Bert’s August Stock Watch List

Earlier in the week, I crossed a big investing milestone….crossing $3,000 in forward dividend income.   It took me 15 months to jump from $2,000 to $3,000 and at the end of the article, I challenged myself to hit the next milestone in half the time.  To get there, I better get moving quickly.  What’s the best way to increase your dividend income?  Not a trick question here, but purchase stock!   I thought it would be a good idea to do some research this evening and put together a small watch list of stocks that have caught my eye.  Here it is, my August stock watch list.

Watch List

Now, I know there are a lot of great stocks out there and Lanny’s August stock watch list feature 3 great stocks as well.  So obviously I can’t cover them all in the article.  Please share the wealth and spread your watch list in the comment section.   But here are three names that I am monitoring.  The figures below were calculated using the 8/25/16 closing prices (Quick note…it is my sister’s birthday today!).

Stock #1:  Cardinal Health (CAH)  –  This mega-player in the medical services and medial distribution company came on to my radar recently.  Headquartered in our home-state, Ohio, would represent a new industry in my portfolio (which is always a plus).   CAH has increased their dividend for 11 consecutive years and while they aren’t a Dividend Aristocrat yet, they are slowly and surely making their way towards that mark.   CAH’s dividend yield is ~2.25% at the moment and their 3 and 5 year average dividend growth rates are 13.8% and 15.1%, respectively.  Recent history has seen dividend growth rates decline, so it would be nice to add a company that has a nice balance of yield and double-digit dividend growth.   Further, the fact that they are a major player in the medical industry (which is only getting larger) has me optimistic that the company can continue to sustain their growth over the long run.   CAH is also down 10% YTD, which has pushed their P/E Ratio below the market’s.  If the stock continues to fall, I may just have to act and initiate a position.


Stock #2:  Flower Foods (FLO) – The darling of the dividend growth community recently.  FLO’s recent downturn shouldn’t be a surprise to too many people at this point, so I won’t elaborate on it too much.  The company is facing low growth and has a DOJ inquiry that is looming.  With that being said, the company is a consumer staples company (which I love) that has a product portfolio that can be found in many, many households and announced a new expense reduction plan to help offset the impact of lower sales growth.   Similar to CAH, the company has a consecutive dividend increase streak that is in the teens, so it is well on it was way to becoming an Aristocrat as well.  The payout ratio is slightly higher than the 60% threshold we use in our stock screener, but at 67%, I wouldn’t say it is an alarming ratio.  Would definitely consider waiving this threshold if I could be convinced enough otherwise.  Down 28% YTD and a P/E Ratio that is well below the current market, I am having a hard time laying off this stock.  The ex-dividend date is coming up on 8/31/16 (my wife’s birthday!), so I better decide quickly if I want to capture the Q3 dividend.

Stock #3:  Wal-Mart (WMT) – Woah, woah?  Am I crazy here?  Didn’t I just purchase more shares of Target after their recent earnings release?  Well, hear me out here.  Despite the fact Wal-Mart’s price increase after their recent quarter, their metrics still pass the Dividend Diplomats stock screener.   Further, WMT is a Dividend Aristocrat and also announced a nice share buyback last quarter.  One of my goals for the year is to invest in five new Dividend Aristocrats…so initiating a position in Wal-Mart would help push me closer to achieving this goal.  For many of the reasons I like Target’s business model, I like Wal-Mart’s just as much.  The Jet.com acquisition is an intriguing acquisition and could potentially be a game changer for the company as it looks to take on the all mighty Amazon.  Further, Wal-Mart is not only a major player in major cities, but has a dominant presence throughout the country in less populated cities and towns.  The company’s footprint is massive, so adding a website like Jet.com and the footprint they have amassed is an exciting/intriguing proposition to me.  I wouldn’t mind owning the two major players in the industry and I don’t think it would be a bad overlap in my portfolio, so I am keeping my eye on WMT to see if there is a pullback in the coming weeks.

