Bert’s January Dividend Stock Watch List

With the first month of 2017 coming to a close, I thought it would be a good idea to put a dividend stock watch list together to focus in on a few companies that have caught my eye recently.  What’s crazy is that each day brings an exciting new day to the market and it seems like we have snapped out of our two month streak of constant appreciation and are finally starting to see some great companies trading at a discount.  After my last purchase and Lanny’s recent portfolio review, I am as motivated as every to keep pushing capital into the marketplace and increase my passive income as much as possible.  Now lets take a look at my January Dividend Stock Watch List!

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Focus of my watch list

Before diving into my watch list, I wanted to discuss what I am looking for in my next purchase.  First,  I am only focusing on companies that would pass the Dividend Diplomats Stock Screener.  This means the company must be trading at a discount to the market, have a history of dividend growth, and the company must have a payout ratio below 60%.   Lately, I’ve just wanted to add quality stocks to my portfolio…no kidding, who doesn’t.  We created this stock screener to identify those under valued dividend growth gems and when I’ve followed the stock screener with a purchase, I have historically done well.  In the past I have occasionally ignored a red flag posed by our screener (and other metrics) and the results were less than stellar and even resulted in a few dividend cuts.  So why not stick to the screener, simplify investing, and purchase great stocks?

Second, I’ve taken an interest to focusing on building positions in my portfolio rather than initiating new positions. Over the years, I have amassed a lot of positions that may have seemed large at the time of purchase, but are moderate to small purchases in my portfolio.  Rather than having many small positions, I am looking to build several large positions that produce significant income on a quarterly basis.  My last purchase, Procter and Gamble, was a perfect example of this.  Before my purchase, I owned 31 shares of income, which producing $21 of dividend income on a quarterly basis.  Over a one year period, I was set to receive approximately 1 new share via dividend re-investment depending on the price movement.   This was a middle of the pack position in my portfolio too.  Then, I decided to add 20 more shares and make this the third largest position in my portfolio that is going to now produce over $34 quarterly.   There is something drawing me to the idea of producing insane income from each of my positions one day and I know that in order to get there I have to begin adding to my positions when the metrics are right and the timing makes sense.  We talk on this site about foundation dividend stocks all of the time and I’m starting to believe that the foundation pieces of your portfolio should be substantial and provide you with a sold, large, growing income stream.  This isn’t to say I am never going to buy a new stock again; heck no.  But I want to take some time to fortify my positions and build on what I already own.

January Dividend stock watch list

My watch list consists of two Aristocrats that I already own.  With the S&P 500 trading at an insane P/E multiple of approximately 25x depending on the source of the statistic), both companies are trading at a lower multiple and pass our first metric.  To calculate the payout ratio, I used the current year analyst estimates per Yahoo! Finance.

Stock #1: Johnson & Johnson (JNJ) – Payout Ratio = 45%; Consecutive Annual Dividend Increases = 54 years.  Honestly, Johnson & Johnson just kind of speaks for itself.  It is one of the most consistent dividend growth stocks out there and I would guess that many in this community have this as one of their foundation stocks.  Currently, I own 18 shares and my wife owns 21.3 shares, so our combined position has a market value of $4,645.   With my next purchase, I would love to bump have our combined position cross $6,000 in market value.   My focus with this purchase would be to make a move before the February 24th ex-dividend date so I can capture four dividends at the new level versus three.  What attracts me to JNJ outside of their dividend history is their impressive brand listing, the name power of this brand listing, and the diversity of their product lines.  They dominate in multiple segments and a large chunk of their products are well represented in every household and hospitals.  Just a great all around company that also happens to check all of the boxes of our dividend stock screener. Did I mention that JNJ is getting reading to announce their next dividend increase in April too?  Man I would love to buy more before his announcement!

Stock #2: Target Corp. (TGT) – Payout Ratio = 48%; Consecutive Annual Dividend Increases = 45 years – The favorite grocery and department store of our household.  We are Red Card, Cartwheeling machines in this house in an effort to save as much money as possible with each trip!   2017 has not started off strong for Target or many companies in the retail space as TGT is down over 11% YTD.  Target’s most recent earnings release, while showing some positive trends, discussed a decline in same store sales compared to the prior year, and offered a slight downward revision of anticipated EPS.   This isn’t the best news, but the downward revision in EPS estimates was minimal and does not threaten the company’s payout ratio and potential dividend growth prospects since their current payout ratio is hovering around 50%.  TGT, like most of he retail industry, has to figure some things out, but the decrease in price is one of the reasons why I am looking to add to my position. What’s crazy is that we own over $5,000 worth of TGT already and they are constantly battling Citizens and Northern Corporation for the coveted title of my largest individual stock holding.   Adding more to my position would definitely push this over the top!

