Bert’s November Dividend Stock Watch List

Lanny said it best, the post election stock market has been crazy.  A lot of industries that have been trading at a discount, financials and REITs for example, have soared while other stocks that have traded at highs over the years are approaching buy-able levels again.    Recently, I was able to knock out one of my 2016 investing goals by crossing $3,250 in projected dividend income; now, I have another goal in sight….investing at least $20,000 in “New Capital” into the market.   I’m ready to keep the pedal to the metal and take advantage of some more opportunities that Mr. Market has presented us.  Time to check out my November Dividend Stock Watch List!

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The Big Three Dividend Stocks on my Watch List

Dividend Stock #1: Unilever (UL) – First and foremost, I had to put the darling of the dividend growth investor community on my dividend stock watch list.  It is not secret on this website that I love consumer stocks that are found in nearly every household.  Strong brands provide management with a lot of different options to provide shareholders with value outside of the traditional means (dividend growth and share buybacks), such as spin-offs and sale of products to other organizations.  The name of the game is building a growing income stream that is sustainable for a long time; and I personally think that consumer goods and strong brands are a great backbone for this.  I’m stepping off my soapbox about consumer stocks now, so why am I watching Unilever.

With the recent dip in price, Unilver’s dividend is quickly approaching 4%.  In April, the company announced a 6% dividend increase, marking 21 annual dividend increases.  At this rate, by 2020, the company should be able to call itself a  Dividend Aristocrat…perfect.  The company’s payout ratio is climbing as well as it is inching its way towards 70%, which is above our 60% threshold per the Dividend Diplomats Stock Screener; however, the fact that the payout ratio is slightly above our screener’s mark isn’t too concerning for me.  The item that concerns me more than the payout ratio is the exchange rate, which has hurt me in the past.   Since the dividend is not paid in USD, I am susceptible to lower than advertised payout ratios after the currency is converted to USD.  Definitely a factor to keep an eye on, but if I can purchase Unilever for the right price, I will also be wiling to overlook this fact.   One more thing, Unilever just closed its acquisition of Seventh Generation, adding another strong consumer brand to the portfolio.  Man do I love consumer staple stocks!

Dividend Stock #2: Kimberly-Clark Corp. (KMB) – Another consumer stock??  KMB popped on my radar as I was researching information about Unilever for this article.  I felt like I struck gold finding another consumer staple that had fallen off of its insane P/E Ratio.  KMB has increased their dividend for 43 consecutive years…43! The best part is that KMB should be announcing their dividend increase when they announce the next quarter dividend in February.  So hypothetically, if I purchased KMB, I would capture the increased dividend for all four quarters in 2017.  Boom.  The dividend growth rates haven’t been spectacular recently, as their three and five-year dividend growth rates are 4.7% and 5.7%, respectively.  Lastly, the company’s current dividend yield is 3.25% and the company’s payout ratio is just norther of 60% (using forward earnings per the company’s last earnings release).  Compared to UL, the company offers just as strong brand recognition, with a lower dividend yield and a slightly lower payout ratio.  However, if I were to select KMB, I would not have to deal with exchange rates!  Regardless, glad KMB passes our dividend stock screener!

Dividend Stock #3: Verizon (VZ) – Last but not least, my cell phone provider.  This is bitter-sweet considering my view on my monthly cell phone expense and the impact it has on your monthly budget; however, I already separated my personal bias from investing when I decided to purchase AT&T a long time ago.   Currently I have a strong position in AT&T, owning 70 shares, but I would love to add the other major communications to my portfolio. Verizon popped on my radar after reading Ben @ Sure Dividend’s recent article about the company and how the decrease in the price has pushed the dividend yield near 5%. Ben provided some great background about the economic moat that VZ and T enjoy along with some of the projects that VZ has in the pipeline. AT&T and Verizon have faced intense competition from Sprint and T-Mobile over the years; however, the company’s performance continues to remain strong and the economic moat seems to have remained in tact.

While the company is not a Dividend Aristocrat, their dividend increase streak is close to a decade and my assumption is that VZ is working their way toward Dividend Aristocrat status.  Further, their payout ratio is much closer to our 60% threshold than their competitors.  Ben talked about it in his article frequently, but the one thing that is concerning to me is their high debt levels.  We have been burned by company’s with high debt levels in the past, but I believe this is different from the leveraged oil company’s that were forced to cut their dividend as the price per barrel fell through the floor.  Ben addressed this in his article, discussing the free cash flow projections going forward and the ability to sustain the dividend despite the higher debt levels.  Purchasing Verizon would add a lot of income to my portfolio and help me keep the dividend snowball moving!

summary

There is it…three strong dividend stocks that I am going to be monitoring closely over the next several weeks and most likely through the end of the year.  Luckily, I was finally able to remove Realty Income from my watch list since I purchased shares earlier in the month.  I was pumped to add 40 shares to my Roth IRA and max-out my contribution limit.  I would have kept the company on my watch list again since the price continued to fall; however, I wrote about how contribution limits have come back are preventing me from taking advantage of the downturn to add to my position.  Come January though…watch out.   I would be excited to purchase one of these stocks because of their strong brand portfolios and history of dividend increases.  So come on Mr. Market, help me out here and allow me to end this year with a splash!