There it is, my August stock watch list.  Three very, very different companies.  Plus, I am unofficially adding TROW and PFE, which were on Lanny’s stock watch list.   What are your thoughts on the three companies?  Are you watching them?  What companies are on your radar?  Would you pass on investing in CAH, FLO, or WMT for any reason?

Bert

DISCLAIMER: I DO NOT RECOMMEND ANY DECISION TO THE READER or ANY USER, PLEASE CONSULT YOUR OWN RESEARCH.   THANK YOU FOR YOUR UNDERSTANDING.
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34 thoughts on “Bert’s August Stock Watch List

  1. I have DIS, CVS, and PII on my watchlist. All seem to have come down a bit. Hoping CVS comes down a little more but we’ll see.

    • Mongrel,

      I was checking out CVS too. Friday (after I wrote the article), pulled CVS down a little bit. I would love to add them to my portfolio if the price is right. I love the fact that they purchased Target’s pharmacies and is now in every Target. Keep us updated on Twitter if you see the price falling and decide to act.

      Take care and thanks for stopping by and sharing your watch list.

      Bert

  2. I added FLO and PFE. Great companies and will do will in the future. Flower Foods had some growing pains again but the pullback was a great buy opportunity. PFE has loads of cash and buying up companies to grow. I like Walmart but feel its overvalued right now. I did at TROW this week too. Great entry point.

    • Nice job adding those companies! Love my purchase of Pfizer earlier in the year. Heck, they announced two separate purchases during over the last couple weeks. Ever since their merger fell through last year, they are looking for some way to use the capital. Flower Foods definitely has some pains at the moment, which is why I opted for Target over FLO. However, I’m still giving the company consideration. What metrics are you seeing at WMT that lead you to believe it is overvalued (besides the appreciation in price).

      Bert

  3. Hi Guys,

    First, I would like to say that I enjoy reading your articles.

    I have Afl, Rtn, Lmt, Tgt, Itw, on my watch list but feel everything is over priced right now. I was expecting a summer correction so I’ve been waiting impatiently to pull the trigger. However, impatience can lead one to lose money so I’m waiting.

    On another note, I’m a big fan over Drips because of the minimal fees and have been able to accumulate over $470,000. in stock over the last several years. Most Drips, not all, require a $10 or $15. Account opening fee and $1, $2. or $3. each time I purchase shares. Some charge a reinvestment fee on top of that. I usually purchase monthly so these fees add up over time. I have 582 shares of Pm and have paid $230.40 since starting the drip. Most of the time I stop investing new cash once I reach 100 shares and then buy a new company. I reinvest all my dividends.

    I’ve been toying with opening an account with robinhood because they don’t charge any fees and I would be able to purchase small number of shares without fees. Using this method I could purchase shares monthly or weekly and cost average my purchases. They don’t reinvest dividends at this point which is a downside but I could use the cash from dividends to buy new shares. I’m thinking that once I’d get to a 100 shares of each new company I would then transfer that particular stock to my online broker who doesn’t charge reinvestment fees and let it ride.

    Have you guys had any experience with robinhood? Any thoughts on what i’m thinking of doing?

    • With an account that is your size and the large number of shares that you are going to be purchasing, I don’t think Robinhood would be ideal for you. Yes, there are no commissions, but Robinhood does have other fees. In fact, I opened an account with them to try it out and purchased about $50 worth of a small company. It is basically stuck there because to transfer that stock out costs $75. I think the account transfer is also all or nothing. The cheapest way would be to sell the stock (also free) and then use the free ACH transfer to get the cash sent to another account, but that kind of defeats the purpose you would be using it for.

      What might work well for you is to use a company like Schwab that offers free dividend reinvestment. Rather than owning the company directly through a company run DRIP, Schwab will, for no cost, buy partial shares of the stock using the dividend you receive. You could initiate a transfer of these companies held in your name into Schwab. From that point on there is no fees for reinvesting the dividends. The only cost to you would be $8.95 if you wanted to place another order for more stock. You could also collect the dividends and pay $8.95 to purchase a different equity.

