This Tech Stock has Raised Dividends 11 Straight Years

Investing Begins with Research

Stocks that are red hot can fall just as quickly as they went up. Be very careful. You are better off finding good companies in strong industries that have been consistent winners.

researchYou can outperform professional investors when you follow a smaller number of companies and truly understand what they do. Behind every stock, there is a company and a story. By doing your homework you can find out what a particular company is doing and if it is a viable investment option. To be optimally diversified, you need to own stock in eight to twenty different companies. If you can’t find any companies that you think are attractive, keep the cash. Investing for the sake of investing is foolish. Wait for the right opportunity.


During one of my weekly market reviews for my clients, I highlighted some of the current market opportunities around the globe.

Here is what I shared:

“Based on institutional buying, option activity, and other factors our indicators take into account, here are some areas of opportunity right now in various sectors/countries with great upside potential:


Emerging Markets       

U.S. Dow              

U.S. Nasdaq 100





Fixed Income:

Shorting Long-term Bonds (20+ years)”

As an investor, I admit I utilize fundamental analysis more than I use technical analysis.  Fundamental research is my specialty and how I have found a way to deliver consistent long-term winners.  To find winning investment ideas, I start with sector analysis (looking for strong sectors) followed by individual company analysis (looking for strong companies).

When I approach investing, I search sector by sector and select my best ideas within each category. In order to determine which sectors I view as strong, I look to have a good portion of my portfolio in industries that are rapidly expanding and less exposure in industries that are contracting.

mchpOn my list right now are semiconductors. This is a rapidly expanding industry and prices for many within the industry are quite attractive. Within this category, one of my favorite stocks is Microchip Technology, Inc. (MCHP). It develops and manufactures specialized semiconductor products used by its customers for a wide variety of embedded control applications. Its product portfolio comprises microcontrollers; application-specific standard products; and related mixed-signal and memory products. The company markets its products to the consumer, automotive, office automation, communications and industrial markets.

Microchip has several key opportunities in the weeks and months ahead for investors:

  1. It sells to tens of thousands of end customers, so it is not overly dependent on sales to any one client or market segment.
  2. Its focus on the microcontrollers (MCU) market gives it an advantage over larger competitors, for whom MCUs are a less important piece of their larger business.
  3. It has one of the highest dividend yields in the chip sector. It is currently at 3.6% and it has raised its dividend every year since 2002 so that is 11 straight years.

Bottom line: Microchip Technology (MCHP) is a part of our All-Weather Strategy, which focuses on stocks that can do well in good and bad markets.  Microchip has produced nearly 14% in annual returns for the past 15 years and should continue to be a strong performer.  It is a good buy up to $45 a share and this one should hit $50-$55 over the next 12-18 months representing 20-25% upside potential from current prices.

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1. Avoid companies that violate your faith and values. Some of the types of companies we can avoid include those involved in the abortion industry, those producing explicit entertainment and pornography, those conducting embryonic stem cell and fetal tissue research, companies funding and lobbying for homosexuality, those involved in vices like alcohol, tobacco and gambling and companies that are abusing the environment.

2. Seek out those companies that complement your faith and values. This involves finding companies: Helping the poor and defenseless; Protecting the sanctity of human life; Producing morally sound entertainment; Finding cures for life threatening diseases; and Improving the society we live in…

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Dueling Duos Portfolio (DDP) detects top-ranked large caps with building momentum. We buy them when our signals tell us they are just starting to gain notice by others. Then we sell for maximum profit when the interest intensifies.






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Building a Rising Dividend Portfolio

Building a Rising Dividend Portfolio

High quality and low volatility go a long way…
dividendsMaking money in the stock market isn’t hard — there are hundreds of successful investing strategies out there. But ask any investor how to keep investors consistently safe and profitable, and it’s a different game. To find safe and profitable stocks that weather the storms that come and go through bull and bear markets, I look for high-quality investments with low volatility.

In this light, my favorite investments in today’s market are stocks that steadily pay dividends.

When you buy a dividend-paying stock, you should be concerned about a company’s expected growth and the stability of its dividend payments. I typically look for stocks that have a strong history of consistent dividend payments.

This requires looking at a company’s earnings trends. As a company becomes more profitable, it increases the likelihood of paying — and growing — dividends.

In addition, the company should be safe. This means it should provide a recession-proof product or service. For example, consumer staples companies such as Kimberly-Clark Corp. (NYSE: KMB) or Colgate-Palmolive (NYSE: CL) are always safer picks than some riskier small caps or pharmacy stocks.

But one of my favorite sectors to find safe and steady dividend payers is the food industry. Think about it, people need to eat no matter how the economy is doing. And one of the most sought-after food products is meat. The demand for meat has been steadily increasing since 1960. In developing countries, meat consumption has been continuously increasing from a modest average annual per capita consumption of 10 kg (22 pounds) in the 1960s to 26 kg (57 pounds) in 2000 and will reach 37 kg (81 pounds) around the year 2030, according to Food and Agriculture Organization (FAO).

And of the meat companies, my favorite is a classic dividend stock — Hormel Foods (NYSE: HRL). The stock has consistently paid dividends for 47 consecutive years. That is one of the reasons it is in our All-Weather Portfolio (AWP) and in a few moments you will see how amazing a rising dividend portfolio can be…

Bonds or Dividend Paying Stocks?  You Be the Judge!

