After seeing such incredible numbers posted in our latest edition of our monthly dividend income summary from other bloggers in the dividend growth investing community, I am extremely motivated to invest some extra capital and help push my dividend income forward. Even though I am working hard to earn extra cash via side hustles to try to pay down our debt as fast as possible, I decided that there was a little room to still invest on the side. How could I resist buying a potentially undervalued dividend growth stock after all? This month, I’ve targeted four companies for my September stock watch list. Let’s see who I am keeping my eye on!
Since I won’t have a lot of extra capital available, I wanted to focus my attention on adding to three positions in my portfolio. My positions in these companies are lower than I would like and it would be nice to start adding to them, increasing my dividend received quarterly from the positions, and ultimately increasing the fractional shares I receive via DRIP. For the fun of it, I added one company that I do not own to my list because the price has continued to fall. So if I do decide to add to a position, it will most likely be with this company.
Company #1 – Archer Daniels Midland (ADM) – ADM caught my attention in the second quarter when the price fell to the low-$40 price range. The company’s stock price has recovered over the last few weeks; however, the metrics are still looking great and would pass our dividend stock screener with flying colors. The P/E Ratio is ~16.8X and the dividend growth has continued to be solid, as the despite the company’s recent high single digit growth rate. When I purchased ADM, their yield was about 2.3%. Now the company’s dividend yield is ~2.90%! My position produces $13.54 in dividend income quarterly, so it would be nice to increase my stake to receive at least $20 per quarter.
Company #2 – Canadian Imperial (CM) – CM is the highest yielding stock on my watch list, so I would get the most bang for my buck in terms of dividend by investing in CM. CM’s dividend yield is 4.8% and their annualized payout ratio per their latest press release was around 50% (these figures are in line with the other major Canadian Banks). After diving further through their financials, I was very happy with their loan quality, recent dividend increase, and their awesome 16% ROE! That is a very strong mark for the banking industry compared to what we typically see. One nice thing about potentially investing in CM is that the company’s ex-dividend date is September 27th. If I invest in the next few days, I would still have time to capture their next dividend payment in October. It would be nice to boost my income in an “off month” during the quarter. Man I would love to increase that $10 quarterly dividend check I receive from CM.
Company #3 – IBM (IBM) – IBM has quietly decrease 12% YTD, which caught me off guard. I have always been hesitant to invest in the tech industry for some reason, despite the fact that Lanny made performed a stock analysis over Cisco earlier in the year and invested twice in CSCO subsequent to the analysis! I dipped my toe in the waters by investing in IBM several years ago and well, the position has remained relatively stable. The price has not appreciated despite all of the share buybacks over the last few years and the only reason I am not showing a net loss on the position is due to re-invested dividends. The company’s metrics look great, as they always have (P/E = ~10.5X, Dividend Yield = ~4.1%, and a low payout ratio = 43%). Since IBM continues to pass our stock screener, the dividend yield is very strong, and the fact company has an insane cash balance to continue re-purchasing shares or increasing their dividend, I thought it would be a nice company to keep my eye on over the next several weeks and see if I can add to the $21 quarterly dividend I receive from Big Blue.
Company #4 – General Mills (GIS) – Last buy not least, the one company I do not own on this list. My love for consumer stocks, the company’s -15% YTD performance, and 3.75% dividend yield has General Mills on my radar. There are a few negatives that I have to consider before initiating a position. The company has a high debt to equity ratio, their dividend growth rate slowed tremendously in 2017 (only posted a 2% increase during the year), and the company’s payout ratio is higher than the 60% threshold we use in our screener at the moment. However, if the price continues to fall and the P/E ratio continues to fall (currently just over 16X), I may be too tempted and initiate a position! But I must say, this is the most unlikely investment on the list.
Four solid companies that I look forward to closely monitoring over the next few weeks. I would be excited if I could add one of these companies. Man, over the last few weeks I have felt as motivated as every to keep on reaching deep, keep on pushing, and JUST GO FOR IT. Are you watching the companies that I included on my watch list? If not, which companies are you considering? What are your thoughts on IBM or GIS?
-Bert