When it comes to investing for future income, I favour dividend stocks that produce a regular income stream year after year, especially if they are well diversified amongst sectors and countries. I try to avoid companies that have excessive debts and those that are betting their future on the success of a single product.
My goal is to identify solid dividend and growth stocks for making conservative investments. I don't mind investing in a company that is not currently paying dividends, provided that the company is investing its earnings to achieve a fast growth in sales by developing new products and expanding into new markets.
When deciding which stocks to buy now, I look at the short-term and long-term perspectives of companies. In my view, the best companies follow a clear, understandable management strategy that allows shareholders to see where the company is going. As a matter of principle, I stay away from companies that I do not understand.
The composition of my portfolio also takes into account where to invest at this time. I try to identify appealing companies on a national and international level. Occasionally, I would invest in a country that is generally considered as high-risk if I can see good reasons to expect an improvement of the situation in the mid-term.
Making money from investing is difficult and my portfolio does not aim at achieving quick, short-term gains, which I consider too difficult to predict. I select stocks on the basis of both financial and philosophical criteria. I want to obtain a good return on my investments, and at the same time, I am looking for investments that provide peace of mind. For this reason, I typically choose solid, well established, and well managed companies.
In terms of disclosure, readers should take into account that either I already own shares of these companies or that I am currently considering to add them to my investment portfolio. Before making any investment decision, readers should make their own research and check thoroughly several independent sources.
The John Vespasian investment portfolio
- Baidu (China) Despite its high price-earnings ratio, this company is performing excellently and achieving a very fast growth of the top line. Even if it does not pay dividends, this company can be regarded as a rather conservative investment. Its total market and its market share should continue to grow in the foreseeable future, and it has little debt in its balance sheet.
- Ford Motor Company (United States) Sales continue to increase and the company is very well established internationally to take advantage of any improvement in the worldwide economic growth. The low price-earnings ratio of its shares reflects in part the fact that the balance sheet is loaded with debt. However, the quality of the company's products should make up for this drawback.
- Sasol (South Africa) As the South African economy continues to grow, its energy consumption should rise. This energy company has little debt in its balance sheet, a low price-earnings ratio at this time, and it also pays a good dividend. It makes a good margin on its sales and its top line continues to grow year after year.
- Bank of Nova Scotia (Canada) Despite generalized fears about the health of the banking sector, this particular bank does not worry me. Its balance sheet looks solid and its lending operations are well diversified internationally. At the moment of this writing, the price-earnings ratio of the shares is reasonable and the company is paying a good dividend in a hard currency.
- Sysco (United States) The wholesale distribution of food does not seem like a high-growth business, but it has the advantage of requiring large amounts of capital if you want to run it efficiently. Smaller operators have difficulties competing with this company, which runs a highly effective distribution network. The small amount of debt in its balance sheet, combined with a good dividend, make these shares an attractive investment in my view.
- United Technologies (United States) The unique combination of several high-technology businesses makes this company very attractive. On the one hand, the company makes elevators for buildings and factories, which typically generate a steady income from maintenance contracts. On the other hand, it runs a top manufacturing operation of aircraft engines. In addition, this company pays currently a good dividend.
- Posco (South Korea) This is one of the biggest steel producers in the world. Its main production facilities are located in the area of the world where economic growth is the highest. The company has relatively low debt, a modest price-earnings ratio, and it is currently paying a good dividend. If you believe, as I do, that the world economy will continue to grow, you may want to take a closer look at the shares of this South Korean company.
- Medtronic (United States) As the population in industrialised countries continues to get older, more medical devices will be needed. This company is a world leader in devices such as pacemakers and heart valves. It sales are growing year after year, and it is making a very good profit margin on those sales. Furthermore, this company has little debt in its balance sheet and currently pays a good dividend.
- Arcelor Mittal (Luxembourg) This company is a truly global steel maker, with manufacturing capabilities in all main markets of the world. What I like best about this company is that its balance sheet carries relatively little debt, a circumstance that should allow the company to go unscathed through any economic downturn. Its top line continues to grow from year to year, and it is currently paying a good dividend.
- Ericsson Telephone Company (Sweden) This international manufacturer of telecommunication equipment is benefiting from the rapid upgrade of telephone networks around the world. The company's balance sheet has a small amount of debt and the sales of its products continue to grow. The fact that it is paying a good dividend at this time increases the appeal of its shares for conservative investors.
