The calendar turns and I am ready to put some extra capital to work. Over the last month, I have been busy initiating positions in Tyson, WestRock, and Illinois Tool Works. The market has been interesting over the last few weeks. There haven’t been too many buying opportunities out there, at least compared to the previous months. Still, I run a stock screener each week (sometimes daily) to see what opportunities may be out there. It has been a while since I have published my dividend stock watch list. I figured this was a perfect month to do so. Here is my September Dividend Stock Watch List!
Company #1: J.M. Smuckers (SJM) – With a name like Smuckers it has to be good! SJM is headquarter in Northeast Ohio and I am always looking for an opportunity to invest in this consumer staple stock. SJM has some of the leading brands in the peanut butter, jelly, coffee, baking, breakfast, and many other industries. Plus, the company is expanding its presence in the pet food industry as well! The company also announced a 8.9% dividend increase in July!
Smuckers recently released their earnings and their stock price fell accordingly. Sales and EPS grew during the period, predominately due to their acquisition of Ainsworth Pet Nutrition. The company also updated their fiscal year outlook post-acquisition. EPS remained the same, with an expected range of $8.40/share – $8.65/share. So using the low-end of the range, I calculated their P/E Ratio as 12.5X and a payout ratio of ~40%. Smuckers isn’t an Aristocrat, but they have been paying a dividend since the 1940s and have increased their dividend for 8 years. All in all, I would say SJM performed very well in our screener! I would like to see the company fall below $100/share before purchasing and will most like do if they break this threshold.
Company #2: Illinois Toll Works (ITW) – This stock continues to make appearances on our website and was one of the feature stocks on Lanny’s last watch list. In fact, I have purchased the company three times over the last month. The company just continues to show great metrics. Their P/E Ratio is around 18X and their forward P/E Ratio is even lower. The company announced a MASSIVE dividend increase last month, 28%, and their payout ratio is still below our 60% threshold. ITW is a Dividend Aristocrat and has demonstrated their ability continue increasing their dividend through various economic cycles. It has been a long time since ITW has been trading at these levels and they are down 19% YTD, so I can’t think of a reason why I wouldn’t continue to keep the company on my dividend stock watch list for the month.
Company #3: Kraft-Heinz Corporation (KHC) – KHC wasn’t actually on my radar until Lanny surprised me with a purchase last month. In his purchase article, he ran KHC through our dividend stock screener and the company passed. Their P/E ratio was <16X, dividend yield >4%, and their payout ratio was slightly above 60%. However, the payout ratio was below 70% and I am willing to continue considering them as an investment opportunity. I would be alarmed if their payout ratio exceeded 80%. Plus, the company continues to reduce costs, which would decrease their payout ratio. So overall, I’d say the company passed the screener.
There is one thing that I am continuing to evaluate before purchasing. KHC was supposed to announced their dividend increase in August. But the company did not announce an increase. Rather, KHC maintained the same dividend. I’m guessing the company just delayed it a quarter, but I will be watching closely to make sure KHC continues to increase their dividend. Still, the company has found a place on my watch list and I would be happy to add a small amount to my current position for the right price. After all, I do love consumer stocks with great brand recognition!
Company #4: International Business Machines “IBM” (IBM) – I don’t hold a lot of technology stocks in my portfolio. In fact, IBM is my only individual technology holding (Not counting 401k plans as I’m sure the company is represented within those holdings). But I was flipping through my portfolio and couldn’t figure out why I haven’t been paying more attention to Big Blue. Their P/E ratio is around 10X. The company’s dividend yield is 4.3%, and their 3-year average dividend growth rate is 8.6%. The company passes all the metrics of our stock screener!
I have been slowly adding to positions over the last few months and I have been fortunate to be able to add small dollar amount purchases due to free trade credits. I only own 14 shares of IBM at the moment, so this may be a great time to continue to build my position. On a different note, I read this article titled “Coffee-delivering drones in the office? IBM inventors say yes!” While the prospects of drones flying around my office bringing me coffee when it senses I am tired creeps me out, it is pretty freaking cool! Some fun ideas are being thrown around in the IBM research facilities!
What are your thoughts about my watch list? Are you waiting and seeing with KHC after they didn’t announce a dividend increase? Are you focusing on other tech stocks besides IBM? Have you also initiated a position in ITW like Lanny and I have over the last few weeks? What stocks ARE YOU watching this month? I’m looking forward to your comments!
-Bert