Friday, January 28, 2011

Opportunities in a down market: try Bunge BG

Traders will not want to be long the market over the weekend with all the upheaval going on in Egypt and its neighbors. However, investors need to use these market corrections as an opportunity to invest
. We are rarely traders; we are investors.

Today I combed through my wish list looking for a company that I like but does not quite meet the dividend machine criteria because the dividend is less than 3%. Sometimes I can find a bargain when the stock price goes down enough to make the dividend yield the required 3%. However, as of the writing of this post I have not yet found one.

My next screen is to look at an industry that I want to be in. Maybe the stock I look for is not a dividend machine but it has all the fundamentals of a good company (it makes money, shares the profit in a dividend and has a strong balance sheet) but perhaps it is well below the 3% or has not consistently increased the dividend.

I like the food area. The world is growing and it is hungry. We already have a dividend machine in Sysco, symbol SYY but they are end distributors. We have a few almost dividend machines in DD (DuPont) and DOW (Dow chemical) which provide the chemicals etc. used in the agriculture industry and we have a big dividend producer in Con Agra (CAG.) Potash and Monsanto have been too expensive for me and do not pay enough of a dividend to warrant the risk.

Today I settled on Bunge symbol BG. Bunge operates in the farm to consumer part of the food chain. It has a solid balance sheet with a D/E (debt to equity ratio) of only .28. Bunge earns $12.62 and pays out $.92 per share in a dividend that has increased consistently. The yield is a paltry 1.35% but I am looking for capital gains on this stock.

If you find nothing in your wish list that you want to buy, then just be patient over the weekend. Monday I will profile a new dividend machine that you can consider.

Very Truly Yours,