Own Solid Companies in Troubling Times

Own Solid Companies in Troubling Times

This past week has been fairly brutal to stocks as the situation in Syria deteriorated and American saber-rattling suggested that a military intervention may be right around the corner. In troubling times like these, it's tough to stay invested and keep money at risk in the market.

The real-money Inflation-Protected Income Growth portfolio fell right along with the market since last week's update. Still, that portfolio is designed in a way that lets it stay invested no matter how the market moves, as long as the companies that it owns continue to operate in the way that made them worth buying in the first place.

To earn a spot in the portfolio, the companies behind each stock had to:

  • Pay dividends, have a history of increasing their dividends, and look capable of continuing to increase those dividends;

  • Appear reasonably to cheaply valued by some fundamentally focused valuation technique;

  • Have decent balance sheets that can help protect them from inevitable slip-ups; and

  • Fit with the rest of the portfolio reasonably well from a diversification perspective.

Those company fundamentals don't change simply because the market is worried about Syria or whatever the next crisis will be. That doesn't mean the iPIG portfolio is immune to market realities or the Syria situation, but it does mean that buy and sell decisions are based on company fundamentals rather than market gyrations. Indeed, the Syria situation is directly affecting the corporate reality of at least one iPIG pick. Generic pharmaceutical maker Teva Pharmaceuticals is headquartered in Israel, and increases in Middle East tension automatically adds risk. This particular situation has additional risk as Iran has threatened to retaliate against Israel if the U.S. attacks Syria. Teva's shares have been dropping for a few weeks as the situation escalates.

It's all about the cold, hard cash
While the news can move stock prices in the short run, over time fundamental business performance drives investing returns. And when it comes to returns for investors, nothing quite compares to the feel of cold, hard cash hitting the brokerage account. Several iPIG picks are ready to pay their owners cash dividends for the risks they're taking in owning those stocks. In part because the holiday-shortened week compressed payment schedules, a lot of it happens this Tuesday.

On Tuesday, supplemental insurance giant Aflac will pay its owners $0.35 per share for the fourth consecutive quarter. If it keeps with its recent trends, investors (including the iPIG portfolio) could expect to see a raise as soon as its next payment. Also on Tuesday, staple foods maker J.M. Smucker will pay its owners a $0.58 dividend, its first since its recent dividend increase. Smucker's raise for its shareholders exemplifies exactly the sort of investor-oriented behavior that made the company worth buying for the iPIG portfolio in the first place. Joining the dividend party, banking giant Wells Fargo hands its owners $0.30 per share on Tuesday, its second at that level since resuming dividend increases after the recent financial meltdown. Wells Fargo was among the fastest major banks to recover its dividends since the crisis, showcasing its financial strength.

Not to be outdone, Teva is also paying its dividend on Tuesday, handing its U.S.-based owners a payment that starts around $0.32 per ADR for the third consecutive quarter. Because the company is based in Israel, however, US investors will see about a 15% haircut from the Israeli withholding tax. Still, the fact that the company continues to make its dividend payment in spite of potentially being in the crosshairs of the Syrian conflict showcases just how committed it is to its shareholders. And finally, delivering consistent income for its shareholders along with those famous brown trucks, United Parcel Service is also expected to pay its dividend this week. The company's $0.62-per-share quarterly payment marks its third at that level

Solid companies delivering real cash
Those dividends, paid even during a period of increased geopolitical turmoil, provide key signals of strength from the companies that pay them. That signal -- plus the cold, hard cash itself -- help the iPIG portfolio stay invested even as Middle East tensions threaten to flare up again.Put together an entire portfolio based on companies like that, and you wind up with something like the table below, which shows a snapshot of the iPIG portfolio as of last Friday's close:

Company Name

Purchase Date

Total Investment (Including Commissions)

Current Value
Aug. 30, 2013

Current Yield
Aug. 30, 2013





Teva Pharmaceutical





J.M. Smucker

























United Parcel Service














































Wells Fargo











Data from the iPIG portfolio's brokerage account as of Aug. 30, 2013.

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The article Own Solid Companies in Troubling Times originally appeared on Fool.com.

Chuck Saletta owns shares of Aflac, Texas Instruments, Microsoft, McDonald's, Genuine Parts Company, United Technologies, Wells Fargo, Teva Pharmaceutical Industries, Emerson Electric, Becton Dickinson, Walgreen, Union Pacific, Hasbro, United Parcel Service, CSX, J.M. Smucker, Air Products & Chemicals, Mine Safety Appliances, Raytheon, Kinder Morgan, and NV Energy. The Motley Fool recommends Aflac, Becton Dickinson, Emerson Electric, Hasbro, Kinder Morgan, McDonald's, Mine Safety Appliances, United Parcel Service, and Wells Fargo. It owns shares of CSX, Hasbro, Kinder Morgan, McDonald's, Microsoft, Raytheon, and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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