When you buy a dividend paying stock, you should be concerned about a company’s expected growth and the stability of its dividend payments.  I typically look for stocks expected to perform in-line with the market or better with above average. dividend yields.  I also want to find companies that have a strong history of paying a dividend and more important those that have consistently raised their dividends. This requires looking at its earnings trends.  As a company becomes more profitable it increases the likelihood that the company can continue raising dividends. Additionally I look for companies in strong demand sectors that have the potential to thrive in good and bad times.

Companies who offer recession proof products around the globe should continue to thrive!  With 70%–80% of the world’s population living in developing countries, emerging markets have been a growth area for many consumer staples companies, especially food.   As per-capita wealth has risen in these emerging economies, goods considered staples in developed countries have become universal needs and wants.  With the increase in global consumption, staples companies have great opportunities to increase their market volumes and accelerate their earnings growth rates.

That is why I love stocks like Hormel Foods.  Hormel is a leader in its industry because it trumps the competition by selling value-added meat products, as opposed to distributing solely raw meats and other commodities. Hormel’s notable brands include Spam, Jennie-O, Country Crock, Lloyd’s and Chi-Chi’s.

Here are a four other reasons I like the stock…

1. Convenience
It focuses primarily on convenient products, which are in high demand today with so many people on the run. This should be a growth opportunity for Hormel as more people are eating meals at home and looking for time-saving meal options.

 2. Successful acquisition
In January, Hormel purchased Skippy — the 81-year-old peanut butter maker — from Unilever for about $700 million. This should allow Hormel to expand its brand across the globe further, as Skippy is sold in more than 30 countries.

3. Lean supply chain
Hormel has a strong, vertically integrated supply chain that takes advantage of economies of scale. This keeps new competitors from eating into Hormel’s current market share. For example, Hormel raises about 70% of the turkeys needed to meet sales volume. This lowers its costs and allows it to have a competitive advantage.

4. Strong financials
Hormel’s financial health is very impressive. At the end of 2012, its current and quick ratios were about 3 and 1.7, respectively. As a quick background, the current ratio is used to calculate the company’s ability to payback its short-term liabilities (bills, debt, etc.) with its short-term assets. The higher the current ration, the more capable the company is of paying back its obligations. The quick ratio shows a company’s ability in quickly converting inventory into cash.

With EBITDA covering interest expense almost 70 times at the end of 2012, it looks like Hormel is in great shape for the future. Hormel’s forward price-to-earnings (P/E) is low — at roughly 17, compared to the industry average of 27.

In addition, Hormel’s operating margins should continue to average around 10% during the next few years as a result of its recent success in generating cost savings throughout the supply chain.

Hormel foods (NYSE: HRL) is an Attractive Investment Opportunity! Putting Hormel to the Test

Many investors choose bonds for income over quality dividend paying stocks and this can often is a huge mistake.   Let’s go all the way back to January of1990 for an example.  1989 had been a tough year.  There had been a recession, inflation was at 5.1%, and economic growth had come to a screeching halt. The Fed decided to raise rates to combat inflation also slowed the economy down. By 1990, economic trouble continued with the Gulf War, which would lead to massive spikes in oil prices. So investors were nervous to say the least with high unemployment, massive government budgetary deficits, and slow Gross Domestic Product (GDP) growth.   Interest rates were hovering around 8%.

Let’s say an investor decides to forgo the stock market and look for safety in the bond market.  They decide to put $100,000 in a quality bond paying 8% maturing in 2013.   This investor would have received $8,000 a year for the past 23 years and then receive their original $100,000 back at maturity.  Not to shabby!

However, what if this same investor looked at a quality dividend paying stock and planned to hold the stock just like the bond all the way until 2013. One of my favorite sectors is the food industry.  Think about it: people need to eat no matter what the economy is doing and the global population keeps growing!  And one of the most sought after foods is meat.   Of the meat companies, my favorite is Hormel Foods (NYSE: HRL).  Now this is a classic rising dividend stock.

Investors who purchased $100,000 worth of the stock on Jan. 2, 1990, would have gained $2,910 annually with a yield of about 3%. This yield might have not meant much in 1990, but fast forward to today and you will be amazed at the compounding effect on the gains.

Take a look at the table below…




  Income 1990

  Today’s Value

  Income 2013

Hormel Foods (NYSE: HRL) Bought on 1-1-90
 HRL  $100,000  $2,910  $1,793,722   $30,493
20-Year Treasury Bond, @8% Interest 2013 Maturity
 $100,000  $8,000   $100,000  $2,680


The Rising Dividend Stock Crushed the Bonds!

Today, the Hormel’s stock yield is only 1.6% about half of what it was back in 1990. That’s because as you probably know, as a stock’s price rises, its yield falls. The stock has had significant growth, so its share price has risen dramatically to nearly $40. Despite a much larger annual dividend today (68 cents a share vs. 6.5 cents a share in 1990), its yield has fallen yet income has increased substantially.

Bond investors, however, enjoyed a steady 8% income for 23 years, but they were shocked when they had to renew their investment at a measly 2.7% after 20 years.

BOTTOM LINE: As you can see Hormel stock rose 1,793% from 1990-2013.  Income from the stock rose from just over $2,900 per year in 1990 to $30,493 in 2013, a 1,048% increase in income. While the bond produced no gain and income decreased from $8,000 per year down to $2,680, a pay cut of 66%!

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