There we have it.  Two rock solid Dividend Aristocrats that I would love to increase my position with.  What are your thoughts on JNJ and TGT at the moment?  Are you in wait and see mode with TGT based on their last earnings release?  Or if you were me, would you focus on other companies like TROW, Realty Income, and other great dividend paying stocks that I currently own?  What stocks are on your watch list??

-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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13 thoughts on “Bert’s January Dividend Stock Watch List

  1. Couldn’t agree more on these two giants! My girlfriend has taken a recent interest in stocks and the power of dividend investing so I got her set up with her first purchase of JNJ a few weeks ago and queued up a sharebuilder purchase of, you guessed it, Target, for execution tomorrow. She doesn’t have a ton of $ to save every month but I told her a few hundred here, a few hundred there will start to add up!

    • You aren’t kidding, both of these companies are MASSIVE! JNJ is a great first stock for her to invest in and I’m pumped you got here going with one of the best out there. Who cares how much she has saved. All that matters is that she is taking action and getting here dividend portfolio started. Once she gets here first dividend, she will be addicted!

      Bert

  2. I would love to add JNJ to my portfolio, I’m just waiting for a price drop as I find it a little bit expensive. TGT is one of my biggest holdings and I’m not worried at all about it’s performance this year.
    My most recent purchase was QCOM. I liked the price drop on the fear of the legal dispute. I think the market has overreacted so it was a good opportunity. Any views on that?

    • Roadrunner,

      I’m in the boat of “it hits our metric, even if it may be perceived as over priced.” Do you have a certain price target in mind? Interesting choice with QCOM. I’ve looked at them in the past but decided to put them on the backburner once the legal dispute was announced. Its not that I don’t like them as a company, I just have found other values out there that I am looking to exploit!

      Best of luck stock hunting. You’ll have to let us know how it goes.

      Bert

  3. Nice stocks you’ve got here, Bert!

    JNJ was one of the first stocks we bought when we started with dividend growth investing.
    We are following the company more closely now, and really like that they just made a nice acquisition and continue to improve their competitive value and future growth. It’s definitely a solid foundation stock 🙂

    • ivnomics,

      Thank you very much! Couldn’t think of a better first stock to own that JNJ. I like their acquisition a lot as well and think it has the chance to add some strong value in the long run. Hopefully we are right and hopefully it bumps up their FCF so they can distribute it to us shareholders 🙂

      Bert

  4. I just added to JNJ, which is now my fifth biggest position. There’s change ahead in the health care sector and JNJ’s share price could continue be hurt by short-term uncertainty. But JNJ is the most diversified, high quality company in the sector and I have no concerns about it in the long run. I like that it’s trading at a discount to the S&P 500, and I also expect another 5 cent dividend hike beginning with the May payment. Much better than the 1 cent per share raise AT&T has been giving me.

    I’ve been wrestling with myself over the retail sector. I don’t own any retailers because of concerns about competing with Amazon, but buying Amazon seems bizarre to me too as a dividend/value investor.

  5. JNJ is like the king of all kings for dividend investing. Added some of these recently and its one of my largest holding. Same with TGT, I been adding to it while its getting beat down as I know it will recover from this temporary disaster. Next for me is QCOM to start piling up.

  6. Your prelude reminds me of Buffet’s idea to act as if you had a 20 ticket punch card and you could only make 20 different investment decisions in your lifetime.

    In other words, focus on the absolute best ideas, go all in, and ignore the rest of the noise.

    What’s not clear to me is if you punch a ticket each time you make an investment or just for each macro-idea (like, you can keep investing into the same 20 ideas as more capital becomes available, right? But then how does valuation play into it? Surely Warren would still be a champion of dollar cost averaging wouldn’t he? The Oracle?)

    Regardless, it’s kind of a slap in the face of the so-called importance of diversification in modern portfolio theory, and it intrigues me greatly…even if I’m not completely sold.

  7. Target over the last few years has been an opportunity for the ages for people willing to play the highs and lows of a stock.

    50s after the data breach, run up to the 80s, back to the mid-60s, back to the high 70s. and it’s repeated more times after that! I love this stock in the 60s, but it has proven to me so far, sell when it gets over $75 and wait! retail is very fickle these days with the online threats faced.

  8. hi Bert,
    I would love to add JNJ to my portfolio, I’m just waiting for a price drop. And the same for TGT.
    And I have the same idea to build my position in stocks I already own

    Kee up the good work!

    Cheers,

    Pollie

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