- Procter and Gamble (United States) This company possesses wonderful brands of household consumables that are sold around the world. The company's ability to develop and promote top brands is legendary. Its balance sheet carries little debt and, at the present time, the shares are paying a good dividend. The fact that the company is very well diversified internationally makes its shares particularly attractive in times of economic upheaval.
- Pepsico (United States) This company has two very strong legs, beverages and snacks, and those allow it to run a highly efficient distribution network around the world. I like in particular the fact that the company's balance sheet is healthy, and that the company is currently paying an attractive dividend. Low economic growth in some parts of the world should not prevent this company from growing in other places.
- Delhaize Group (Belgium) Despite the fact that this company has been barely growing during the last years, it possesses a remarkably healthy balance sheet, a low price-earnings ratio at this time, and it is currently paying an attractive dividend. If its new strategy attains some measure of success, its profitability should increase. The company is well diversified internationally, an aspect that increases the appeal of its shares for conservative investors.
- Nippon Telegraph and Telephone (Japan) This company has been going through a period of little growth in the last years, but it has a healthy balance sheet with relatively low debt. The fact that the company has currently a low price-earnings ratio, and that it pays a good dividend at this moment, make its shares particularly attractive.
- Schlumberger (United States) This company is a world leader in providing services to major oil companies. As the price of oil continues to rise, more exploration will be needed to find new oil wells. This company should profit from this trend. The low amount of debt in its balance sheet and the fact that the company is currently paying a good dividend may appeal to long-term investors.
- IBM (United States) This is a high-technology company that continues to grow even in a negative economic environment. The low amount of debt in its balance sheet and the dividend make its shares attractive, as well as the fact that the company is very well diversified internationally. For the long term, this trend should continue unchanged, and the profits of this company should continue to rise.
- Caterpillar (United States) A company that has grown its sales very fast during the last years. Despite the debt in its balance sheet, this company possesses a great international brand, high quality products, and a well-established network to service its machines. As long as the economy continues to grow in a good part of the world, this company should continue to do well.
- eBay (United States) In addition to a well-established internet retail platform, this company possesses one of the most widely used internet banks in the world. Its internet banking operations continue to grow at a fast pace and make its shares attractive for growth investors. Furthermore, its balance sheet carries very little debt, and this fact should allow this company to overcome any headwinds that it may encounter in the future.
- 3M Co (United States) The low price-earnings ratio, coupled with the good dividend at this time, make the shares of this high-technology company particularly appealing for conservative investors. Its innovative product development and the wide range of markets in which it operates should allow the company to continue to grow in the future. In addition, it possesses a healthy balance sheet.
- Astra Zeneca (United Kingdom) This is one of the major international pharmaceutical companies, and it has a solid balance sheet with low amounts of debt. The sales of its products are well diversified across the world, and its shares remain attractive despite the fact that the company has growth its top line at a low speed during the last years. Its strategy of acquiring smaller firms with high-potential products should pay off in the mid- and long-term.
- Market Vectors Africa (ETF Africa) The African economy is growing overall at a good rate, a fact that is not widely known to people living in industrialised countries. This Exchange Traded Fund holds shares of major companies in countries such as Egypt and South Africa. The fact that this funds pays a good dividend adds to its attractiveness. This investments vehicle may appeal to those who are looking to diversify their portfolio globally.
- iShares MSCI Russia Capped Index (ETF Russia) As a private investor, it is not easy to invest in the Russian economy. This Exchange Trade Fund holds a portfolio of major Russian companies, primarily in the energy, banking, and telecommunication sectors. In addition, the fund currently pays a good dividend to investors. This investment vehicle may appeal to those who wish to place part of their savings in Russia.
- Kraft Foods (United States) This company owns many great international brands and a well-established distribution network. In addition, it possesses an impeccable balance sheet. If the management of the company succeeds in increasing its sales and profitability, even marginally, shareholders should benefit in the next years. Its shares might appeal to conservative investors who like global companies with strong brands.
Tickers: BIDU, F, SSL, BNS, SYY, UTX, PKX, MDT, MT, ERIC, PG, PEP, DEG, NTT, SLB, IBM, CAT, EBAY, MMM, AZN, AFK, ERUS, KRFT