I will be buying another #dividend #stock in the next few weeks. As you may know, I have been analyzing insurance company stocks for a long time. I have been pouring through annual reports and financial metrics. While I am not ready to make my decision yet, I am getting closer. I want to take you through my #investing journey in choosing stock 40 for my dividend growth portfolio.
First, I want to share why I’m not building the index. While I own 39 stocks (soon to be 40), my portfolio is nothing like the S&P 500. In fact, my top 5 stocks make up 24% of my portfolio. And, sin stocks come in at 11.3%. My current dividend yield is 3.89% (vs. 2.01% for the S&P 500). I like to diversify for stability, but my portfolio is very unlike the index, in my humble opinion (in a good way, as I don't like index investing for my personal situation).
Moreover, learn why 40 stocks may not work for traders, but can make a ton of sense for long term, buy and hold dividend investors. I buy and hold forever, so I can afford to hold 40 stocks. Someone investing for capital appreciation will likely have a very different strategy.
As someone who's underweight in financials, I'm so excited to add an insurance company. While financials are not my passion, I do see the value they bring to my stock portfolio. I especially feel that the timing is right with rising interest rates on the horizon.
I like insurance companies because they are sort of like dividend stocks. They sign up customers and then enjoy a stream of income. Customers are like long term dividends for these companies!
In my insurance company analysis, I'm looking at a bunch of metrics including:
* Float (the delta between premiums and claims). I'll be analyzing how these companies invest their float very carefully.
* I'll be looking at the sustainability of the business model. I can tell you right now I really like property and casualty insurers (with a heavy focus on property). I like life insurance companies ok. I do not like auto nor health. Learn more in today’s investing video.
* Learn all about the combined ratio and why I'll be investing in an insurance company that has the lowest possible combined ratio. By the way combined ratio = losses payable / incoming premiums.
* Learn all about return on equity (or ROE). Measured as earnings / stockholder's equity, ROE characterizes how effective insurance companies are at generating returns of capital invested. ROE is an important metric for insurance companies and also banks too.
* I'll be looking at book value (and price / book) to determine value as well.
* Much more in today's investing video!
Want to see my complete dividend stock portfolio? Check out this video: https://www.youtube.com/watch?v=6S-7R8iihPk
I own all the sin stocks! Download my free sin stock guide here: https://www.youtube.com/watch?v=q8eoj-r51uk
Don't forget! I'm on Instagram too (I'm @ianlopuch). Make sure to connect: https://www.instagram.com/ianlopuch/
DISCLOSURE: I am long United Technologies (UTX) and General Mills (GIS). I own these stocks in my stock portfolio.
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