Bert’s September Dividend Stock Watch List

The year is flying by.  For a good portion of the year, we have experienced some wild, and unpredictable swings, in the marketplace.   I’m trying to be better about having a watch list handy to capitalize on sudden drops in the market.  There are some names out there that caught my eye as I ran a stock screener during Labor Day weekend.  So I put my thoughts down on paper.  Please see my September Dividend Stock Watch List and let me know what you think!  Hopefully there will be some opportunities to add to my portfolio.

 

Dividend Stock #1: J.M. Smuckers (SJM) – Smuckers is number one on my list.  I think the company has appeared on my watch list at least once annually since we started this website over five years ago.  I love the company, their products, their dominance in the consumer staples market, and their recent expansion into the pet food arena.  They check a lot of the boxes that I am looking for in an investment.

Which is why when their price plummeted after their recent earnings release, I was instantly interested.  The company’s earnings release was not great, I’m not going to lie.  The company reported a decrease in sales, earnings, and cash flow from operations compared to last year.  Further, the company downward revised their earnings guidance for the fiscal year.  From a headline perspective, it wasn’t the best.  The stock price rightly plummeted accordingly.

The one item that caught my attention was the revised outlook.  Below is a table from the earnings release summarizing the changes.

I asked myself…what really changed that would impact the company’s fiscal year results?   The sales ranged decreased by 2 percent and the forecasted adjusted earnings per share range decreased by $.10 per share.  But free cash flow, CAPEX, and the Effective Tax Rate are still the same.   The changes are slight and to me, may not have that material of a long-term impact on the company.  So using the low end of the earnings per share range, I range the company through the famous Dividend Diplomats Dividend Stock Screener.  I’ll use the company’s August 30, 2019 close price of $105.16 per share for the purposes of our analysis:

  • P/E Ratio – 12.59 X – Pass, the company is trading at a multiple significantly lower than the market.
  • Dividend Payout Ratio below 60% –  42%.  Pass, the company is below our threshold.
  • History of Increasing Dividends – They aren’t a Dividend Aristocrat…yet.  The company has increased their dividend for 18 consecutive years.

Overall, Smuckers passes our screener.  With the downward pressure on price, the company’s now yielding close to 3.5%.  If the company’s stock price hits $100 per share, I will initiate a position.

Dividend Stock #2:  3M Company (MMM) – I’m not looking to far for the next company on my dividend stock watch list.  MMM was one of my last stock purchases.  I added to my position when the company was trading at $165 per share.  Now, MMM is trading below the level.   The company’s diversity among industries, dominance in their respective industries, and dividend history.  The trade war with China has caused turbulence in the stock price; for good reason.  3M is a global company.  Uncertainty and sudden changes in tariffs may have a significant impact on the company’s earnings.

After their recent price decrease, the company remains attractive when run through our Dividend Stock Screener.  I’ll use the company’s August 30, 2019 closing price of $161.72, forward earnings per share of $9.41 per share, and an annual dividend of $5.76 per share.

  • P/E Ratio – 17.2 X – Pass, the company isn’t the cheapest.  But it is lower than the market.
  • Dividend Payout Ratio below 60% –  61%.  One percent above our screener threshold.  I’m not too concerned about the safety of the dividend just because their dividend payout ratio is 61% instead of 60%.  That’s the true intent of this metric.  So MMM passes here.
  • History of Increasing Dividends – Two words…Dividend King.  MMM has increased their dividend annually for over 60 years.  A major pass here.

MMM performed very well and I will continue buying if their price remains at this level or decrease to $155 per share once again.

Dividend Stock #3:  Exxon Mobil (XOM) –  Again, I’m not straying too far from my recent stock purchases.  The oil sector has taken a beating in 2019 and the major integrated oil companies are appearing attractively valued.  When the sector turns south, my attention turns to buying the best in the industry.  Exxon Mobil comes to mind.  The company is one of the few major integrated oil companies that managed to continue increasing their dividend during the financial crisis a decade ago and the sudden drop in oil prices a few years back.  XOM also has a strong balance sheet.

In my mind, whenever XOM dips below $70 per share I am interested.  That indicates that the company is yielding nearly 5%.  So at those levels, I can purchase one of the strongest major oil companies at a 5% yield with a strong history of growing their dividend through various economic cycles.  Check please.

But with all investments on my watch list, I must run them through our Dividend Stock SCreener to make sure the company truly is an undervalued dividend growth stocks. I’ll use the company’s August 30, 2019 closing price of $68.48 per share, forward earnings per share of $4.15 per share, and an annual dividend of $3.48 per share.

  • P/E Ratio – 16.5 X – Pass, the company isn’t the cheapest.  But it is lower than the market.
  • Dividend Payout Ratio below 60% –  83%.  XOM is above our threshold, but lower than their peers in the industry.  Oil is one of those sectors that typically has high dividend payout ratios.  Overall, I’m not too concerned here based on their history.
  • History of Increasing Dividends – XOM is a Dividend Aristocrat and has increased their dividend through many economic cycles.

As you can see, XOM passes our stock screener here.  Chevron is also another integrated oil company worth considering here, along with Shell.  Shell has announced their plan to increase their dividend in 2020.  But hopefully the drop in oil price won’t jeopardize those plans.