What are your thoughts on my watch list?  Have you purchased any of these stocks recently or are they on your watch list?  How do you feel about Verizon’s debt levels?  Would that cause you concern?  Or are you willing to overlook the high debt levels based on the free cash flow (as outlined in Ben’s article)?  What other stocks are you watching?

-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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20 thoughts on “Bert’s November Dividend Stock Watch List

  1. Recently I have been watching CALM, DIS and CHD. I think CHD might fit into your consumer staples. It’s down a little bit but I really like the long term prospects. Plus that have a lot of number 1 or 2 rated brands in the market. Let me know what you think.

    • DIS is just one of those companies that is always in the news and making moves. Every year they seem to have one major announcement that pushes the forward. Did I hear some Netflix rumors too? They are the company that I would buy and hold forever. CALM always intrigues me and I think their dividend policy is creative; I just don’t think I could stomach the unpredictability that comes with tying your dividend to earnings. Not too familiar with CHD. After a quick look, the PE looks a little too high and the yield a little too low for me at the moment. But you played right into my weakness haha Brands like Arm and Hammer, Oxi Clean, etc. Amazing product portfolio.

      Thanks for the suggestions!

      Bert

      • I like and own DIS for the reasons you have mentioned. CALM is quite interesting too, but definitely not to be part of a core portfolio. However, if you have a small position in CALM, you will not feel too much the dividend payout fluctuation. We have it in some of our DSR portfolios.

        Good list Bert,
        I prefer KMB out of those 3. I’m not sure where VZ will find its growth in the future… The stock price hasn’t been doing much over the past 5 years and I think VZ will continue to underperform the stock market. Check out Telus (TU) if you are looking for a telecom company 😉

  2. Thanks for mentioning Sure Dividend in this article! The pullback in the consumer staples sector with KMB (and a few other companies) could provide a good buying opportunity if it keeps going.

    • Of course. Thanks for bringing VZ onto my radar and having the great background analysis. It was a big help. I’ll be monitoring KMB closely and would have no problem jumping on that company if the opportunity presents itself. Great company, great products, hopefully at a great price.

      Bert

  3. I added to both my KMB and UL positions recently. I agree with MSM on CHD, the numbers may be a little distorted due to their recent split (although not a screaming bargain). On UL, any time a foreign (non-US) investment is considered exchange rates are a factor (think Canadian banks, as well) resulting in a choppy dividend payout post conversion to US$.

    “Since the dividend is not paid in USD, I am susceptible to lower than advertised payout ratios after the currency is converted to USD.” This comment is only true in the unlikely event that the US$ remains at current (elevated) levels versus the €. When the US$ drops the reverse would be true.

    • Charlie,

      Fair point about the current currency levels. I should have been more broad with my comment. My point is that the currency levels giveth and taketh. As I have seen dividend payouts decrease because of currency, I have become less interested in owning stocks with fluctuating payouts. Hopefully that clarifies my position a little bit.

      CHD is now on my radar based on MSM. Didn’t realize they had a split, so I would be very interested to see what direction the company is heading as the dust settles. I love my consumer staple stocks and I appreciate all of you opening my eyes to a new one!

      Bert

  4. Seems like UL has gotten a lot of chatter lately. This is the first mention I have heard of the exchange rate. Still the valuation, dividend, and history are hard to ignore. I have a limit buy in at 38.50. For a couple of shares on RobinHood.

    • They definitely have. People are swooping them up left and right. Great company, great products. I wouldn’t let the exchange rate be the final factor in your purchase decision, but it is something worth considering.

      Bert

  5. I am looking at the 5 year chart on VZ and I am hoping for an opportunity to get in at or below $45.

    It looks like there is support at that price.

    I’m thinking about selling put options instead of buying the stock.

  6. Hi Bert,
    I guess I like KMB and UL most of the three; I own both KMB and VZ. I can’t help but think that T are doing a better job with their capital in acquiring Time Warner than VZ picking up Yahoo.

    UL is great too and popular at the moment, although interestingly in the UK (as ULVR) they’re only a 1+ year dividend growth stock having reduced their dividend in 2015. So exchange rates can make a big difference and I’m avoiding ADRs for that reason.

    I own PG shares so I don’t feel any need for UL although I own both VZ and (mostly) T

    Best wishes,
    -DL

    • DL,

      Agree. I do like T’s acquisition better than VZ’s. I’m interested to see how that acquisition plays out. It doesn’t seem like you are that hot on any of there. Starting off with I guess doesn’t give me the warmest feeling haha Are you watching any other stocks instead??

      Bert

  7. Hi Bert,

    Happy to hear you’re onboard with VZ. I’ve been eying it for sometime now but have been hesitating. What are your thoughts on MFIN? Their div is up to 7% now with a lot of room to gain.

    -Mike

    • Mike,

      What’s holding you back with VZ? Are you cold on all stocks after the recent build up. I’m not too familiar with MFIN. However, I looked at the type of loans they offer and it isn’t exactly my cup of tea. A lot of their loans are in taicab medallions, and I would be interested to see how well those continue to perform as apps like Uber, Lyft, and other ride sharing programs take off. Also, a lot of their consumer loans may not hold up if the economy decides to turn south. I could foresee a day where their delinquencies take off, but that’s just my opinion. I think I would prefer the community banks that pay a solid dividend. The two I hold are CZNC and NWFL.

      Thanks for the comment. Hopefully you stop by again!

      Bert

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