Bert’s May Dividend Stock Watch List

The market has been beating down consumer staple stocks lately, which shouldn’t exactly be a surprise to my fellow dividend growth investors.  Lanny detailed this trend last month in his infamous “Battle of the Consumer Staple Stocks, ultimately showing how some of the best consumer staple stocks are trading at a nice discount.  The trend has still continued to this day, which is great because I love consumer staple stocks.  This was probably evidenced by the fact that I purchased P&G twice in April!  I’m back on the lookout for another purchase as I have some capital to deploy.  With the introduction I have written, it shouldn’t be a surprise, but my watch list is going to be heavily focused in consumer staples sector.  Let’s check out the four companies on my May Dividend Stock Watch List.

Dividend Stock #1:  General Mills, Inc. (GIS) –   GIS is a consumer staple stock that I do not own and I can’t figure out why I haven’t initiated a position in the company yet.   The company’s brand portfolio is impressive, owning food brands such as Cheerios, Annie’s, Green Giant, Yoplait, Nature Valley, Pillsbury, Betty Crocker…you get the drift!    Those are some of the top brand names in each of their respective food categories.  How could you not love it?

From a metrics standpoint, GIS passes our Dividend Stock Screener with flying colors. Their  forward P/E ratio is well below the broader market (~14.25X), payout ratio is less than our 60% threshold (50%),  the company has a nice streak of increasing their dividend (14 consecutive years), and their 5-year average dividend growth rate is solid (8.34%).   The company’s stock price has fallen significantly during the year and GIS is now yielding well over 4%.  I have been looking at these metrics a lot recently and I cannot figure out why I haven’t made the plunge yet.

Dividend Stock #2: Kimberly-Clark Corporation (KMB) –  KMB has a very strong brand portfolio as well, sporting brands such as Huggies, Pull-ups, Kleenex, Cottonelle, Scott, Viva, Kotex, and Depends.  KMB’s current yield is slightly below 4% and the stock has fallen nearly 15% YTD (as of the time of the article).  KMB’s  forward payout ratio is also lower than the broader market (~14.6X).   In January, KMB announced a dividend increase of 3% that continued their dividend increase streak. They are a Dividend Aristocrat after all.    Like, GIS, I do not own KMB, but man would it be nice to add it to my portfolio.

Dividend Stock #3:  PepsiCo (PEP) –  I am very excited to add PEP to my watch list after their recent slide.   What’s funny is that I made a list of 5 “Always Buy” stocks back in 2015 and you guessed it, PEP was one of the company’s on my listing.   But since the article was published over two and a half years ago, PEP had typically maintained a high P/E ratio and was unfortunately not on my radar.

But that has changed recently.  At the time this article was written, PEP’s stock price was $101.15/share, trading at a forward P/E ratio of 17.71X.   The company’s forward payout ratio was calculated at ~56%, which is just below our threshold.  In terms of dividend increases, PEP announced a VERY strong 15% dividend increase earlier in the year, along with a massive share buyback program.   Finally, PEP passes all metrics of our stock screener and is a serious contender on my watch list.

The Clorox Company (CLX) – Last, but definitely not least, Clorox.   CLX has consistently traded at a premium for as long as I have followed them.  Their brand portfolio is strong, as they own brands such as Clorox (obviously), Burt’s Bees, 409, Kingsford, KC Masterpiece, Glad, Fresh Step, Hidden Valley, and Tilex.  In my eyes, that’s a very, very strong brand portfolio!  Despite trading a premium over the years, the company has not been immune to the pullback in consumer staple stocks.

While CLX has the highest forward P/E ratio at the time I am writing this article (~18.80X), the metric is below the broader market and passes our screener.  Their forward payout ratio is 62%, which exceeds our 60% threshold barely, but not by an amount that would cause me to lose sleep and pass on a potential investment opportunity.  Like many of the others on this list, they are a Dividend Aristocrat and announced a very strong 14% dividend increase earlier in the year.   CLX isn’t a screaming buy for me yet and I may opt for a different investment on this watch list if the prices remain about the same.  However, if their price continues to fall, I will jump all over the investment opportunity!

There they are.  The four consumer staple companies on my May Dividend Stock Watch List.  What are your thoughts about my watch list?  Which of the four would you invest in at the moment?  What stocks are on your overall watch list? Are you watching predominately consumer staple stocks right now like me?  Or are you considering stocks in other sectors as well?    I’m looking forward to your responses!

