Case in point, my income portfolio currently consist of 8 ETFs and 27 individual stocks. Of the 27 individual stocks, only 7 of them would I consider purchasing today based on their valuation. They are listed below along with their buy below price and other information as of 9/12/2008:
AFLAC Inc (AFL) - Yield: 1.65%
Buy Below: $66.75
9/12 Close: $58.60
NPV MMA Diff: $13,075
Concern: The above data assumes a very aggressive dividend growth rate of 20%. With a low yield of 1.65%, AFL needs the high growth rate to be viable. From 1998-2007 the dividend growth rate averaged 22.3% with a low of 11.8% in 2001 to a high of 45.5% in 2007. Another concern is AFL's currency exposure in Japan, where roughly 75% of the company's earnings are derived.
BB&T Corporation (BBT) - Yield: 5.72%
Buy Below: $35.79
9/12 Close: $34.05
NPV MMA Diff: $10,573
Concern: BBT's exposure to the banking industry's current issues with funding and credit quality.
BP Plc (BP) - Yield: 6.29%
Buy Below: $83.28
9/12 Close: $54.79
NPV MMA Diff: $34,463
Concern: Failure to come to an understanding with Russia over its operations in the region (TNK-BP), inability to diversify away from Russia and terrorism could adversely affect BP's future performance.
General Electric (GE) - Yield: 4.40%
Buy Below: $32.69
9/12 Close: $26.75
NPV MMA Diff: $8,103
Concern: Slower-than-expected global economic growth, as well as manufacturing and regulatory problems and the potential for higher delinquency rates in GE's financial services segment.
Paychex Inc (PAYX) - Yield: 3.65%
Buy Below: $49.88
9/12 Close: $34.01
NPV MMA Diff: $149,426
Concern: The highly competitive nature of the outsourcing industry as well as the threat of new entrants into the human resources segment could pose problems for PAYX in the future.
Pfizer Inc. (PFE) - Yield: 6.96%
Buy Below: $27.72
9/12 Close: $18.62
NPV MMA Diff: $56,099
Concern: Patent expirations and pipeline uncertainties could cause PFE significant problems in the future if left unresolved.
Royal Bank of Canada (RY) - Yield: 3.99%
Buy Below: $49.08
9/12 Close: $46.46
NPV MMA Diff: $250,334
Concern: A further weakening of the Canadian economy, which grew at only 0.3% in the June quarter, a prolonged housing-related downturn in the United States economy, and unexpected sharp currency fluctuations.
The buy below price is the minimum of the Mid-2 (as described in Fair Value Data) and price needed to generate the minimum NPV MMA Diff. (as described in Measure What's Important). As always, you will need to do your own research and reach your on conclusion as to appropriateness of adding any of these securities to your portfolio.
Disclosure: Long in all the aforementioned securities.
Tags: [AFL] [BBT] [BP] [GE] [PAYX] [PFE] [RY]