Dividend Diplomats’ January Watch List

We are already halfway through the first month of 2015 and it has been a very active month for us.  There have been a few purchases, some we have written about and a few we haven’t, and one big sale.   If there is one thing I have learned over the last year, it is that we do not hold cash for a long period of time and we are always looking to make a move.  The big question is, which stocks are currently on our radar?

December Watch List

Bert’s Watch List

After my recent sale of ARCP, I have ~$1,700 of capital to deploy into the market.  I am still torn with how I should allocate this capital.  Should I purchase one new stock or use the capital to re-up some entry-level positions in my portfolio?  I don’t think I could go wrong with either decision, as long as I use the capital to invest in a strong dividend growth stock.  Let’s see which three stocks are on my January Watch List?

  1. Canadian Imperial (CM) – I know what you are thinking…”You are still talking about this stock” and “Hasn’t this stock been on your watch list before?”  The answer to both these questions is yes, and I think I am watching this stock for good reason.  Last month, Lanny performed a stock analysis showing that CM passed all three metrics of the Dividend Diplomats’ Stock Screener, which placed the stock on my radar in the first place.  Since this analysis, I have purchased CM twice, the first purchase was for 5 shares in December and the second purchase added 4 shares to my holdings as the stock continued to slide.  Why am I considering CM once again?  The stock has been off to a rough start in 2015 and is down over 11% YTD.  Since my position is still smaller than I would like, the recent decrease in the stock price might provide too great of an opportunity to pass up and I may be “forced” to re-up my position and continue to lower my cost basis.
  2. Philip Morris International (PM)– Another stock that I currently hold.  PM was one of my first stock purchases as I set my sight on becoming a dividend growth stock.  Now, it might be time to add to this position.  I don’t think I would invest the complete proceeds from my ARCP sale into PM; Rather, I would split the funds and re-up my position in multiple stocks, one of which would be PM.  So why am I considering PM now?  The company’s PE ratio continues to remain below the S&P 500’s average ratio and PM has sported a strong dividend growth rate over the last five years, has a strong dividend yield (currently 4.8%).  increasing their dividend by an average of 11.65% in this period.  Lastly, my portfolio has a relatively low allocation in tobacco (<3%) and could use some additional capital to increase this allocation.   Over the last 6 months, I have forgotten this industry as I saw other tobacco stocks soar.  However, I do not think I can continue to ignore PM as a possible option.
  3. Parker Hannifin (PH)–  Recently, I have focused on investing in stocks that are industry leaders and are the dominant players in their industry.   PH is just that.  As described on Morningstar, PH “is a diversified manufacturer of motion and control technologies and systems, providing precision engineered solutions for mobile, industrial and aerospace markets.”   To quickly run through some of the metrics, PH passes the Diplomats’ Stock Screener as the current PE ratio (16.88) is below the S&P 500, the payout ratio is below 60% (26%), and the company has continued to increase their dividend.  While the dividend growth rate has not been overly impressive over the last five years, PH rewarded shareholders with a 33% dividend increase in 2014 and announced a share repurchase program of up to 35 million shares!  Plus, PH has a strong balance sheet with a current ratio of 2, debt to equity of .33, and 13.71 in cash/share.  A very impressive balance sheet.  While the yield is lower than my overall portfolio yield, I think this company would be a welcomed addition to my portfolio

 Lanny’s Watch List

Okay, back in the saddle and the market is stacking odds for us this time.  I’m not with a new look after reviewing my portfolio and learning lessons from it.  I’m hoping to take more emotion out of the game, re-upping into my positions that I like, believing in strong dividend growth as well as having the power of DRIPing on my side.  Most of these stocks I own or have even recently purchased stocks, as us Diplomats had a nice purchase at the same day a week or so ago.

  1. IBM – Have to love big blue!  Passing the dividend stock screener results – great yield at 2.80%, with a DGR from last year of 16% approximately with a P/E sub 10 range = a great price point right now, with approximately 2 weeks until ex-date and I only have a tad over 3% exposure to them.
  2. McDonalds (MCD): Coming it at over a 3.70% yield (3.74%) a lower dividend growth rate = around 5%, but a decent price to earnings and is a stock that is solid in a foundation portfolio to build upon.  There may be other buys out there, but those that love to own McDonalds and want a larger position of them in your portfolio, now is not that bad of a time to buy into more.
  3. John Deere (DE)  – Similarly to my boys in the blue above; a great 2.75% yield, payout ratio extremely low at approximately 29%, with a P/E barely over 10 on this one, with a growth rate last year of 17.65%.. not a bad little point they are at right?  Great yield, great dividend growth and solid fundamental metrics.  Between DE and IBM – both are strongly valued for a dividend investor as they fit this criteria essentially: Above average yield, a well above average dividend growth rate, a well above average/below what the normal payout ratios are, and an above average attracted Price to Earnings ratio.  Also — both are trading above their 5 year dividend yield averages.

