Dividend Diplomats December Watch List

Another month is entering the mid-point, which means another Watch List for the Dividend Diplomats!  The market has shown us signs of great opportunities with the Oil discussions, amongst other things.  This has put pressure downward on stock prices, which as dividend investors, we love.  The watch list may have old names, but also some new names to the listing.  We may be looking at re-upping our positions or embracing new family members to the dividend portfolio.  Enough of the chit chatter, let’s get into the December watch list below!

December Watch List

Lanny’s December Watch List

1.) Canadian Imperial (CM) – Even though I purchased them last week with Bert, this stock remains on my watch list as they are still trading $2 below that purchase price even!  I still barely have a 4.5% exposure to banks and an addition here would be nice.  I’ll save you the details on why it’s on my watch list but will say – it passes all of the dividend metrics from our stock screener, has a very solid yield over 4%, has a payout below 60% and has started to increase the dividend consistently throughout the year and not just in a single instance (as last year/2014 year has had an over 7% dividend growth!).  Not too shabby.  Oh and I guess they were on my watch list back in October as well, let’s give CM a welcome back!  $1,000 here would essentially pop in around ~$43 to my dividend total.

2.) AT&T (T) – Good old AT&T.  Where would we be without them?  Good old blue chip from the telecommunications sector.  I recently showed that this company should be a Top 5 foundation to a dividend portfolio and here are the reasons why they are on my list:

Currently are trading at $32.14 which is below my original purchase price of AT&T back in the day at $32.65.  This then pumps the yield to 5.72%, with $1,000 invested would provide a nice $57 to the portfolio.  Additionally, I think they will capture synergies with the DirectTV acquisition and they’ve been paying dividends and increasing them for more than 25+ years.  However, their dividend growth rate isn’t the strongest, and I’ve been anticipating the increase this month but to no avail yet, c’mon AT&T!  It has only been 1 cent per quarter increase for the last handful of years, something us dividend investors don’t like to see, as that approximates at this rate, barely over a 2% growth.

3.) IBM – Speaking of a blue chip, Mr. Big Blue themselves.  This company was on both Bert and my watch list last month of November.   The company has taken quite the slide the last week, inching down to the lower $150’s.  I stated this in my last list “Further, I will be considering further purchases of IBM if it dips into the $150-$157 range, as I think there is further shareholder value to be unlocked for years to come with IBM.”  Therefore, it has dipped into that range and holds a 3.48% weight in my individual portfolio – nothing huge.  The yield now is at 2.91% and would provide an additional $29 in dividend income if I added another $1,000 to it.  This stock, like the others, fulfills the Diplomats stock screener metrics and is currently at a P/E of 9.40 in my books with a sub 30% payout ratio – now that’s Dividend stock screening at it’s finest.

4.) Shell (RDS) – What would the list be without oil this month?  I know there’s been non stop talk.  Let me repeat that – non stop talk about oil, the price per barrel, the regulations, etc..  This has happened more than once in our lifetime.  Outside of the spike recently, Shell has taken a large smack in share price.  Based on the close on the 16th, I am showing a yield of 5.94%, P/E of 9 and a payout of 53% – not too shabby and fulfills all dividend metrics.  One thing I would be uneasy on if oil earnings did take a haircut from the drop in oil price would be the ability to grow their dividend at the rate that they have been able to in the past.  $1,000 into Shell would provide an additional $59 to the portfolio in annual dividend income.  I may hold off on oil for a bit, but this one and Bert’s choice in Chevron are high on the radar.

Summary on Lanny’s Watch List

I have some high yielders in there, that is for sure – and we shouldn’t just chase the yield, so I need to keep that in mind.  IBM is the one stock above that has a lower yield and an amazing track record of increasing their dividend at a high rate, whereas – the other 3 haven’t shown the exact history for higher dividend growth rate.  Not sure where my capital will end up, or if I sit on the sidelines for other opportunities, but the market is looking to be trending, I feel, in a certain direction – correction, please?  I am looking forward to cross $5,000 in projected dividend income, but I definitely want to do it the right way.  I know I had a decent month in Dividend Income from November, but I am already excited to write at the end of December for the activity this month.  What do you think of these stocks above?  Any of them on your list?  Other pros/cons that you see?  Thanks ~ now let’s go see what Bert has up his sleeve!

Bert’s December Watch List

Great list Lanny.  I like how you are very focused on re-upping in a  position in your current portfolio that has had a rough couple of weeks.  You know they are great companies already since they are in your portfolio, so why not take advantage of what the market is giving you so you can lower one (or several) of your investments average cost per share.  You can’t go wrong with any of the four companies listed above.  My watch list is going to be very oil/Canadian Bank focused as well.  However, I will have two stocks that Lanny did not include in his listing.  With that being said, I am getting ready to deploy more capital in the next few weeks, so let’s see which companies I will be watching closely.

1.) IBM & CM.  I won’t go into too much detail on these two stocks, especially since Lanny covered the stocks in his section of the watch list.  I am interested in both of these stocks because I recently initiated entry-level positions in both companies.  A few weeks ago, I purchased ~$500 of IBM, adding $13.51 in annual dividend income, and last week I purchased $440 of CM, adding $18.05 in annual dividend income to my portfolio.  Since my purchases of both companies, IBM and CM have declined over 5%!  So why not use the downturn in the market to re-up on positions I purchased at a higher price just a few weeks ago?  Tough to argue against purchasing more.

