Dividends and Strong revenues seen as a bulwark against trade wars

President Trump has many characteristics but every once in a while, as an investor you have to ensure you are protected against his twitter comments. Whether that is increasing tariffs against China or anyone else; whether it is comments on the economy and how to keep it strong; or what industries he loves or does not like. One method to protect yourself is to buy companies with strong US sales under the expectation they will continue to sell many items well.

Ian Tam works at Morningstar Research and his criteria to produce a list for your consideration was:

use the S&P 500 stocks

quarterly sales momentum (last 4 quarters of revenues compared with same figure 1 quarter ago

sector-relative price-to-sales  – a value  metric comparing the company’s price to sales ratio against the median sector

historical relative price to sales – comparing the P/S ratio against the stock’s own median over the last 10 years

To  read the table a P/S ratio of 0.3 means it is 70% lower than the sector to which it belongs.

To qualify a company must have a sales to total assets ratio greater than 0.5 to ensure it has enough sales to cover its debt. 0.5 is the median sales to total assets ratio of the S&P 500 Index.

Company                      Mkt Cap   Qtrly Sales   Sector/Rel   Historical    Sales to    Dividend

$ bil           Momen %    P/S Ratio       P/S Ratio    T.A. Ratio    Yield %

Quanta Services             5.367         6.5                   0.3               0.6                    1.4           0.4

Marathon Pete             40.033        12.5                 0.1                1.1                   1.3            3.6

CVS Health                    71.793         2.9                 0.1                0.6                    1.2           3.6

McKesson Corp            24.108          3.1                 0.0                0.6                     3.3          1.2

Amerisource Bergen   16.351         3.7                 0.0                 0.7                    4.2           2.19

Cardinal Health            14.584         3.1                 0.0                 0.7                   3.4           3.9

LKQ Corp                         8.800         4.3                0.5                 0.5                     1.0           0.0

CBRE Corp                    16.801          3.7                0.1                 0.8                     1.6           0.0

Walgreens Boots          48.403         2.9               0.2                   0.6                    1.8          3.3

L Brands                          6.698         1.3               0.3                   0.4                     1.6          4.9

The other companies on the list were

Campbell Soup, American Airlines, Facebook, Jacobs Eng and Nucor

Linking to dividend paying stocks, at least 5 of the names are in health care which indicates no matter the economy, people are still going to need health care. It might be a good idea to ensure your portfolio has some health care to protect you. The numbers allow you to be as defensive as possible. In this case, Morningstar Research provided some details but your company you buy stock has similar information. Narrow the field, at least that is what dividend investing tries to do. You may miss some opportunities but the number one rule in investing is try not to lose money.

There are more questions than answers, till the next time – to raising questions.


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