This was the quick and dirty version of the Dividend Diplomats Stock Watch List.   So all, it looks like we are really focused on re-upping positions in our portfolio this month.  For those of you keeping record, we currently hold 5 of the stocks listed on our watch list!  But why use the recent decline in stocks to take advantage of the recent downturn in the market?  After all, the companies went through a pretty tough screening process when we initially purchased the stock.  If nothing has fundamentally changed with the stock, why not purchase additional shares?   What are your thoughts with the 6 stocks above?  See one’s you like?  What are we missing?  What don’t you like about the 6 listed above?  Think they may be overvalued?  Let us know and once again – THANK YOU!  Talk soon.

-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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12 thoughts on “Dividend Diplomats’ January Watch List

    • DD,

      Thanks for the stop by. I’m in a position where I have many stocks I like with not as much capital as I’m used to having, that’s what happens when you invest so much in 2014! Looking forward to seeing what you’re doing DD!

      -Lanny

  1. Diplomats,

    Seems like a solid list up there. The Canadian banks have taken a hit lately, which puts them squarely in value territory. There are some issues going on up there, no doubt about it, but I think they’ll do well over the long term.

    IBM is very cheap here. If you’re okay with tech exposure and waiting for the turnaround, this seems like a no-brainer to me.

    I’m not sure if I’ll be buying any stocks at all in February. Depends on the cash flow and how much I think I’ll owe in taxes. There’s some value here and there in energy, though I’m a bit overexposed there. I probably wouldn’t mind joining Bert in a Canadian bank like BNS or TD. CAT looks solid. As does Dover.

    Best regards!

    • DM,

      Thanks for your comment! There are definitely issues going on with the banking industry in Canada, wonder how much oil is pressuring the loan exposure.

      I have a small position in tech, and IBM is looking solid – excited to see what their increase will be in the upcoming few months, that dividend growth record has been insane.

      I know we both have been scooping up some Canadian bank action lately.. I think I’m okay where I’m at now, but if valuations turn in different directions, then it could be a different story. Always have enjoyed watching CAT and wouldn’t mind owning them at some point.

      Thanks again Mantra, talk soon!

      -Lanny

    • ADD,

      Making moves over there? I know Bert and I are in the midst of gathering capital right now, as we just don’t seem to pull off the pedal. How are things going for you? Doing well? Making some action plans?

      thanks for stopping by!

      -Lanny

  2. Dividend Diplomats,

    Having recently purchased MCD and IBM, I have to agree with your picks! John Deere sounds like a good idea as well, and it wasn’t on my watch-list..until now!

    Cheers, and keep up the good work – love your blog.

    Dividend Legion

  3. Like what you 2 are up to. Long term you will be so happy with what you are doing today.
    I am Canadian and am doing the same thing. I also work for 1 of the big 5 banks – BMO.
    With the small amounts you are investing I believe you are fine investing in any of the big 5 Canadian banks.
    Ry, TD, bmo, Bns or cm. We definitely have our housing issues here and personal debt is LARGE which has to affect the banks 1 day. But you can average down when they drop.
    For yield I would look at a Canadian Reit called Choice Properties – CHP. 6% today paid monthly. Majority of their properties are occupied by themselves (Loblaw – L) which is our largest grocery chain. With the current exchange you will win even more. They broke the real estate out about 2 yrs ago and has been a win since. I believe their will be a decline in some point with real estate but this should not be hit as hard – imho.
    Also in Canada look at PPL, Pembina Pipeline and anything to do with Brookfield (box / Bip ), these guys know how to make money. The majority of our utilities and telephone companies are fully valued.

  4. I think you must look into Blackrock (BLK) for financial. It showed very interesting results. Just an idea if you want to buy different shares! 😉 Let me know what you think.

  5. Solid watch list especially CM. Canadian banks have been down lately which make them more attractive than before. I added BNS lately and I am sure Canadian banks will keep paying uninterrupted dividends for a long time.

    BeSmartRich

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