Bert’s December Watch List

First of all, I want to take the time to wish everyone a Merry Christmas.  Today is such a great day as you get to sit down with family, share stories, exchange gifts, and spend some time catching up with each other.   Hopefully everyone is having a relaxing, special, day off.  I know Lanny and I are.   A few days ago, I published my 2016 goals article and I have been inspired over the last few days to find some great dividend growth stocks to add to my portfolio.   After all is said in done, there have been two stocks recently that I keep coming back to and wanting to add to my position/initiate a position in my portfolio.  Here is my December Watch List everyone!

Watch List

The Watch List

1. Archer-Daniels Midland (ADM)–  ADM has taken a bloodbath in 2015 and has been scooped up by a lot of different individuals in the dividend growth community.  Heck, it isn’t like I need to go far to find someone who has taken advantage of the downturn recently as Lanny purchased shares  earlier in the month.    Despite the tough year, ADM sports some  impressive metrics that have flown this stock onto my radar.   The current P/E ratio is below 12X (Way below the current market), the dividend yield is over 3% which is over 100 bps higher than their five year average yield (as Lanny pointed out in his purchase article), and the three-year dividend growth rate is ~17%!  Again, very impressive figures.  ADM is set to announce a dividend increase in February and I would like to increase my stake in the company before this announcement.  I must say, I am a little skeptical that the dividend growth rate will remain in the teens considering the company’s recent performance and the KMI experience that we all shared.  One of the things that I love about ADM is that the company appeared in my Top 5 Dividend Aristocrats with a Low Debt to Equity ratio screener that I ran earlier in the month.  So unlike KMI and their dividend cut, which had a heavy debt load that impaired the company’s ability to pay/grow their current dividend, I feel pretty good about ADM’s ability to increase their dividend in February.  I’m expecting a pullback in the growth rate, not the dividend.  In this environment and all other things considered, that is okay with me!  One other thing I forgot to mention, I purchased shares of ADM way back in April of 2015 and I am staring a 21% loss in the face.  Purchasing shares in ADM would allow me to reduce my cost basis and capitalize on this downturn.  Very, very, appealing if you ask me!

2. Target (TGT)- This stock has been on my mind a lot recently and it always reminds me of the holidays and my fiance.  My fiance is a loyal Red Card holder and we have made many trips to Target over the last month as we grocery shop, purchase presents, and just aimlessly wander the aisles using Cartwheel to score as many discounts as possible. Similar to the emotional attachment that many customers have with Starbucks, I feel that way with Target and the store will forever remind me of my fiance.  I know investing on sentimental value can be dangerous and luckily for me, the company’s metrics and valuations back it up!  Last week, Lanny performed a stock analysis over the retailer so I won’t spend too much time going over the metrics in this article.  If you want more detail about the company, please check out his article!  Here are some of the highlights: TGT’s yield is just over 3%, a payout ratio just below 50%, a P/E ratio of ~15X which is below the broader market, and has a dividend growth rate of 20%!  Similar to ADM…impressive figures.    The one argument to be had against TGT is that Walmart appears to be trading at a steeper discount that Target at the moment, so Target is not the best option if I am looking to just find a stock that is trading at the lowest multiple.  I understand that argument and my response is that both companies are trading at a lower multiple than the broader market and therefore, both companies pass the first metric in our stock screener.  What puts TGT ahead of WMT is the dividend growth rate and the fact that TGT is considered one of my 5 “Always Buy” stocks, so I have the chance add a company that I have already identified as one of my Top 5 to my portfolio at a discount to the market.  Sounds like a great plan to me.  Plus, if I were to invest in Target, it would be a new position in my portfolio and one of my 2016 goals is to add 5 new Dividend Aristocrats to my portfolio.  Selecting TGT would allow me to begin making progress on this goal right out of the gate in 2016.

