Preparation involves getting familiar with different businesses, and understanding whether they have some sort of a competitive advantage. Preparation also involves getting familiar with company fundamentals, and reviewing trends in those fundamentals over time.
During a recession, fundamentals tend to lag by a large margin. This is why I find it helpful to focus on companies where I can get comfortable with the qualitative side, as well as the quantitative side.
In order to prepare, I downloaded the list of dividend aristocrats and reviewed their earnings histories over the past decade. I reviewed those histories, without knowing the company behind them. I did this in order to avoid letting my biases towards certain companies influence me towards them, even if the fundamentals do not look as hot today. One of the risks behind investing include situations where investors fall in love with a company, and are willing to ignore every red flag, until it is too late. Other times, the investor may have a negative opinion on a company, which may be incorrect. Looking at information from a distance may help them see things more objectively.
As a result of this exercise, I ended up with a list of 36 companies, which are worth reviewing further. I have these companies on my list for potential investment ( or addition to existing positions). I just need to make sure that I acquire these companies at the right price of course.
Ticker
|
Name
|
Price
|
Forward
P/E |
Annual
Dividend |
Dividend Yield
|
Years
of Annual Dividend Increases
|
10
year Dividend Growth
|
ABBV
|
AbbVie Inc.
|
78.56
|
8.24
|
4.72
|
6.01%
|
47
|
14%
|
ADP
|
Automatic Data
Processing
|
138.53
|
22.94
|
3.64
|
2.63%
|
45
|
11%
|
AFL
|
AFLAC Inc
|
37.77
|
8.56
|
1.12
|
2.97%
|
38
|
7%
|
ALB
|
Albemarle Corp.
|
61.82
|
13.89
|
1.54
|
2.49%
|
26
|
11%
|
AOS
|
Smith A.O. Corp
|
40.22
|
19.62
|
0.96
|
2.39%
|
26
|
22%
|
APD
|
Air Products
& Chemicals Inc
|
215.76
|
23.71
|
5.36
|
2.48%
|
38
|
10%
|
ATO
|
Atmos Energy
|
102.65
|
21.93
|
2.3
|
2.24%
|
36
|
5%
|
BF-B
|
Brown-Forman
|
61.22
|
34.98
|
0.7
|
1.14%
|
36
|
8%
|
CAH
|
Cardinal Health
Inc
|
49.4
|
9.22
|
1.92
|
3.89%
|
24
|
18%
|
CLX
|
Clorox Co
|
181.04
|
28.29
|
4.24
|
2.34%
|
42
|
8%
|
CTAS
|
Cintas Corp
|
192.41
|
23.93
|
2.55
|
1.33%
|
37
|
18%
|
ECL
|
Ecolab Inc
|
170.81
|
30.13
|
1.88
|
1.10%
|
28
|
13%
|
EXPD
|
Expeditors
International
|
72.47
|
22.09
|
1
|
1.38%
|
25
|
11%
|
GD
|
General Dynamics
|
137.39
|
11.04
|
4.4
|
3.20%
|
29
|
10%
|
GPC
|
Genuine Parts Co
|
73.25
|
13.77
|
3.16
|
4.31%
|
64
|
7%
|
GWW
|
Grainger W.W. Inc
|
270.4
|
16.94
|
5.76
|
2.13%
|
48
|
12%
|
HRL
|
Hormel Foods Corp
|
47.37
|
27.22
|
0.93
|
1.96%
|
54
|
16%
|
ITW
|
Illinois Tool
Works Inc
|
158.8
|
23.46
|
4.28
|
2.70%
|
45
|
13%
|
KMB
|
Kimberly-Clark
|
132.64
|
18.19
|
4.28
|
3.23%
|
48
|
6%
|
LEG
|
Leggett &
Platt
|
28.77
|
14.98
|
1.6
|
5.56%
|
48
|
4%
|
LOW
|
Lowe's Cos Inc
|
94.35
|
15.67
|
2.2
|
2.33%
|
57
|
19%
|
MCD
|
McDonald's Corp
|
177.49
|
24.86
|
5
|
2.82%
|
44
|
9%
|
MKC
|
McCormick &
Co
|
149.1
|
28.78
|
2.48
|
1.66%
|
62
|
9%
|
MMM
|
3M Co
|
148.99
|
17.28
|
5.88
|
3.95%
|
61
|
11%
|
NUE
|
Nucor Corp
|
39.05
|
17.05
|
1.61
|
4.12%
|
47
|
1%
|
PBCT
|
People's United
Financial
|
11.2
|
9.74
|
0.71
|
6.34%
|
27
|
2%
|
PPG
|
PPG Industries
Inc
|
93.35
|
16.15
|
2.04
|
2.19%
|
48
|
6%
|
ROP
|
Roper
Technologies, Inc
|
318.08
|
24.54
|
2.05
|
0.64%
|
27
|
19%
|
ROST
|
Ross Stores Inc.
|
89.05
|
23.25
|
1.14
|
1.28%
|
25
|
25%
|
SHW
|
Sherwin-Williams
Co
|
488.31
|
22.18
|
5.36
|
1.10%
|
42
|
12%
|
SPGI
|
S&P Global
|
261.51
|
25.89
|
2.68
|
1.02%
|
47
|
10%
|
SYY
|
Sysco Corp
|
47.25
|
15.10
|
1.8
|
3.81%
|
50
|
5%
|
TGT
|
Target Corp
|
104.63
|
15.76
|
2.64
|
2.52%
|
52
|
14%
|
TROW
|
T Rowe Price
Group Inc
|
105.51
|
14.97
|
3.6
|
3.41%
|
34
|
12%
|
VFC
|
VF Corp
|
57.99
|
18.47
|
1.92
|
3.31%
|
47
|
12%
|
WBA
|
Walgreens Boots Alliance
Inc
|
43.09
|
7.83
|
1.83
|
4.25%
|
44
|
14%
|
I have listed the companies below, along with some fundamental data that I find to be relevant. This includes price, yield, P/E ratio, Dividend Payout Ratio and 10 year annualized dividend growth rate. It also includes the dividend streak as well.
I try to avoid paying more than 20 times forward earnings for companies. At this stage of this recession, a lot of companies are withdrawing guidance and a lot of analysts are playing catch up to the downward revision trend for earnings per share for 2020. The problem during a recession is that you need to think beyond the numbers you are seeing. I am reminded by the old joke that in a recession your value stocks have no value, and your growth stocks have no growth. As long-term investors, we need to
Perhaps forward earnings for 2021 should be the guiding estimate for future earnings. Another guide may be using earnings for 2019.
The quality of earnings will also drive the dividend payout ratio as well. Once we end up with the earnings figure to use, calculate the payout ratio with it.
This is the type of analysis I may do to come up with a potential shopping list. It is possible that stock prices go up from here. It is also possible that stock prices go down further from here. As an investor, my goal is to uncover quality companies, selling at attractive valuations, and to be prepared to invest when I find what I am looking for. If I invest regularly with a long-term focus, keep investment costs low, keep diversified and keep activity low, I have an edge over most everyone else.
Whether the stock market is going up or going down, I stick to my plan. We may get a lot of dividend cuts, or not, but I will continue sticking to my plan. So far, most dividend cuts have been in cyclical companies, which tend to cut dividends.
Again, this is just a list for further research, not a recommendation to buy or sell. It is imperative to stay diversified, and not overweight a single company or sector too much. However, it is equally important to know what you own, and determine how resilient that business is under most probable scenarios out there.
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