It’s already mid-August and us Diplomats haven’t came out with our watch list yet. The market has been a rollercoaster ride, to which I hope everyone this summer has had some sort of an amusement happen, gone to a theme park, taken a day or so off to take it all in. Well, we were back to the lab and doing research on finding what stocks we are looking at. Enough with it – lets see what is on our August watch list!
Lanny’s Watch List
Okay, Bert here is a sneak preview at the big watch list, as the market has overall taken a continued downturn for us value investors, with our obvious focus on dividend stock screening metrics. Who is on my list, may one ask? Fine fine, here are my top three stocks I am looking at:
Caterpillar (CAT) – Down 14.25% and I have purchased them twice during this year – first had $83.31 and then later on at $79.06 ; took advantage of a price swing there on the 2nd. As of Friday close they are trading at $78.50; not too far from that second purchase, with a drop of only 56 cents or only 0.70% decline. However, this is AFTER a 10% increase to the dividend from $0.70 per quarter to $0.77 per quarter. What is this known as? Yes – more dividends for less… aka, this is back on the watch list. I have a nice position already here but will continue to add more to the forward looking dividend income where I see fit.
Procter & Gamble (PG) – Okay… something has to give with this company. For sake – we had them on our foundation stock list for a dividend investor! The had a dismal 3% dividend increase this year, after they had a proven track record of approximately 7% ish on average, similar to JNJ. However, it’s been a telling year for PG investors, which includes the two of us. New CEO David Taylor started at the beginning of August and also PG sold/splitting off its 43 beauty brands to Coty, which us shareholders will have the option to have shares in this entity. Additionally, there was also another sale of Duracell. This is allowing PG to focus in their core brands, which we have seen them do in the past with sales of Pringles to Kellogg and Jif Peanut Butter to Smuckers. Not the first time PG has done this and not the last. Further, it’s all about increasing and giving back to shareholders from the press release statements and to continue it’s strong dividend history. Also to note – they are down 17% this year. Current yield at 3.51% vs their historical 5 year average of 3.20%. With these spin offs, sales and a nice share buyback commitment – one could imagine the impact this will have on dividends going forward. Further, I bought them at $79.05 the first time, and with a price at $75.61; that’s a nice 4.35% decline from that price, with a higher dividend. Interesting.
Bert’s Watch List
Lanny, I’m digging the list my friend. I don’t think you could go wrong purchasing either. Regardless of which company you select, you are adding some strong dividend income to your portfolio. That’s all that matters! Here is my situation, I have $900 that I want to deploy next week because quite frankly, I am getting awfully tired of seeing my cash sitting on the sideline. I am all on board with Lanny’s low cash account strategy that continues to fuel his dividend income growth. Similar to our last watch list, I want to use the $900 to fortify a position that I already own, since I own several smaller positions in my portfolio. At this point, I think they are too small and I would love see all of my positions above $2,000. So here are the two stocks I am watching this month!
IBM (IBM) – Man, I just can’t get enough of Big Blue. Not only was IBM on my last watch list, but it was actually my last purchase. The metrics speak for themselves: over 3% yield, 14.88% five year dividend growth rate, payout ratio below 40%, and a massive share buyback program. I really don’t want to dive into too much detail because we have covered this stock in plenty of detail on this website. So why IBM again? Even after my last purchase, my cost basis is only $1,159. I have eluded to the fact that I want all of my positions to eclipse $2,000 one day, and throwing another $900 at IBM would put me over that mark. While there may be other great discounts in the market (such as NSC, which Lanny recently bought), it would be nice to cross the mark, be comfortable with my position, and allow myself to focus on building other positions in my portfolio as opposed to having to re-focus on IBM at a later date. Why not just take care of this now and be done with it, right? That’s the though process that has earned IBM yet another spot on my monthly watch list.
Emerson Electric (EMR) – Let’s be honest here…I love Emerson Electric at the moment. I purchased ~38 shares last month and even though my cost basis is just shy of $2,000, I would love to add to my position. What’s not to love about the company? Lanny did an excellent job refreshing the metrics in his EMR purchase article from my stock analysis a few months ago and similar to IBM, the metrics paint a great picture. The company is Dividend Aristocrat for a reason and has a great track record over the last decade of rewarding shareholders, so what is not to love? Plus, Lanny and I talk about the 5% rule on our website, where we will look to re-up our position and lower our cost basis the stock price decreases 5% subsequent to your purchase. See where I am going with this? Currently, my stake in EMR is down 5.5% since my initial purchase. The big question is if I loved the stock at that price level and nothing has changed (as Lanny proved in his last purchase article), why wouldn’t I continue to build my position? Man is it going to be tough deciding between IBM and EMR!
1 stock of IBM remained from our July dividend stock watch list. We love finding value and value is what we have found. This is why we constantly try to save over 60% of our income and continue to have record breaking dividend income each month that we have when compared to last year. It’s fun seeing what new flavors we have for the month, but even moreso when we read what other bloggers have on their menu as well. It’s always interesting to see if others have the same and even more interesting when there is a curveball involved.
What do you think of the four companies listed above? Are you watching them as well? What are your thoughts on PG, given everything they’ve been doing? Are you looking to invest now, add to it or stay away? Do you own any of the above? What other stocks are you watching as the market continues to pull back?
Thanks everyone we are looking forward to your comments!
-The Dividend Diplomats