Kick Off Summer with These Low-Maintenance Stocks

Kelly Green
|
July 10, 2024
|
Comments

We don’t really have seasons here in South Florida. The forecast is typically warm and sunny with a chance of a 40-minute rainstorm. The exception is a short stretch of 40-degree days that can randomly happen December through February. That’s winter.

For me, the Fourth of July is a reminder that it’s actually summer. I spent mine relaxing in a friend’s pool while her partner finished the brisket he had been smoking since 5 am. That’s the definition of summer, right? Outdoor cooking with friends and family enjoying the pool or the beach.

What happens to the stock market during summer?

There’s the old adage “sell in May and go away” suggesting we should pull our money out of the market until October. I don’t put much faith in this one because we’re not trying to time the market. And we would miss one or two dividend payments per stock during those five months.

History suggests that July can be a good month for the markets. It’s the strongest month for the Dow when you average its returns for the past 100 years. Over the past 20 years, the Dow rose in July 80% of the time with an average gain of 2%. The S&P 500 was higher more than 60% of the time with an average gain of 1.7%.

July’s success makes sense as it coincides with Q2 earnings season.

Right now, we’re seeing investor sentiment at neutral despite a new record high for the S&P 500. By the end of this week, we’ll have a better idea of investor sentiment as big banks kick off earnings.

So, which stocks can we add to our portfolio today to profit through the summer?

Invest in Brands People Use Every Day

Did you know that Kingsford is the leading charcoal maker in the US? It owns 80% of the market. I don’t recommend investing in charcoal, but Kingsford is one of the many brands owned by The Clorox Company (CLX).

Clorox brands include Hidden Valley Ranch, Pine-Sol, Brita, and Glad just to name a few. Most of its brands hold the number 1 or 2 market share in their category. The company earns over $7 billion in net annual sales and 9 out of 10 homes use a Clorox product.

Clorox currently yields 3.6% and has raised its dividend for 48 straight years. It’s a Dividend Aristocrat and just two years away from being crowned a Dividend King (50 years of higher dividends).

Or maybe instead of your kitchen pantry, you want to look for dividends under your bathroom sink.

Kimberly-Clark (KMB) is a top-three leader in toilet paper, diapers, and feminine care. It is the parent company of Kleenex, Pull-Ups, Scott, Viva, and Huggies. And the company’s Kimberly-Clark Professional products are used in retail and business restrooms as well.

The company generates over $20 billion in net sales annually. It currently pays a 3.5% yield and has increased its dividend for 53 consecutive years.

Both of these companies have time-tested brands that consumers will use not only through the summer but all year round. But that’s only half of the story.

Use Compounding to Build Wealth

Like what you're reading?

Get this free newsletter in your inbox every Wednesday! Read our privacy policy here.

I’ll admit a 3.5% yield isn’t much to write home about. It sounds even more disappointing when compared to today’s CDs and high-yield savings accounts paying 5%. The difference here is the holding time and the ability to leverage that time to our advantage.

Remember that both CLX and KMB have a long history of boosting their dividends. That includes the years when interest rates were practically zero. And I would bet that both companies will continue to increase their dividends for many years to come—even if the Federal Reserve cuts rates.

Consumer staples stocks are being overlooked by most investors right now due to interest rate competition. In my book, it’s time to own them and start your wealth-building plan using dividend reinvestment.

Using your dividends to buy more shares (even fractional shares) rather than taking cash means more shares earning more dividends.

Instead of taking cash, you instruct your broker to buy more shares with the money. With an online brokerage account this is done by checking the “Dividend reinvestment” box. The same thing happens again with every dividend. You’ll continue to collect dividends on your dividends.

The longer you hold the shares, the greater the compounding effect on your wealth. And the compounding is supercharged by dividend increases, which both of these companies have done every year for decades.

My favorite part is this is a low-maintenance strategy. If you want to add more shares you can. Other than that, you don’t have to do anything. You can enjoy your summer… and all the other seasons without trying to time the market.

For more income, now and in the future,