October Stock Considerations

As the month of October begins, dividend growth investors all over the world check up on their portfolio health and scout new investment opportunities. With recent market declines and an overall shakiness to the major averages it would seem that several stocks are going on relative sale these days offering better pricing from all time highs and better valuations as well. This fact presents two opportunities for myself and my portfolio as I have the decision to choose between averaging down with some of my current newer holdings or expand my portfolio by adding new higher yielding stocks.

For the month of October I thought about shaking things up a bit and mention several new names I am considering that all offer relatively high yields and run the gamut from standard common stocks to closed end funds. For those that do not know, a closed end fund is basically like a mutual fund except it issues a finite amount of shares that is traded on the stock exchanges. Unlike a regular open mutual fund which can issue new shares to new investors at any time, a closed end fund cannot and its stock value is determined by basic supply and demand laws and trade either at discounts or at premiums to their net asset value NAV which is basically the sum of the value of their current assets. Not all closed end funds are created equal and “dividends” received might be a return of capital which is taxed at different rates than standard dividend distributions. Plus, many closed end funds employ leverage to enhance returns and with rising interest rates coming down the pipe higher borrowing costs may impact future earnings. With all that being said here are my October stock considerations.

First up is a utility that I have been watching in recent weeks, Hawaiian Electric Industries Inc. HE. This company, as the name suggests, produces, purchases, transmits, distributes and sells electricity in Hawaii. It also owns American Savings Bank, the third largest bank in Hawaii. As you know I have been particularly fond of the financial sector for many months and this stock seems to offer the stability of a utility along with financial sector exposure. The stock currently yields a very juicy 5.30% with a PE of 15.21 which is well below the S&P and industry peers.

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Disclosure: Long BNS, TD, RY

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