-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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31 thoughts on “Bert’s May Dividend Stock Watch List

    • P2035,

      GIS is a very solid pickup and so is KHC. I have a nice position with KHC at the moment, but to be honest, I need to investigate their situation a little better. That stock has tumbled during the year.

      Bert

  1. Nice list!

    Glad that you bring up GIS. I initiated a post the other week, after seeing how the yield has sky rocketed. I´ve seen complaints about the cost of a recent purchase GIS made, but I believe the low stock price is more an effect of the whole consumer staples sector being pushed down. Hence I don´t worry about the future of GIS. I´m just glad I got this nice opportunity to buy.

    I also added some PEP. Nice combination of stability and growth.

    I guess I also need to take a closer look at Kimberly and Clarke.

    Cheers
    /GI

    • GI,

      I actually liked GIS’s acquisition and thought it added a valuable sector to their portfolio. Time will tell with the exact purchase price, but it will take a few years to realize. GIS and PEP are two awesome pick ups and I’m pretty darn jealous haha Maybe I’ll be joining you soon 🙂

      Bert

  2. Bert,
    I would love to own all of those mentioned. Of those mentioned, I am only missing PEP and CLX in my portfolio. It has been a while since I looked into PEP and based on the details you’ve provided regarding the massive share buyback announced, this makes it even more attractive IMO, especially if prices continue to hang out where they are or even recede a bit more. Also, given the rather significant single day slide in T valuation yesterday, I wonder if this would have made your watchlist? T looks attractive in the low $30s to me. Best of luck, a lot of good options to choose from.

    PIV

    • PIV,

      Great points about PEP. That’s exactly why they are on my watch list. Great company, great diversification, and very strong dividend increase/buyback. All around, a great company. I saw the T slide and while I considered adding after the fact, I decided against it since I already have a very healthy position! Are you looking to buy T now?

      Bert

  3. Bert,

    Great names on your list.. except CLorox I have them all ( pep only 6 shares but every share is counting) in my portfolio.
    I also look deeper into them, hope they will fall a bit more in price

    Willem

    • WIllem,

      It is not about the number of shares you own, its about building a portfolio of great dividend growth stocks over time. That’s the name of the game. I am still waiting for CLX to fall a little more, but I would love to initiate a position at the right price.

      Bert

  4. All names look good to me. Remember back when we all wanted to buy the staples but they always seemed way too overpriced. Looks like we are finally getting our chance to load up on some very high quality names at much better prices, values and yields. Personally, I’d but all the names you mention if I had enough cash. Think long term with these buys.

    • Divhut,

      How could I forget? It wasn’t very long ago either. I hated running a stock screener and seeing that every consumer staple was overpriced, especially since I love shopping in this sector when I can. Glad you are on the same page about the companies and you are right, they are all great names!

      Now lets get you some cash so we can strike.

      Bert

  5. Great list Bert! Both KMB and CLX are on my watchlist. I already have PEP and GIS, but I am looking to add more in the future. I am also keeping a close eye on T. So many opportunities! Thanks for sharing your list. 🙂

  6. All these names would be on my list too, but maybe the biggest players I am currently looking at are MMM/HON. Hoping for them to drop a bit more and buy into these stable businesses with great history and great forward growth! I recently purchased another 6 shares of KMB myself though and PG is as always on the list aswell!
    Nice work!

    DI

    • DI,

      I am a huge fan of MMM and it is one of my favorite companies that I own. I should probably also look and consider them as well as their price continues to fall. HON is an interesting choice as well and now I will have to do some extra research over them. Cheers and happy shopping!

      Bert

  7. I agree this is a great time to buy CLX. MO is also worth looking at, I can’t remember the last time that was trading at a 5% yield. I won’t be taking advantage of those deals though, actually I am selling off half of my taxable account to buy a condo.

  8. Consumer staples seems to be under-performing the market overall. Definitely a good time to pick up a few stocks. I am thinking of buying some Vanguard Consumer Staples ETF (VDC) ETF.

  9. It’s a great shopping time for us dividend growth investors focusing on consumer staples. Their stocks become more and more attractive. It reminds me a bit the “oil resp. commodity price crash” a few years ago, when great names such as Royal Dutch Shell, Chevron, Rio Tinto or BHP Biliton were down significantly. They all made good deals.
    Can’t wait my next paycheck to put some money to work.
    Cheers

  10. For me I was eying PEP since I didn’t own the company but I managed to snag 5 shares @ 97$ so I’m pretty happy with that. Actually bought to more stocks but that’s a future post. For now I’m enjoying my April record dividend haul 🙂

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