Dividend Diplomats July Watch List

The month of July has been a very unusually favorable month – especially if you have capital!  We have seen the market go up and down, similar to last month, except this week, recently, the market has been on a bigger slide, opening up, of course, great dividend stock buying opportunities.  Given the new opportunities unfolding in front of our eyes, it of course leaves us to really pin point down to which stocks are we really looking to purchase into.  Lets see what is on our July watch list!

Watch List

Lanny’s Stock Watch List

I love when Mr. Market is taking a stroll and making that turn.  Just love it when the roller coaster decides to descend and you can feel it in your stomach.  Given that I have only made one nice purchase of Canadian Imperial recently/earlier this month, as they’ve slide down quite a bit since the last time I bought them, I’ve been keeping my eyes tightly peeled at what are the most ripe dividend stocks for my portfolio.  I wanted to keep my focus on what is currently in my portfolio, to beef up and add onto the positions I currently own.  Given that, and using our summarized dividend stock screener, let’s take a look at what I’m looking at:

watch list

NSC – I am sure you can imagine that I didn’t want to stop at my only purchase being just under $1,500; What I am driving at is that I definitely want more.  Right now, I’d like to have my position at roughly $3,000.  The stock trading, as of this writing, at $85.37, only represents a decrease of 0.73% since my purchase price.  I usually, as we all have become aware given my recent purchase in CM, that I like to buy on 5%+ dips from my last cost/purchase price.  For that to happen, $4.30 would need to be ratcheted down from $86 for me to look at them.  I honestly would have bought more when I did had I had more capital.  Given that we had our recent bonus discussions with our partner and I am receiving a pay this Friday, I should have plenty of capital by the end of the month to make a move.  Simply put – great yield, fairly priced, slightly undervalued and great dividend growth.  Additionally, they are set to, from my expectation, announce a dividend increase this Friday (24th) just before they discuss earnings next Monday.  Therefore, the current 2.76% yielder could be coming closer to 2.9% shortly (I am going on a limb and saying they increase the dividend so annually it is $2.50/share).  The yield is lower than my overall yield but the dividend growth rate (as they have an increase twice per year) would be much higher than my overall portfolio.  Sorry Bert… I am sticking with what’s in my portfolio, but congrats on Emerson (EMR) purchase this week!  You’re definitely getting closer to that $2,750 goal and are blowing your last update out of the water, keep it up.  Just more fuel to keep me going on mine.

DOW – Ah… Dow Chemical, I actually ended up buying them twice, simply to increase my position.  Similar to above, I would like to reach $3,000 with this position and my current cost basis (not Market value) is at $2,034, so essentially $966 more.  I could do a combination down the line where I add $966 here and then add $1,500 to NSC, we shall see.  But back to DOW.  They have a yield that’s closer to my portfolio yield average but, again, the dividend growth rate is astounding.  I don’t expect them to keep up with the 54% payout ratio, but I expect upper single digit dividend growth going forward, especially with the share buyback program that they have.  Further, though not above, their 5 year yield average is 3.00%, therefore, they are well above that.   This would be a nice position for me going forward.

Okay, what do ya’ll think here?  Bert – you own DOW, think they are still legit?  One can only assume that ARCP is on your list, oh wait, uhm, probably not – what do you have?  What are you seeing?  Show it off son!

Bert’s Watch List

Thanks Lanny, those are two great companies. Prior to Emerson Electric, NSC was my most recent purchase and I may not be able to hold off again if the price continues to fall.  I am pumped about the Emerson position and it filled a great hole in my portfolio.  Anytime I can add a Dividend Aristocrat yielding above 3.5% with a high single digit average dividend growth rate I have to take opportunity.   Luckily for me, my initial position was ~$2,000 and while I would like to have a larger position in the company, there are several other positions in my portfolio that are smaller and could use some beefing up.  I like how you are focusing on building larger positions in your portfolio to maximize the dividend and the corresponding DRIP that comes along with it.  That’s when you really start to see the huge impact of dividend re-investing.   I would love to have all my positions close to $3,000 and that will be a major focus of mine going forward.  The foundation is there, now it is time to start building upon it.   The two stocks on my watch list are both stocks that I currently own; however, before I dive into my list, there are a couple of responses I have for Lanny above.

First,  I love Dow Chemical and was pumped when I initially added the company to my portfolio last year.  I have been watching the stock a lot recently and noticed there have been many days where the stock price fluctuates by multiple percentage points.  It definitely has been volatile recently and I am informally adding it to my watch list.  However, the reason it is not on my watch list is because I own nearly $1,800 in the company, which is greater than the positions I currently have in both of my watch list stocks combined!  So I am going to focus on building my position in the other two stocks before investing again in DOW.  Great company with an impressive dividend yield and dividend growth rate; however, I want to continue building smaller positions first before addressing DOW.  Second,  I haven’t talked about ARCP in months!  I don’t know where you are getting that crazy idea from.   I get it, I realized a huge loss in January, but I immediately wrote it off and forgot about it.  That was several highway exits ago.  You seem to be bringing it up a lot, please tell me you aren’t thinking of investing in that REIT.  Man, we may need to talk about that after we finish writing this article.  Now that I have those two things behind me, let’s see which two stocks are on my watch list for July.

watch list

IBM– Big blue is back on my watch list for the first time since February after having one heck of a week in the market.   The company had been gathering momentum prior to their recent earnings week, seeing their share price increase from the low 150s to the 170s; however, the company’s disappointing results cause the price to fall over 5% in one week.  Ironically, this tumble caused the share price to retreat to the same levels the stock was at when I initially purchased IBM at back in 2014.  Talk about a crazy turn of events.   Lanny mentioned the 5% rule above and even though my position is essentially even at the moment, here are some of the reasons why I am considering adding to my stake in IBM: current yield is over 3%, the five-year average dividend growth rate is double digits (which is insane considering the >3% yield), the company continues to buyback shares in large volumes,  and the payout ratio is below 60%.  

