Chevron Offers a Mixed Q2 Update; Procter & Gamble Receives an Untimely Downgrade

A three-year-long experiment intent on showing that life's most basic needs can result in market-beating portfolio gains, hefty dividend income, and a good night's sleep!

Jul 14, 2014 at 6:35PM

Last May, I announced my intention to create a portfolio that embodied life's basic needs. To that end, over a period of 10 weeks, I detailed 10 diverse companies that I think will outperform the broad-based S&P 500 over a three-year period because of their ability to outperform in both bull markets and bear markets, as well as their incredible pricing power in nearly any economic environment.

If you'd like a closer look at my reasoning behind each selection, just click on any, or all, of the following portfolio components:

Let's look at how our portfolio of basic-needs stocks has fared since we began this experiment.


Cost Basis


Total Value


Waste Management 










NextEra Energy 















Select Medical 










American Water Works





Procter & Gamble





AvalonBay Communities









Dividends receivable




Total commission




Original Investment




Total portfolio value




S&P 500 performance



Performance relative to S&P 500



Source: Yahoo! Finance, author's calculations.

Although the Basic Needs portfolio gave up a fraction of its value this week (0.1%), the broader S&P 500 lost considerably more, pushing the Basic Needs portfolio to its largest outperformance of the S&P 500 since this experiment began a little more than 11 months ago.

What's more impressive is that only two stocks are in the red -- and both are just pennies away from breaking into positive territory. If we account for dividends received, then every stock has returned some form of positive value since we "purchased" them -- and that will often lead to few, if any, complaints.

As always, let's start off with this week's pressing dividend news.

Show me the money!
Although payment processing facilitator MasterCard (NYSE:MA) didn't directly put any money in our pockets (as of yet), it did go ex-dividend on Monday with shareholders on record as of July 9, who are expected to receive $0.11 per share on Friday, Aug. 8. MasterCard's dividend isn't much to look at for the time being, but considering that it boosted its payout 83% and drastically hiked its long-term share repurchase agreement in December, and also has a double-digit growth opportunity in emerging markets for decades to come, I'm not exactly sweating its tiny 0.6% yield.


2015 Ford Escape. Source: Ford

Automaker Ford (NYSE:F) announced on Thursday that it would be paying a third-quarter dividend of $0.125 per share on Sept. 2 to shareholders on record as of Aug. 1. This payout is unchanged from its sequential second quarter, but it is 25% higher than the $0.10 Ford paid out to shareholders in the year-ago period. Ford's payout is currently sitting at its highest level in 13 years and is well-deserved, considering the progress Ford has made in Europe's commercial market, within China and India, and in the economy car and SUV market within the U.S. since the recession. With an impressive long-term vision and solid execution lately, Ford continues to impress me with each step.

Chevron drills away
Investors in integrated oil and gas giant Chevron (NYSE:CVX) once again experienced indigestion after the company provided its interim update for the second quarter on Thursday evening. On one hand, improved liquids pricing and expanded production in the U.S., coupled with fewer impairment charges and the sale of overseas assets, look set to push Chevron's EPS higher from the sequential first quarter. On the flip side, foreign-exchange losses are only getting worse, and the company's downstream operations are looking at a flat quarter when compared to Q1.

Source: Kool Cats Photography via Flickr.

It's no surprise that Chevron lost value on Friday, considering that investors expected higher oil prices to have a stronger impact on its bottom-line results. But Chevron also didn't give us a specific EPS number to latch onto, either. At just 11 times forward earnings, Chevron still remains an attractive long-term buy-and-hold company. 


Source: Eric Norris, Flickr

American Water gets bigger
They normally fly right under most investors' radars, but water utility giant American Water Works (NYSE:AWK) announced, via one of its subsidiaries, the purchase of Mt. Ebo Water Systems for an undisclosed amount on Thursday. The purchase will add 400 water and wastewater customers in Putnam County, N.Y., and it demonstrates once again just how easy it is for American Water Works and its subsidiaries to grow by picking apples off the branch. Because its business is largely regulated, investors are rarely surprised by American Water Works' results, which makes it a low-volatility play on a finite resource.

The dreaded downgrade
Lastly, global consumer goods giant Procter & Gamble (NYSE:PG) received a dreaded downgrade on Friday from Wells Fargo analyst Chris Ferrara. Ferrara chopped P&G's price target to a range of $85-$87 from a prior forecast of $88-$90 and lowered his rating on the company to market perform from outperform. Specifically, Ferrara pointed to increasing competition, weakening U.S. sales trends, and new product launch execution risk as a reason for the downgrade.

It's no secret that Procter & Gamble is growing at a snail's pace relative to the market, and that returning CEO A. G. Lafley is in the process of cleaning house, so to speak. As P&G has shed noncore assets we've witnessed its cash position grow and we've also seen an uptick in volume unit growth outside the U.S. So long as Lafley keeps Procter & Gamble focused on its emerging market potential, while in turn ensuring that its U.S. name-brand products remain competitive, then I see no reason why P&G won't head higher over the long run.

The key to long-term outperformance is high-quality dividends.
The smartest investors know that dividend stocks simply crush their non-dividend-paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool owns shares of, and recommends Ford, Intel, MasterCard, Waste Management, and Wells Fargo. It also recommends Chevron and Procter & Gamble. 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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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