Monday, October 20, 2008

Just Started Small Automatic Investment Plans in Three DRIPS (Exxon Mobil, Dow Chemical and 3M)

I just started small, $50 per month, automatic investment plans in Exxon Mobil, Dow Chemical and 3M. I'm also doing periodic manual investments in my Johnson & Johnson dividend reinvestment plan (DRIP). I've owned an XOM DRIP since the 1990s. I've owned 3M and JNJ for 2-3 years. I've owned Dow for about one year.

I like Dow Chemical (DOW) because it has a huge dividend, 6.9% and it's raw input costs has to be coming down substantially with the huge drop in oil costs. It's payout ratio is a little high at 62%, but I think that might come down with the lower input costs.

I'm buying 3M (MMM) because it has a nice dividend, 3.5% and is still growing, albeit slowly in this economy. Since 2007 much of it's earnings gains have come through currency exchange rates. Nonetheless it's a nice blue chip. Also, it has a high return on equity (ROE) of 32.83%... among other things.

I'm buying Exxon Mobil (XOM) sort of as a hedge against Dow Chemical. But, I still love the company. It has a measly Debt to Equity of 0.077. It has a decent dividend of 2.3% and has more than 10% of its stock value in cash on hand. It is has been buying stock back vice plowing its cash on hand into more oilfield rights. Smart move, at least recently while oil prices have been in bubble territory.

Finally, i'm not starting an automatic investment plan in Johnson & Johnson (JNJ) because their agent, Computershare, charges $1 per month for the JNJ automatic investment plan. Instead, i'm manually doing purchases via my online account. Doing purchases like this in JNJ allows you to bypass the $1 fee.

My other periodic investments going forward will likely be the international (EFA) exchanged traded fund, government bonds and precious metals.

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