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
Bert,
I am a big fan of SJM and KHC especially on recent weakness. The others are good options too, which have rewarded shareholders for a decades. Honestly, there are a bunch of good investments out there that are undervalued, despite the market being at all time highs overall.
– Gremlin
Gremlin,
Thanks for the comment. I’ve had a more difficult time find a lot of investment opportunities out there. But with that being said, if you dig hard enough, you shall find some of the opportunities that exist. Hopefully SJM can break that $100/share mark!
Bert
Hi Bert,
Great list and thanks for the ideas! I am also looking at ITW but it might take some time for the funds to become available, so I may miss this dip in their price. I also had KHC in my watchlist a couple of months ago but didn’t purchase it then, will need to reconsider them again.
By the way, where are you checking those ratios? I find P/E (for the last 12 months) at 25.22 for ITW at the moment, so I’m thinking if I am looking at some other ratio here 🙂
BI
BrokeInvestor,
Thanks for the comment. I’ll keep my fingers crossed for you that ITW stays at these price levels. That way, I can add some more shares with you 🙂 For my P/E ratio, I used average analyst EPS for the year from Yahoo Finance. That is probably why you are seeing some disparity from the trailing twelve month total.
Bert
Hi Bert,
Thanks for the explanation! Will be looking forward to see what you decide to purchase in the end 🙂
All good choices Bert, and I’ve seen SJM popping up more and more recently. I had almost included IBM when building my DGI portfolio but currently am holding Apple and Microsoft in the technology sector.
DivvyDad,
Thank you very much! SJM having a 3%+ yield is great and certainly caught my attention haha Understandable with IBM, especially if you already are pretty well represented in that sector. Happy shopping!
Bert
Bert,
I like all the stocks mentioned on the list and I currently own all but ITW. I’ve mulling over the idea of purchasing ITW and my pull the trigger on this name soon. My suspicion on KHC not announcing a dividend increase is that they may be shoring up some capital for an acquisition in the near future (I’d be a supporter of an aggressive stock buyback at these prices as well). They have two of the best minds in the investment world in their corner (Buffett and 3G Capital) so I am hopeful that management will make some significant yet prudent decisions and that we’ll hear about them fairly soon.
Regards,
PIV
PIV,
Thank you so much for the comment. You’ll have to let us know if you make a purchase here with ITW! That would make sense with KHC and I think you may be on to something. I saw Tyson do the same thing this month, and plenty of smaller community banks have done so as well. KHC has a solid yield at the moment and I would be pumped if they added some new, strong brands to their already impressive portfolio.
Bert
nice list here.
like all the companies!
Kraft would probably be my go to. In a falling market consumer staples may hold up a little better.
I aint calling a crash but defensive stocks are always nice. Buffet and 3g are a nice bonus as well!
lets see which one you decide!
cheers
PCI,
Thank you very much! I already own KHC, so you know I love the company. And it is for many of the great reasons you mentioned 🙂
Bert
A great list of fantastic companies as usual. I own SJM and IBM. I’m looking to add to MO at these levels. A near 5.5% yield on a company one year away from being a Dividend King is quite an attractive opportunity.
Thanks Kody! Smart move with MO, especially after their second dividend increase this year! I didn’t realize they were one increase away from being a kind, so that’s pretty cool if you ask me.
Take care,
Bert
Interesting Watchlist Bert. ITW seems to be a favourite of the dgi community of late. IBM might be a candidate for me as well. I’ll also be looking into KHC as well. Would they make another pass at Unilever maybe?
Thanks here Mr. Robot! ITW has been all over everyone’s map recently and they are a great option at these prices I am very happy/fortunate to have built such a strong position in the company, that’s for sure. IBM and KHC are prime contenders here as well as I continue to look to build some positions! Interesting thought about KHC and UL, which could explain the delay in the dividend increase.
Regardless, thanks for stopping by!
Bert
Nice list, SJM is always a solid pick, ITW is great at these prices, KHC I need a little more convincing on though. But the turnaround story of IBM I’m a believer of, even if they take a few more years, if you buy in at this price with this yield… What could go wrong haha. I myself was looking at BlackRock (BLK) for this month, care to share your opinion about that one?
DI
Thanks DI. SJM is looking solid right now and I’m hot on their trail haha I do love your attitude about IBM. They popped on my screener and I would be happy to grab them at this yield. I’ll look more into BLK. I don’t know a ton about them, but you’ve given me a fun research project for the weekend!
Thanks for the comment.
Bert