The final month of the quarter is flying by. Where has time gone? With just under half of the month left, I wanted to follow Lanny’s lead and prepare a March Dividend Stock watch list myself. Fresh off of my recent portfolio review, I am ready to continue pushing forward and grow our portfolio. This listing will have three stocks on it. Let’s dive into my March dividend stock watch list.
I mentioned in a Tweet how this market is making it difficult to find a potentially undervalued dividend stock. March is yet another month of insane stock price appreciation. Luckily, with the help of a few Twitter followers, I was able to identify three stocks to keep an eye on. For each of the companies, we will use the following sources for information while running them through the infamous Dividend Diplomats Dividend Stock Screener: Share Price as of 3/20/19 close, Average EPS per Yahoo!Finance, and the annual dividend per dividendinvestor.com.
Dividend Stock #1: CVS Corporation (CVS) – CVS has received a lot of coverage on our website recently. In fact, it was Lanny’s recent purchase and I may have already added a small mount to my position this month. The stock price at the time of Lanny’s last purchase was $58.33/share. Now, the company’s price is in the mid-$50s/share. CVS’s stock price continues to fall subsequent to the close of the CVS/Aetna merger. The company’s current P/E ratio is 8.15X ( $56.16/$6.89), the dividend payout is 29% ($2.00/$6.89), and the company’s current dividend yield is 3.56% ($2.00/$56.16).
Sure, it may be a few years before the dividend increases again due to the acquisition and the acquired debt. The prudent thing for management to do is to reduce their debt. In the meantime, we will collect a nice dividend at an above market yield. It is nice to see that the dividend payout ratio is only 29% as well. I would be much more concerned with the debt load if the dividend payout ratio was close to 100% and a sudden drop to earnings could result in a dividend cut. But that is a very, very solid cushion. I currently own 36.312 shares and would love to increase this amount to at least 50.
Dividend Stock #2: Westrock Company (WRK) – WRK is a company that was new to my portfolio in 2018. I initiated a position in the packaging giant during Q3 and continued adding in Q4. Now, I own 46.132 shares of the company. Despite my efforts to add when the price fell and lower my cost basis, I am staring an unrealized loss in the face. The company’s current metrics continue to look great and may be calling for me to continue lowering my cost basis. WRK’s P/E Ratio is 8.90X ($37.65/$4.23), their dividend payout ratio is 43% ($1.82/$4.23), and the company has increased their dividend annually since 2015. With a dividend yield of 4.83% ($1.82/$37.65), the company’s yield continues to climb higher and higher. The company’s yield is much higher than my Yield on Cost (3.65%).
Dividend Stock #3: Home Depot (HD) – This is the least likely contender on my list and the price would need to fall more before buying. But with a dividend yield of 2.92% ( $5.44/$186.10) and a recent 32% dividend increase, Home Depot caught my attention. The company’s P/E Ratio is 18.40 ($186.10/$10.11) and their dividend payout ratio is only 49.5% ($5.44/$10.11). Home Depot performs well in our stock screener and has room to continue growing their dividend. Although I doubt that HD would continue announcing 32% dividend increases! If the yield crosses 3.25%, I would be much more likely to jump the gun and add a position to my portfolio. With these metrics, HD earned a firm spot on my watch list.
On a different HD note. It is my home improvement store of choice and I selected them as my company for the Home Improvement category in the Bumped app (See our review of Bumped here). So now I will start receiving cash back in the form of stock from Bumped at least! It is likely I will continue shopping here over Lowes, so it would be nice to own a company that I shop at regularly. Thanks Eric Landis for bringing HD to my attention at their current price.
What do you think of the three companies on my watch list? Do you have any other companies you are watching? Are you having a hard time finding stocks to add to your watch list as well? How are you approaching this bull market?