I know IBM is in the midst of a massive turn around and the company is altering their business plan, but these conversions take time and the road is going to be bumpy along the way.  Some quarters will be great and others not so much; however, what I like about IBM is that the are sticking to their long-term plan of focusing on investing high growth areas while rewarding shareholders along the way.  Based on their last earnings release, the company is showing they are heading in the right direction and their last dividend increase proves they have not forgotten about the shareholders.   Since I am a buy and hold investor, I like IBM’s long-term prospects and am willing to deal with the short-term madness along the way.   Currently my position in IBM s pathetic and I only own 4.8 shares of the company.  Are you kidding me??  I would love to triple my position in the company with my next several purchases.  Expect IBM to remain on my watch list for a long time.

Canadian Imperial (CM)–  Canadian Imperial has been talked about a lot on this website recently as Lanny decided to re-up his position again in the Canadian Bank.   How can you blame him, especially as the price continues to retreat.    I won’t go into too much table about the metrics because they are covered well between the table above and Lanny’s last purchase article.  I’ll keep this brief, but what interests me about this stock is that the yield is above 5%, the company has announced quite a few dividend increases over the last year,  my current position only has a market value of $660, and I currently have a 16.9% unrealized loss (which is WAY below our threshold of 5%).  It seems like a no-brainer to me to add this company to my watch list so I can take advantage of the recent downturn and build my position in the company while lowering the cost basis.   All of this while collecting a 5% annual dividend along the way!

Summary

There is something unique about this watch list compared to all the other watch lists we have produced over the years.  For the first time, the two of us own all four companies listed in the article.   Over the last few weeks we have talked about how we wanted to build our portfolio positions and this fact has been referenced several times in the article.   We know these companies are great companies, as we have invested in them once already.  So why not use a pullback in the market as an opportunity to build on the foundation that we set earlier in our investing careers?

What do you think of the four companies listed above?  Are you watching them as well?  What are your thoughts on IBM post-Q2 earnings?  Are you looking to invest or are you staying away?   Do you own NSC as well, or are you waiting to see if the stock will fall below $80/share before investing in the railroad giant?   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

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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11 thoughts on “Dividend Diplomats July Watch List

  1. I am curbing my enthusiasm. I have been watching many stocks fall over the last month. I haven’t bought anything and this is working if you want to buy in the industrial/energy/materials space. CAT just passed the 4% yield mark, a rare event.

    NSC is noteworthy because it really is nothing like the old railroads. NSC has 30% operating margins, more like a technology company. UNP is higher quality, having 37% operating margins. For comparison, Apple/MSFT each have 30% margins, IBM has 21% margin. NSC isn’t that sexy, but I think its a great investment. The question: how cheaply can we buy it?

    • SFI,

      Thanks for coming by – glad you’re extremely excited with the downturn – I also own CAT, and wouldn’t mind scooping them up again soon, right?

      Also – NSC is interesting, especially from a pure metric standpoint. One sad point though – they announced the same dividend yesterday, when I – and a few others, were hoping for an increase.

      I see them trugging downwards a little bit – in the $81-$82 range – I’ll be buying more.

      -Lanny

  2. DDs,
    Excellent choices. The Canadian Banks in general along with most industrials (esp. railroads) are in excellent position to be bought. Its hard to not like any of them. My watchlist right now has similar names including those industries and the ‘wealth advisors’ such as TROW and BEN along with a few others such as NOC and MMM.
    In general people seem to be losing their cool in the market right now, and that means buying opportunities for us little guys!
    -Gremlin
    – Long CM and UNP as well.

    • Gremlin,

      I’m very surprised with the beating that Canadian Banks have taken over the last few months. I am waiting for the decrease to bottom out, but every day seems to bring a new percent or two decrease. Which is great for someone like me who is looking to build their position in a company but doesn’t have the full amount of cash to initiate a full position. I am going to have to settle with multiple $400-$500 purchases and hopefully CM’s price continues to fall so my cost basis will continue to fall!

      You listed some awesome names. I love MMM and would love to initiate a position in the stock one day. Unfortunately I do not have the cash to do so at the moment…bummer! Which stock is your leading candidate to be purchased?

      Hopefully the market will bring us as many opportunities next week as it did this week! Thanks for stopping by. Power to the little guys!

      Bert

    • Thanks Mr. Retire by 35! Sounds like we are on the same wavelength here. EMR is a great company and I couldn’t be happier with the position I initiated this week. The price has fallen ever further since my purchase, so it may be a great time for you to pull the trigger!

      Best of luck with your purchases!

      Bert

    • Thanks Investing Engineer. What isn’t there to love about CM. One of the large Canadian banks, great dividend growth, and best of all…a yield over 5%! It is getting pretty difficult to continue passing on adding to my position.

      Have a great weekend!

      Bert

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