Dividend Diplomats February Watch List

We are already halfway through February and it has been a very fast month for us.   Time is flying by and the market is rapidly evolving as a lot of new data has become available over the last week.  It is time to update our February watch list to reflect the changes in the market.  Lanny gave our watch list a new look this month, so we are excited to unveil our changes.  Let’s see which companies we have our eye on!

December Watch List

Bert’s Watch List

Alright everyone, let’s roll!  I’ve got some capital to deploy from my recent sale of ARCP and I am looking for a great dividend growth stock to purchase with it.  Let’s see what 4 stocks are on my February watch list.

Feb Watch List

Based on my list, there are two stocks that I currently own and two stocks that would be new positions in my portfolio.  One that I hope is not a surprise is British Tobacco International (“BTI”).   BTI was accidentally placed on my radar last week when I performed a stock analysis of rival Philip Morris.  When I performed my stock analysis over PM, it became apparent that BTI was performing better while being run through the Dividend Diplomats’ stock screener as  BTI had a lower PE ratio, lower payout ratio, and a higher one year dividend growth rate.  This morning I began researching BTI in greater detail and liked what I was reading.  While BTI does not sport the Marlboro brand like PM, BTI has some of the largest cigarette brands across the globe and has a footprint on every continent.  In addition, international tobacco companies are trying to find ways to break into China’s massive cigarette market, and BTI announced last year it will begin construction on a production plant in China.  Could this possibly be their way in?  Lastly, BTI owns a 42% stake in Reynolds American, the large US cigarette company.  So while BTI does not sell directly to the US market, it has a major investor in one of the market’s major players.  It is not to say that I don’t like PM, as I own shares in the company already.  It would be nice to own stock in the company’s international competitor and gain some indirect exposure to the US tobacco market. For those reasons, BTI has earned a spot on my watch list for the month.

The other stock on my watch list is Emerson Electric (“EMR”), which I discovered while reading Write You Own Reality’s purchase summary from last week.  EMR is a great stock, has a long dividend history, a great growth rate, is a market leader in its industry, and is trading at a discount compared to the market.  What is not to like about the stock.  Great pick last week WYOR; I may have to follow your lead soon!  As mentioned earlier, the other two stocks on my watch list are current holdings.  First off is HCP, the large healthcare REIT.  What I love about this company is their diversification of operations, as they focus on five different types of healthcare facilities as opposed to one.    Have I mentioned yet that HCP is a Dividend Aristocrat that announced a dividend increase recently?  What is not to like about a REIT that has consistently increased its dividend for a long period of time?  Lastly, HCP has had a terrible month subsequent to its announced dividend increase, as the company’s stock price has fallen 9% over the last month.  Now, HCP is trading a much lower multiple (I used price per FFO) compared to its competitor Ventas, which is trading at ~17.6 times FFO.  Wouldn’t be a bad time to re-up my position.  And Last but not least, IBM.  Are you all getting tired of us talking about IBM yet?  Big Blue was on our watch list last month and Lanny and I have purchased many hares in the company over the last six months.  IBM is trading slightly below my purchase price, so why not continue to keep a close eye on this company?

Alright everyone, that concludes my February watch list.  It has four company’s that I would love to either own or increase my current position in.  I am expecting to make a move soon, so let’s see which company I select (if it is even on this list!).  You’re up Lanny, let’s see which company’s you have your eye on!

Lanny’s Watch List

Okay Bert, time to put whatever the heck you wrote above to shame.  Also – sick of all of your damn references to selling your ARCP, stop with those “tears” and keep churning along, c’mon man!  For my watch list, I will add my screener attributes below and look at the metrics from our dividend stock screener – such as P/E ratio, dividend yield, dividend growth and payout ratios.  I am also looking at the buy back from the 10-K of 2013 vs the latest released financial data (either the 3rd quarter 10Q or their 10K, whichever has been released).  Let’s see what I’m currently looking at below, as the screen shot will depict the attributes:

Lannys Watch ListThough I think all are very attractive above  – I am not the biggest fan of the growth rate on Norfolk Southern (NSC), given their lower dividend yield, so I’m going to hold off on them.  IBM I already own approximately $3.5K, so I may scratch them off as well.  Leaving me with UPS and Caterpillar (CAT).  From looking at the items above, both have similar payout ratios but in obvious different industries.  Given that CAT has the same payout, but a higher yield and a better dividend growth rate, paired with a higher share reduction (as you know I love share buy backs) – I will say that they are taking the crown on my watch list.  This may help in curing my dividend investing anxiety that I posted about over the weekend, as it’s been almost two weeks since I’ve made a purchase, agh!  I have John Deere (DE), so this will pair nicely with that, given I don’t have a large position in them either.  A $1,500 investment into CAT would produce $49.35 in dividend income at 2/15/15 stock metrics above, I kinda like that ~ $50 amount.

 Summary

All in all, I don’t think we could go wrong adding or increasing positions in any of the seven companies mentioned on this list.  Some may have rockier short-term prospects than others, which is okay because we are long-term, buy and hold investors! I love that both of us have the opportunity to add positions that would represent new industries for us (Bert – EMR and Lanny – UPS and NSC) as we further diversify our dividend portfolios.   Hopefully you will be reading an article soon summarizing our purchases from this watch list!

What do you think of the stocks we are watching?  Are you following any of the same companies?  Or are you staying away from any?  If you were Lanny, would you hold positions in both CAT and DE, or would you use your funds to purchase shares in a company that would represent a new industry to your portfolio?

Thanks everyone, 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.
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19 thoughts on “Dividend Diplomats February Watch List

  1. Bert and Lanny,
    Wow great lists you got there! I recently purchased HCP doubling my position in it with the recent price drop. I bought CAT below 80s and still thinking of buying more after 6% gain from my last purchase. Buffett just bought some more IBM, getting more interesting over there. R2R just reviewed UPS which I like as well. Just a quick question about EMR, -1.62% DGR? Was there a recent problem/headwind with the recent decline of dividend?
    Thanks for sharing your watchlist guys!
    FFF

  2. Interesting that UPS is now popping up on a lot of people’s radars. CAT is looking very interesting as well. Keep us updated on which one(s) you end up pulling the trigger on.

    • Yah.. I’ve noticed it is as well. I’ve seen both CAT & UPS on a few here and there. I’m going to evaluate this weekend where I stand and what makes the most sense and see where I go on next week, barring any dramatic market moves over the next two days. Hope you’re having a great week Tawcan!

      -Lanny

  3. Nice looking list of stocks. I might average down on EMR in the future if it keeps falling from my purchase price. I have no money at the time, but I’ll keep it on the list. You also mentioned DE above. I put them on my watchlist today after it was reported that Warren Buffet has a stake in them. I’ve looked at them a few times before but have never made the leap. The stock has floundered for a few years now so perhaps it will return to growth for the next few.

  4. Between you both, HCP, EMR and CAT are my favorite choices going forward. Of course, I still have an eye on those Canadian bank stocks and as of today still have not made a February purchase. We’ll see how the rest of the month progresses. Thanks for sharing your watch lists.

  5. Wow, thanks for the mention! Glad I could bring EMR to the forefront for you. I still like them in the $58 range, and IBM is still a value as well for me. There is almost never a good time to snag NSC, but it is something I’m watching as well.

    Thanks for sharing your watch list!

  6. Diplomats,

    Great looking list of stocks. I’m watching UPS, TROW, MSFT, and PX among a few others. EMR is a solid pick here. If I didn’t own as much as I do, I’d be all over it. I may buy some more anyway. BAX also seems pretty solid.

    Happy shopping! 🙂

    Best regards.

  7. I like those stocks but personally I wouldn’t invest in them yet. Per my “valuation screener” they are still overvalued or at their fair value. I want them undervalued to invest in them. If you already have them in your portfolio, keep them for dividends, but no new purchases. Just my two cents.

    • Div Guy,

      Glad you like the intro! Always have to throw some jabs at Bert – you should see what I’m like around the office and at clients though ahaha.

      CAT is looking solid right now, capital has been accumulated on my side. I hope Bert comes out with an article – he’s had quite a big week!

      -Lanny

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