What do you think of my watch list?  HAve you purchased shares in ADM recently?  What about TGT?  Would you select TGT over WMT or vice versa?  Are there any other  stocks that you are watching that you think I should consider as well?

Happy Holidays everyone!

Bert

DISCLOSURE: I DO NOT RECOMMEND ANY DECISION TO THE READER or ANY USER, PLEASE CONSULT YOUR OWN RESEARCH. THIS IS ACTUAL DATA, ANALYSIS, HOWEVER I BASE NO INVESTOR RECOMMENDATION.  THANK YOU FOR YOUR UNDERSTANDING.
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13 thoughts on “Bert’s December Watch List

  1. i was in Target 2 days before christmas and it was a zoo and made me feel like a proud shareholder as i purchased 60 shares not to long ago !

    • It was insane how busy that store was in the weeks leading up to holidays. Always busy, carts zooming by were packed. The company has done an impressive job creating its brand over the years and they have hooked many shoppers for life. That’s the kind of company I want to invest in and hopefully we will be considered fellow shareholders soon.

      Cheers!

      Bert

  2. Hi Bert,

    Merry Christmas!

    I wouldn’t quite describe this as a watchlist, more of a target-list. You know what you want, you’ve narrowed down your choice to 2. I’d bet your next buy is one of these 2!

    Both would be a pretty good choice, though out of the 2 I’d choose ADM.

    Tristan

    • hahaha I’m digging the pun there whether it was intended or not! I would be shocked if it isn’t one of the next two, but I guess you never know. The market could always surprise us with another discounted stock or I could always have another trick up my sleeve…. ADM is definitely the more discounted stock at the moment and I would love to add to my position. I just makes too much sense not to at the moment.

      I’m sure I’ll keep you all updated with which I decide. Have a great weekend.

      Bert

  3. I like both of these stocks. I bought ADM a few weeks ago. TGT, I sold out my shares for a gain this year. The stock is down $13 from where I sold, so the price looks attractive again now.

    • Nice move making IH. Looks like you timed it well. It sounds as if you are out of the 30-DAy sale/purchase window too so you will be able to pick up the shares at this price and not take the higher cost basis. If you don’t mind me asking, how come you sold out of TGT this year? Base on your metrics did the stock just become too overpriced for you? I just wanted to see if there as something else that concerned you about the company that we should be considering before buying in now.

      Thanks for stopping by!

      Bert

  4. Ciao Bert,

    Got some ADM myself, more for the value play than dividend growth in the future, 3% is good enough for me to reach my goal of a “net” 2% dividend, so I moved in this giant (industry leader) that is suffering from crop prices among other things…

    Target, I do not know… I am invested in Walmart, and decided not to increase the “retailers” weight on the PF, it seems like a very good company though…

    Ciao ciao

    Stal

    • Stal,

      Thanks for the input. I don’t have any stake in retailers so I am interested in initiating a stake during this time. Choosing between TGT and WMT should net me one great dividend stock at least. You’re smart in your thinking, don’t become overweight in a sector just for the sake of adding to your position. You identified that you want to look elsewhere and haven’t looked back.

      The goal of 2% net is a cool strategy. I’m assuming that implies purchasing stocks and averaging your purchased yield to 2%. Or is that your portfolio’s target allocation? That’s a great way to force yourself to consider dividend growth and yield. Either way I am way above that mark on my end which is why one of my 2016 goals is to invest in at least two stocks with a dividend yield below 2%. My dividend growth could use a nice jolt, and that would definitely provide it.

      Take care, thanks for stopping by, and have a great weekend!

      Bert

  5. I like the list. I’ve bought a few shares of TGT the last couple months in my Loyal3 account, and I’m eyeing ADM for a purchase. Just one thing I’d point out if you’re considering TGT is that (iirc) in the last earnings report and guidance, management said they’re guiding for high single-digit growth of the dividend going forward. So if you buy it for the 20% recent dividend growth rate, you might end up somewhat disappointed.

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