Please consult a professional investment advisor before making any decision on what stocks to buy and read my  disclaimer here.

I would have no problem buying any or all of the stocks on these lists as of right now. They’re cheap and safe on a price to earnings basis and have a low yield but not too low so as to not grow their dividend payout. They will over time. If you are looking to buy individual Canadian or US Stocks now, I would seriously look at these. Where do you think they will be in 10 years? It won’t mater what you pay for them today if you look out 10 years from now. How much will you have collected in dividends during that time and how many times will those companies have raised it?

If you like to trade stocks and want to swap out your holdings for a new Dogs of the Dow list every year, of course you can do that to. There is a great book called ‘How to Make Money in Stocks’ that is also a great read on another stock picking strategy that I also follow to help weed out my US stock picks. You can read what other customers say about it here.

I do own some of the stocks I’ve mentioned here but not all. I have not been paid compensation by anyone or any company for mentioning these particular stock picks.

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11 thoughts on “The Best Stocks To Buy Now

  1. These stock trading strategies are very interesting. I didn’t know however that banks are steady dividend payers that increases it on a regular basis, this is indeed a means of growing wealth. I will definitely look into your trading strategies. Thanks much

  2. This is interesting reading. I used to do the odd bit of trading in the past but I found that I didn’t really have time to keep on top of it. I did manage to pay the deposit for my first house using my Microsoft stock which at the time had just split. Sadly I sold all my stock at this time. Now I prefer the returns from property but the amounts you have to put down are so much higher.

    • RE is also a good investment but I think nowadays most people have too much of their net worth tied up in houses. Thanks for your input Evie.

  3. Okay, confession time. I know diddly squat about stock portfolios and dividends. I have some money in the bank that just sits there in fear of what might happen next. Perhaps it’s time to look at investing for the long term. Here in Ireland, things are a bit different. We invest a small percentage of our salary into a pension scheme (like a 201k) and this fund is managed by a company who invest on our behalf. I’ve had mine for 10 years and it grows but really that’s all I know about it. And I won’t be retiring for another 30 years anyway so it’s something I don’t think about much. Your website spoke to me totally! I am a dummy when it comes to personal finance I’ll stop back again soon and maybe then I’ll have some money to invest!

    • Thanks Dan please do. I really appreciate you stopping by and sharing your situation. I have to admit I know diddly about the Irish pension system. I do know this, a bank is a poor place to keep your money. Invest it and watch it grow. Please check back often for other ideas and inspiration to help you. Cheers!

  4. I have always been curious about trading stocks because of the potential reward, but I really don’t know anything about it. Where would be a good place to start if I want to learn the ropes on the stock market?

  5. Peter,

    The information you have provided in this post is really useful for current and future investors. I viewed the penny stock video and it provides some real significant income possibilities for small investors. I made some small investments in the stock market years ago and used the profits to help pay for our first house. The Dogs of the DOW trading strategy is very interesting and I will do some more research on it. Thank you.

    Roy

  6. Hi there

    I’m not really one for knowing about stocks, especially the best ones to buy but I am very informed now so thank you very much for the content you’ve shared here.

    Keep up the good work!

    Thank you =)

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