DRIPs: A 5-Stock Starter Package

12/31/2014 8:00 am EST

Focus: STOCKS

Charles Carlson

Editor, DRIP Investor

I’ve always maintained that DRIPs provide an excellent opportunity to participate in the stock market. Anyone can buy DRIPs—rich or not so rich, college educated or high school dropout—explains Chuck Carlson, editor of DRIP Investor.

There are no restrictions or guidelines or prerequisites for buying DRIPs. If you can pony up $50 or $100, you can be an owner in some of America’s finest companies. That’s a powerful thing.

A common question I receive from readers, especially new readers who may be investing for the first time, is what stocks should I buy to start a portfolio?

Any investor, regardless of income levels, should be able to buy at least one of these quality stocks. And for $1,850, any investor may take positions in all five stocks.

And for just $275 per month, you can make optional purchases in all five. And remember—you are also buying more stock via reinvested dividends.

CVS Health (CVS)

CVS is getting more involved in providing healthcare services via its Minute Clinics. Its Caremark unit is a leading pharmacy benefits manager.

CVS has put up impressive growth numbers over the last several quarters and growth should continue.

Indeed, the firm is in the sweet spot in terms of benefiting from aging demographics in this country and the increasing numbers of people with healthcare coverage.

The stock trades around its all-time high, but I expect these shares to outperform the broad market over the next several years.

Disney (DIS)

Disney is one of my favorite long-term investments. The firm has strong market positions in a host of attractive markets; theme parks, entertainment, movies, and broadcasting.

Movie operations should get a lift in 2015 with the next installment of the now Disney-owned Star Wars franchise. Lower gas prices are good news for the company’s theme-park business.

And while broadcasting and cable companies are grappling with disruptive technologies in their markets, Disney still owns strong brands, including ABC network and ESPN cable sports programming.

Exxon Mobil (XOM)

Exxon Mobil has been under a bit of pressure as a result of the recent decline in oil prices. The good news is that Exxon stock is not as sensitive to oil pricing as other energy stocks, so I would expect these shares to be among the more resilient stocks in the group.

Exxon represents an excellent choice for a starter portfolio; it is the type of solid blue chip that provides ballast for a portfolio. Dividends should continue to grow, and the stock price should maintain its upward trend.

UGI (UGI)

UGI gives this starter portfolio exposure to the utility sector. Through its subsidiaries, UGI distributes propane, liquid petroleum gas (LPG), and natural gas. The firm is one of the better growth utilities in the market. These shares yield 2.3% and dividend growth should be well above the industry average.

Union Pacific (UNP)

All portfolios should have some exposure to the transportation sector, and Union Pacific offers an excellent play in the group. Union Pacific connects 23 states in the western two-thirds of the country by rail.

Union Pacific is the only railroad serving all six major Mexico gateways. If you believe the US economy will continue to grow, railroad stocks should do well. These shares represent a blue chip play for buy-and-hold DRIP investors.

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