2.) Chevron (CVX).  Chevron was actually on my  watch list last month, we was written before the price of crude oil fell through the floor.  Like Shell, BP, and every other major company, the stock has taken a beating recently and the company’s stock has declined over 12% this last month!  Now, the company’s P/E ratio is a meager 9.4* and is yielding over 4%.   I like CVX over others in the industry due to its lower payout ratio, which is currently 37.8%*.  The low payout ratio provides the company with enough room to grow its dividend even if 2015 earnings are lower than anticipated because of the lower oil prices.  We can’t guarantee anything, especially with everything that has been going on in the oil market recently, but I really like the fact that CVX has the extra room to continue to grow its dividend going forward, has cash per share of >7*, and a current/quick ratio greater than 1*.   The ex-dividend date for the next dividend (which hasn’t even been announced) isn’t until February, so I still have time to make this investment without missing out on a dividend.

3.) Schlumberger NV (SLB)- The decline in the price of oil has provided a great opportunity to invest in Schlumberger, as the stock has declined 6% in the last week and 15.5% in the last month.   I was first introduced to the stock while reading one of Jim Cramer’s books, and he praised the company’s operations and management team.  To provide a little more background information from Morningstar, which rates the company as a 5 star company,  “Schlumberger NV is a supplier of technology, integrated project management and information solutions to customers working in the oil and gas industry worldwide.  SLB’s major competitor in the industry is Halliburton; however, SLB’s market cap almost 220% greater than Halliburton.  So SLB is by far the largest player in the industry.  With the recent pullback, the company now has a P/E ratio of ~15*, a payout ratio of 28.9%*, a dividend yield of 2%*, and a 5 year dividend growth rate of 14%**.  While the company is associated with oil, it does not share the high yield, low growth model that the Shell/BP’s of the world  have.  The yield is lower than what I typically like to see as the total yield overs around the S&P 500,  but this could be a great opportunity to buy into this strong industry leader since the company has fallen off of the premium that it usually trades at.  If I am going to step outside of the box and my comfort zone for an investment, it is going to be to purchase a solid company like SLB that has a lowe payout ratio, strong dividend growth rate, and a strong balance sheet.

Summary

As we can see, the recent events in the market have created opportunities in many great dividend paying companies.  Our December watch list contains 6 companies that would look great in any dividend growth investors portfolio and would provide us with a solid return over the long run.  What do you think of the stocks on our watch list?  Are you following the same oil companies?  Or are you focused on Exxon, Total, BP, etc.?  Would you consider Schlumberger on your list even though it historically has a yield lower than the S&P 500?  We are looking forward to your comments and feedback.

-The Dividend Diplomats

 

DISCLOSURE: WE DO NOT RECOMMEND ANY DECISION TO THE READER OR ANY USER, PLEASE CONSULT YOUR OWN RESEARCH. THIS IS ACTUAL DATA, ANALYSIS, HOWEVER I BASE NO INVESTOR RECOMMENDATION.  THANK YOU FOR YOUR UNDERSTANDING.
*Information provided by www.finviz.com based on 12/16/14 closing price
**Information provided by www.dividendinvestor.com based on 12/16/14 closing price
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10 thoughts on “Dividend Diplomats December Watch List

    • Captain,

      Thanks for coming by! I agree – they would have been steals this week – IBM/T are still looking attractive; MCDs was actually almost cracking my list as well. Been a whirlwind of weeks – downturn in the beginning, followed by a spike the last few days, Mr. Market better make it’s mind up. I ended up not making any moves this week actually, definitely weird for me not to do that. Hope you took advantage of some!

      -Lanny

  1. That’s a great list guys! Totally with you on Royal Dutch Shell too. Thanks for highlighting Schlumberger too, I guess maybe something for the motte conservative amongst us, given its lower yield?

    Cheers!

    • M,

      Thanks for rolling in! I know Bert has been talking Schlumberger for a while too – though the lower yield; the growth on that bad boy has been solid. It was wild seeing Shell at a forward dividend yield of well over 6% and then we all knew what happened the last few days of the week – I think the stock went up close to 10%, the heck?! Make any moves?

      -Lanny

    • MDP —

      I read your goal list and am stoked for you, that’s all I have to say. Your forward income this year going into 2015, reinvested, will be adding quite a bit automatically to your portfolio. But thanks for stopping by the post; I wasn’t able to take advantage of the prices, as I went astray on a few price points I had, as I felt the market was setting up for a “worse” downturn – and well – the end of the week slapped me in the face! Thanks again MDP, keep killing it!

      -Lanny

    • F2FF,

      The weighting in my portfolio is always interesting – you want to add more, but if its just at the right weight, you stray away from it. I know we should be more in tune of: Hey – it’s heavily discounted and the weight will even itself out eventually with new purchases and share price movement. It’s hard though I know. I didn’t buy anything this week and wish I could go back a week to change that… it’s okay though, building up the ammo to unload soon!

      -Lanny

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