      Another similar option would be to use Scottrade. They offer a thing called FRIP (flexible reinvestment program) where you can pool all your dividends and then use it to purchase commission free up to 5 different equities (which can be dividend paying or not).

      Scott

      • Lou,

        Woah, that is one heck of a portfolio right there Congrats on building that large of a nest egg. Holy cow that is impressive. Scott summed up a lot of how I was going to respond to you here. We did a review on Robinhood ( https://www.dividenddiplomats.com/robinhood-review-pros-cons/) and as Scott said, the account fees really start to add up with a larger account. It is a great tool for new investors that don’t have a lot of capital.

        I would recommend finding a brokerage that has a no re-investment fee. There are plenty of them out there, and we use Capital One Investing. If you like purchasing shares over a period of time, they offer $3.95 trades on a Tuesday that allows you to purchase shares. I’m not promoting them by any stretch of the mean, but there are plenty of other brokerages out there that offer low fee plans that can help push down your trading costs. You are right though, trading costs can definitely add up quickly and I would do anything I could to avoid them.

        Lou, thank you so much for the kind words by the way. Hopefully keep on commenting and coming back. I do agree about the market and it is HOT right now. There are a lot of stocks out there that are above average valuations. But now, some are starting to slip off their highs and offer investors opportunities to buy.

        Scott- Thanks for the information on the brokerages too and the response. That Scottrade program sounds pretty cool. Love the dialogue here fellas!!

        Bert

          • Hi Guys,

            It took me awhile to figure out which broker to go with for free trades but I did it. I transferred $210,000 from Ameritrade to Merrill Edge. As a result, Merrill Is giving me $600.00 for the transfer plus 100 free trades per month.

            Lou

  4. CAH looks interesting and it sounds like a company I need to dig into. I think the rumors of WMT’s death have been greatly exaggerated and they would make for a solid purchase. There’s not a whole lot that I’m excited about in the market as far as initiating a position right this second, at least not among the companies I routinely follow and keep up to date on. TGT could be a possibility but since you just recently added you might want to stay away depending on your weighting.

    • JC,

      I’m not overly excited about the majority of the company’s out there, but still found a few gems to pass along. CAH is a company that has always intrigued me, even back in my college days when they always recruited on my campus. I would love to do a full stock analysis about the company and learn more about them, so sounds like I have a fun research project over the next few weeks haha I was talking to Lanny about the weighting today. Right now, it represents about $5.6k of my $90ish portfolio. I would love to add 20 more shares to round it out to 100 and add 20 more shares. And if I do jump up my position, I know that it will slowly decrease as a heavy weight in my portfolio as I build other positions. What is the largest weight that you have in your portfolio? Thanks for stopping by and the comment!

      Bert

  5. I think taking a position in Wal-Mart is a smart decision. It’s almost recession proof because people will want to flock to Wal Mart for the lowest prices in times of a recession. I haven’t been adding dividends to my portfolio but I understand the passive income nature of dividends and might do it soon. Thanks for the post!

    • People buy cheaper goods whenever they can during good times, and that only magnifies during the bad. You hit the nail on the head for why it is such a good stock to battle the cycles of the economy. What dividend stocks are you looking at? I’m still debating about WAl-Mart, but wouldn’t be opposed.

      Bert

  6. Here’s the opposing view. None of the above – yet.
    1) CAH – good company but now a political hot potato thanks to mylen (same for CVS). You may get a bargain once Congress starts hearings.
    2) FLO – as a trade probably good. But with their payout ratio and probable settlement don’t expect much growth. Then if interest rates start going up …
    3) WMT – Jet is a good acquisition long term. I’d keep my eye on their fight with Visa in Canada though.

