I’m sitting at my dining room table with a freshly brewed cup of coffee and the fall breeze blowing in. What a beautiful fall day here in Northeast Ohio. With a lot of the expenses associated with moving in and updating our house in the rear-view mirror, I’m finally starting to flip on the investing switch again and aggressively look for great opportunities to add to or establish new positions. I’m inspired by Lanny’s recent dividend income month where he covered over 100% of his monthly housing expenses with his dividend income. If I want F.I.R.E, I need to go get it. So today, I sat down and found four dividend stocks that I would like to watch over the next month. Let’s take a look at my October dividend stock watch list.
Stock #1: AT&T (T) – This is the stock that has been on Lanny and my minds a lot recently. We had a nice long conversation about the company on this Friday as the price continued to fall. Unfortunately, as the conversation came to a close, the price began to rebound and no investing decision was made. So this has earned a firm spot on my watch list and one of the top contenders. We all know that AT&T is a Dividend Aristocrat and we are accustomed to receiving our annual $.01/share increase in our quarterly dividend, so it checks out box for investing in a company that has a history of our increasing dividends. At their current price, the company is nearly yielding 5.5%. Sure their payout ratio is higher that our 60% threshold, but the company typically maintains a high payout ratio and I understand that as a part of my investment in AT&T.
One of the topics of our phone conversation was AT&T’s recent earnings release. There was some negative news about how the recent earnings release may impact earnings. But the one thing that did jump out were the positive increases in DirectTV Now subscribers to help offset the impact of cord cutters (which I hope to be soon once I battle my cable company as discussed in my fourth quarter goals article). Sure I have a large position in AT&T at the moment, but I have no problem adding and continuing to receive a boatload of re-invested shares from them on a quarterly basis. Currently, my wife and I combined receive over two shares each quarter from the telecom giant.
Stock #2: Cardinal Health (CAH) – I continue to focus on companies that have not been performing well in 2017. Much like AT&T above, CAH also fits this bill. In fact, back in August, I purchased 15.87 shares of CAH at $65.20/share. This purchase increase my cost basis to over $5,000 and CAH is definitely one of the larger positions in my portfolio. After my purchase, CAH’s stock price rose to above $70/share; however, with recent events, the company’s price has fallen once again and is trading around the levels that I purchased the company at last time. Once again, just like in the linked article above, CAH is crushing our Dividend Stock Screener.
After performing some research and reviewing some SEC filings, the recent drop in price appears to have begun after the company filed a press release at the beginning of October stating they were incurring $130 in exit or disposal activities related to “the transition of distribution of its Medical segment’s surgeon gloves in certain countries outside the United States from a third-party distribution model to a direct distribution model.” The second filing was a “notice of exempt solicitation” filed with the SEC from the International Brotherhood of Teamsters urging investors to vote for an independent chairman of the board in their upcoming vote. The vote is prompted by the looming legal battles associated with the nation’s opioid crisis. For a long-term, buy and hold investor, neither of these activities are moving the needle for me. Therefore, I added CAH back to my watch list for all the reasons I purchased CAH just a few months ago!
Stock #3: Campbell Soup Co. (CPB) – Honestly, this might be the first time that I have ever had Campbell’s soup on my watch list. As a huge sports fan though, I have so many memories growing up of watching the old Campbell’s Chunky Soup commercials with Donovan McNabb and his mom. They always made me laugh! But nostalgia is not why CPB is on my watch list here in October. After having a pretty terrible 2017 (down ~25% YTD), CPB is now performing well in our stock screener. Their P/E Ratio is ~15.1X and their payout ratio is ~46%. Plus, their dividend yield is now above 3%!
The one downside to CPB is that the company does not have a lengthy streak of increasing their dividend each year. In fact, their current annual dividend income streak sits at….one. Reviewing CPB’s investor relations website, the company has paid a dividend since 1980 and their history shows annual dividend increases from 1980 through 2001, when the quarterly dividend was cut from $.225/share to $.158/share. Since then, CPB has announced nine dividend increases and one special dividend. History shows the company increases their dividend; the increase frequency just isn’t as frequent or scheduled as some of the other Dividend Aristocrats in our portfolio. The dividend increase frequency is enough for me to consider adding this company to my watch list.
Stock #4: Canadian Imperial (CM) – Last but not least, a company that was on my September watch list and was actually the last stock I purchased. So why is CM still on my watch list? First, while I purchased additional shares, I only added $908 to my position. In total, I own 20.37 shares with a cost basis of $1,677. This isn’t a large position compared to the remainder of my portfolio by any means, so I would love to continue quietly added to my position of CM if the metrics are right. Which is a perfect segue into my second point. Since I added shares of CM in September at $88.86 per share, the company’s price has remained relatively the same. Nothing has changed fundamentally and CM still has not announced a new earnings release. The company continues to pass our stock screener with flying colors, so why shouldn’t I continue to have them on my watch list?
summary
There we have it. Four great dividend stocks. Three of which I already own and one potential new addition to my portfolio. While I likely won’t have a ton of cash for my next investment and I would lean towards building on a current position rather than starting a new, smaller position. I thought that it could not hurt to take a look at a company outside of my portfolio. Plus, I love consumer staple stocks and will always considered a potentially undervalued consumer staple stock if the right opportunity presents itself. In the end, whatever amount I can add to a great income producing stock is going to pay dividends in the long run and bring me that much closer to retiring early. We always say it and every dollar counts and will make a huge difference. Here, I will make every dollar count by turning savings into an income producing asset.
What are your thoughts about my dividend stock watch list? Do you have any of the same names on yours? If not, what stocks are you watching? What are your thoughts about AT&T and Cardinal Health at the moment?
-Bert