Way back in November 2019–if you remember a period when projected earnings growth was strong and before the coronavirus recession–I argued for a dividend strategy that focused on companies with fast growing and solidly predictable earnings that were, in my opinion, likely to raise their dividends significantly over the next five years or more. It didn’t matter all that much, I argued, that these stocks didn’t pay a big yield now. Buy them now for the future dividend increases. And rather than focusing on the steady dividend growers in the S&P Dividend Aristocrats list, I added stocks like Visa (V) and Illinois Tool Works (ITW) because if their stronger projected earnings growth.
Well, it’s a new world now. Companies are struggling to find the cash to get them through the coronavirus recession–a recession of unpredictable length that the optimists predict will be over by the third quarter and the pessimists see stretching to the end of 2021–and that’s not an economy where companies with small payouts are looking to break into the big leagues on yield.
So the new dividend picks that I’m rolling out as part of my Special Report on dividends–the first picks will get posted today after the market close–pay more attention to high current yields–may be pushed higher by the coronavirus-induced volatility of 2020–and to companies with the revenue and cash flow strength to keep pushing high dividends higher despite this economy.
To make room for those new picks and to close off a dividend strategy that isn’t much suited to the current economy, I’m selling a couple of picks from the Dividend Portfolio today, May 18.
First sell is Visa (V). Please note that Visa remains a member of my 12-18 month Jubak Picks Portfolio where it has been since November 5, 2014 for a gain of 203.25% since that initial pick. Today’s sell isn’t a signal to sell shares of Visa in all portfolios. It is just a call to sell Visa in this particular Dividend Portfolio because I don’t see the stock’s 0.65% dividend climbing very quickly in the current economy. I added the stock to the Dividend Portfolio back on November 11, 2019. The position is up 6.39%, including today’s 4.19% gain, since that initial pick.