Dividend Stock #4: Banks – This may be a cop out.  But there is a trend occurring that I must highlight.  We’ve talk extensively on this website about the impact of lower interest rates.  Rates are falling, causing a refinancing boom.  But there has been an adverse impact on bank stocks as well.  Not surprising, bank prices have fallen.  Lower interest rates on loans is great for consumers, but leads to decreasing revenues from banks.  With falling prices, there are opportunities presenting themselves in this sector.

Unfortunately, there are so many banks trading at discounts that it is hard to pinpoint which one I want to purchase.  I own Canadian Imperial (CM), Citizens and Northern (CZNC), Norwood Financial (NWFL), and several other community banks.  But the other great Canadian Banks are offering high yields and strong dividend growth, along with the major US Banks.  If bank prices continue to fall.  I will either add to a current position or initiate a new one.  The question is, which one will it be?

What are your thoughts about my dividend stock watch list?  Are you more negative about Smuckers than I am?  Are you staying away from oil all together?  What about banks?  What bank stocks do you have your eyes on?

Bert

Facebooktwitterredditpinterestlinkedinmail

15 thoughts on “Bert’s September Dividend Stock Watch List

  1. I’m with you on SJM and MMM. I think anything sub-$100 on SJM is a damn good price and if it drops to <$95 then that's a great price. Cheap valuation, relatively strong dividend history, conservative payout. Lots to like here. Personally I'd need MMM to drop probably to around $145ish before I'd add more but that's because I've already made 2 additions over the last 2 months and $145 would be a further 8% lower than my last purchase. I still need to look into AWR as well as MPW. I'm probably set on XOM because I have a pretty good size exposure to O&G, but I'm still reinvesting dividends at a 5% yield. We'll see what September brings! I've got enough cash for at least 1 purchase this month and possibly a 2nd purchase as well for my FI Portfolio. MO is still a possibility now that it's hovering near an 8% yield too.

    • Thanks JC! I hope SJM does dip below $100. Hey, let’s see if you can must up the cash for another 15 purchases here in September. I would love if MMM fell that low. I would buy in chunks along the way. In the end, its all about buying great companies and great valuations. In the long run, it’ll all work out.

      Bert

  2. Great list Bert.

    I dunno about smuckers but 3m , oil plays and the banks seem like nice moves. Interest rates drop but the banks keep raking in the coin!

    I’m tempted to add more to 3m but whenever I think it’s at a floor it drops more =)

    Bce, jnj, disney, suncor and adm are on my watch list to add to this month.

    cheers Bert!

    • PCI – There are some great names available in both those sectors right now. That is a solid list you have accumulated yourself. ADM is interesting, especially at these levels! DIS still has some room to go before I’m buying.

      Bert

  3. I too like SJM. One of those l have always looked at. 3M is at a good price IMO.
    In regards to the banks, I own CM, CZNC, TD, BNS, BAC, and SBSI, I am pretty satisfied. But I do have my eye on BOH and Citigroup. If the price is right, I may go shopping for one of those.
    Cheers,
    John

    • John,

      Those are some great bank names right there. I love how CZNC made the cut for your banking investments. It sucks the market has popped in the last few days, but the oil and banks are still trading at some attractive values. Hopefully Smuckers comes back down.

      Bert

  4. MMM looks like a stock that I’d be considering in Sept. for my own portfolio. In fact, I added a couple shares to “baby” DivHut’s portfolio a few days ago. XOM looks good as well but Mrs. DivHut went with BP a long time ago in a major way and the numbers look pretty good there too.

    • MMM will serve Baby Divhut well over the years. It’ll make an appearance in my daughter’s portfolio as well one day in the future. For now, I’m building up my wife’s position in it! I own BP, so I can appreciate Mrs. Divhut’s liking for the company. All in all, the Divhut family has great taste in dividend stocks 🙂

      Bert

  5. I’ve shied away from big oil, but I added 3 banks last month.
    I also picked up the battered CSCO.
    I’m sure you’re a little annoyed with the rally this week, that’s usually how it goes when you set up a watch list huh?

  6. Great list Bert! MMM was one of my latest purchases at $165 and it turns out that it was not the bottom yet 🙂
    I own some XOM as well and it was one of my first purchases when I started building my dividend portfolio. The price is still at the same level as two years ago 🙂 At least their dividend yield is very attractive, so I keep collecting those cheques.
    Looking forward to see what you end up buying this month!

  7. XOM is certainly on my list, in addition to MMM. I’ve been especially watching MO and PM lately. Both offer such attractive risk/reward ratios at this time.

  8. Hey Bert,

    SJM isn’t one I’ve seriously considered as an investment, despite my love for their products. When I looked at the financials you posted, I agree that there doesn’t seem to be anything material on the face of it that would warrant a huge selloff. I’ll have to give them a closer look myself.
    I haven’t found many great opportunities lately, but I’m taking a closer look at ABBV. Seems to have some real potential right now if management is able to execute as they so enthusiastically say they can….

    Take care,
    Ryan

Leave a Reply

Your email address will not be published. Required fields are marked *