A group of personal finance bloggers are having a stock picking challenge and I am competing. The challenge is at Money Pros and the contest is simple. You pick three stocks and have $1000 invested in each of them. All dividends will be reinvested in additional shares. Whoever has the best return at the end of the year wins.
For my three stocks I just chose three stocks that I already own. My portfolio returned a little over 7% last year which isn’t bad at all considering the stock market as a whole was basically flat. My stock strategy is to pick stocks that consistently pay dividends and have a history of increasing their dividends. My stock picks follow with a little information on each stock.
Atlantic Power (AT) – This is a utility stock that offers a 7.7% yield. You shouldn’t buy a stock just for a high dividend yield but it is one of the factors I look at. The dividend payout ratio is fairly low and the P/E is low. It also has a good albeit short history of consistently paying dividends. Adding up all those factors makes this stock.
Gabelli Global Gold,Natural Resources & Income Trust (GGN) – This stock combines an 11% yield with a bet on gold and natural resource stocks. This stock might be a little risky but I’m betting natural resource stocks are going to rise this year. If I’m wrong I’ll still be getting the 11% yield.
Enerplus Corp. (ERF) – This stock has a nice 8% yield. This company invests in crude oil and natural gas assets. This is another bet that there will be increased demand for natural resources leading to a stock price increase. It has hedged most of its oil production for the next year which should help keep it a fairly safe investment.
Those are my picks for the contest but I’m not saying you should invest in them. Be sure you do your own research before you invest in any stock.
The stocks for the contest were all high yield stocks but I also own solid consumer stocks such as JNJ and MCD that pay much lower dividends. I try to diversify my portfolio with high yield and low yield stocks.
What do you think about investing for dividends?