    • I agree with you that many pharma companies will be punching-bags for a bit & may see new regulatory guidance. I think they’ll be excellent buys in the near future.

      • That seems to be the case. There is always going on with pharma companies, especially over the last few months. As you said ZJ, could be a great time to swoop in and pick one up at a great price.

        Bert

  7. Nice list! I actually picked up some shares of FLO recently at $14.95. CAH popped on my radar after browsing through some SA articles. I might just wait until I can add to JNJ or PFE though. Congrats on over $3k of forward divi income. That is amazing!

  8. I’m currently holding WMT & FLO. I would add some more FLO if the price goes even lower. I looked at CAH a few quarters back but ended up finding better options at that time. I may need to take another look at CAH and see how they are looking now. I think they are all great companies and would fit well into a lot of portfolios. Thanks for sharing!

    • More Dividends,

      Nice! Glad you hold two thirds of my watch list. Definitely helps me feel better about the companies. What steered you away from CAH a few quarters ago? Looks like the price is higher now, so it might be helpful hearing your thoughts on your decision. Hopefully I can add one of these to my portfolio soon.

      Bert

    • That’s definitely a possibility. My gut tells me a dispute with employees/contractors will reach a settlement before it gets too nasty. Are you planning on buying sooner rather than later then?

      Bert

      • Depends if I sell my shares of Google. If not I will most likely wait till October to buy some stocks. Short term I would probably lose out but long term I would defiantly come out ahead I believe.

  9. We were just at Walmart yesterday to get diapers and baby food. Walked out $132 poorer. They suck you in and take your money. Now granted we bought a lot of clearance clothes (like $3 a piece) for the kids for school. The most expensive thing was the diapers. Kimberly-Clark is making a killing on those things. ANyways WMT is the way to go. Unfortunately they are the cheapest around especially when you get things on clearance like we do.
    Later,
    DFG

    • DFG,

      That’s exactly why I love TGT and WMT. Both places seem the do that to people. Sounds like you were shopping smartly and got a lot for your $132. I’ve never shopped for them yet, but I have heard a lot of friends and family that have kids complain about the cost of diapers. What can you do though…can’t really avoid that expense and I’m sure you wouldn’t trade it for anything haha

      Bert

    • Thanks R2R! Way to go adding shares in FLO. Did you catch it while it was below $15? I’m mad at myself that I didn’t grab some shares when it was at that price. Let me know your thoughts on CAH when you finish your digging.

      Bert

  10. Hey Guys,
    Just found your sight and has really opened my eyes. Most of my $$$ is in my 401k and exclusively with Vanguard Institutional Funds. I have choices of mid cap, small cap,
    International and Vinix. For sake of the dividend strategy do you think it makes sense to go all in on Vinix because it has the biggest dividend yield of a little more than 2%. I was preached asset allocation so I’m 60% large caps, 30% mid and small and 10% total bond. I do have a trading account but that’s mostly been for fun. However I really did well this year with gdxj and VGPMX. Sold both 2 week ago. I think gold and the miners are going lower and probably get back in if gdxj goes below $30. Then wash, rinse
    and repeat. Best of Luck. SD

    • Hey SD,

      I love the Vanguard funds. Great blend of stocks and who doesn’t love their low expense ratios. My company also offers VINIX as one of the investments and I started initially investing in their. I wish their dividend was quarterly versus semi-annual, but I never really seem to mind that much when the December Capital Gains payout rolls around. That is when the serious dough trickles in…

      Glad you were able to do well with gold and mining. Honestly, not my cup of tea. Never really researched the industry and I hate the volatility that comes along with it. I would rather spend my time finding great dividend growth stocks! Best of luck to you as well. Thanks for stopping by and the comment.

      Bert

  11. It’s a good list. I’m curious to see what Walmart can do with Jet.com. With Wal-Mart’s logistics and Jet’s online presence, I assume WMT is trying to take a bite out of Amazon. Many have tried and failed. Let’s see what the future brings.

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