Please ensure Javascript is enabled for purposes of website accessibility

Own Solid Companies in Troubling Times

By Chuck Saletta - Sep 3, 2013 at 8:33PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

If a company is fundamenally strong, it has a reasonable chance of surviving even in an unstable world.

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.

How to keep on keeping on

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 (TEVA -9.56%) 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 (AFL -0.02%) 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 (SJM 1.34%) 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 (WFC 0.25%) 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 (UPS -0.57%) 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

United Technologies 





Teva Pharmaceutical





J.M. Smucker





Genuine Parts 





Mine Safety Appliances 















NV Energy 





United Parcel Service










Texas Instruments 





Union Pacific 















Becton, Dickinson 










Air Products & Chemicals 










Emerson Electric 





Wells Fargo





Kinder Morgan 










Total Portfolio





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

To follow the iPIG portfolio as buy and sell decisions are made, watch Chuck's article feed by clicking here. To join The Motley Fool's free discussion board dedicated to the iPIG portfolio, simply click here.

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Wells Fargo & Company Stock Quote
Wells Fargo & Company
$46.17 (0.25%) $0.12
Aflac Incorporated Stock Quote
Aflac Incorporated
$63.98 (-0.02%) $0.01
United Parcel Service, Inc. Stock Quote
United Parcel Service, Inc.
$205.16 (-0.57%) $-1.19
The J. M. Smucker Company Stock Quote
The J. M. Smucker Company
$139.38 (1.34%) $1.85
Teva Pharmaceutical Industries Limited Stock Quote
Teva Pharmaceutical Industries Limited
$9.97 (-9.56%) $-1.05

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/17/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.