Lanny’s April Dividend Stock Watch List

I believe it is rally time for the dividend portfolio!  The weather is warming up and the appetite is getting anxious to scoop up dividend stocks for the cupboard, that is my portfolio.  The goals are high and the dividend income forward projection is begging to be pushed, just a little bit further.  I say bring on April and let’s see what’s currently on the radar!

Dividend stock watch list

I know I am not the only one struggling to find undervalued, dividend stocks for the portfolio.  The S&P 500 is up over 11% from January through March 22nd and most stocks are following suit.  See the screen shot below:

Therefore, the market is not playing around.  At the same time, the 1-year treasury yield was popping high, due to the federal reserve raising their rates.  However, the latest FOMC announced no interest rate increases for the time being.  Therefore, we are starting to see a tapering of the 1-year rate, see below:

What does this mean?  Well, it’s not a surprise that buying stock is taking on additional risk.  Therefore, you are to be paid for that risk, or the expectation of a premium is there.  One must find a dividend paying stock, in my eyes, that should yield higher than the rate that is risk-free, as well as the growth of that risk-free rate that we have seen.  The yield is tapering below 2.50% and I would use that as my baseline, right now, in an overvalued marked, for purchasing a dividend stock.

I am also looking for stocks that are in my current dividend portfolio, to really fuel the engine, from a dividend reinvestment standpoint and to ease the reviewing of financials that I have to do.  However, my review of financials, due to buying high quality and fundamentally sound companies, for the most part, is not a burden nor takes up too much time.

Without further-ado, let’s take a look at my April Dividend Stock Watch list!

The dividend stocks

ADMlogo2

1.) Archer Daniels MIdland (ADM) – This wonderful dividend aristocrat currently has a price to earnings of 12, based on 2019 earnings projections.  Further, we are looking at a ratio of 11.45 for the year of 2020, under the same metric.  Therefore, it’s hard not to have them on a watch list, especially because they already sit in the cupboard with my other dividend stocks.

In addition, their yield is approximately 3.30%, which is definitely higher than the market and any short-term liquid money market/high yield savings account.  Therefore, there is a premium of owning ADM.  They are up 4% year-to-date, which is not typical for an aristocrat these days, hence the top 10 yielding dividend aristocrat article for 2019 (performances are surging for those companies!).  Everyone still eats and makes food, therefore, ADM should deserve strong consideration for anyone’s portfolio or anyone looking to add to their current position, based on sound fundamentals.

2.) CVS Pharmacy (CVS) – The last time I purchased them, the stock was over $58.00 per share.  They are now trading at $56.04, which this is another decline of 4% since my purchase.  Nothing has really truly changed with the big pharmacy, except that their yield is now swelling over 3.5%.  Dividend growth, again, has stalled, but I remain optimistic.  Once they paid down further on their debt levels, we could see an increase in the near future, say – 4th quarter of 2020.

This then gives the company almost 8 full quarters to really do some damage on the balance sheet, as in – cleanup.  Their forward price to earnings stands at 8.3 for the year and it looks even lower, going into 2020.  Payout ratio is sound and the cash flow is intensive.  Thoughts on averaging down the position?  That is the decision I am mulling over here.

3.) Occidental Petroleum (OXY) – They are back on my list!  I have purchased them on several occasions, but noticed my position wasn’t as heavy as anticipated. Given this is the only company in the energy/oil sector I have purchased in years, my overall sector position still remains well below 10% on my taxable portfolio.  They are currently yielding almost 4.75% and their forward price to earnings ratio stands at 19.90 and 18.50 in 2020.  Not the cheapest stock, but an area where I’d like to add if prices shake down a little further.

Dividend Stock Watch List Conclusion

What should I buy?  That is the question.  I like options 1 and 3 above, with option 1 having better dividend diplomat stock screening ratios, but my overall exposure to the energy/oil sector is lower.  Do I wait for a pullback on OXY and buy slightly more of ADM in the meantime?  There usually is nothing wrong with buying a dividend yield of 3.30%+, with a payout ratio that is sound, in addition to a below market-average price to earnings ratio.  Not to mention, this dividend stock is a beloved dividend aristocrat.  Yes, I am talking about YOU ADM!

What would you do?  Running into the same brick wall as the rest of the dividend investing community?  Share your thoughts, let us know what you are watching and/or buying.  Curious to see if any of yours, are shared in my thoughts and list above!  As always, good luck and happy investing everyone!

-Lanny

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26 thoughts on “Lanny’s April Dividend Stock Watch List

  1. Interesting list Lanny

    Its the big question these days at these values.

    Ill be debating cvs or abbvie.

    But might even add to disney as they are not a bad price and i want to get more before streaming comes out. Yield sucks but a solid blue chip for sure.

    Our canadian dollar sucks so got to debate the exchange rate too. On our side of the border the banks seem to offer the best value but they are a sizeable portion of our portfolio so i should stay away for the time being….

    look forward to seeing what you decide to do.
    cheers

    • Everything is relative. Your CAD rocks. If you want to see banana-republic sucking goatballs currency look no further than the SEK.

    • PCI –

      Thank you for the comment. Luckily, I own both. Disney is great, but that yield is always too low with a high P/E and not even growth hmm, but LOVE the company.

      The exchange rate does stink, but your banks are better, hands down. From a yield and valuation perspective, not to mention consistent as heck to the dividend growth.

      Thank you and looking forward to seeing what you continue to do!

      -Lanny

    • Gremlin –

      Thanks for the comment. The Canadian Banks are always beautiful aren’t they? And interesting – will have to re-look at LEG and check out NOC and GD… hmm… can’t wait to see what you do.

      -Lanny

  2. Lanny,
    Solid names. Unfortunately, I only own CVS of the 3. I certainly think they’re all trading at fair prices currently. Thanks for putting this list together.

      • I know a bit about ADM, but I haven’t really ever delved into the company enough to form an opinion on it. From a valuation standpoint, I certainly think it’s trading at least at a fair price. I’m looking at midstream companies like MMP as of late. The industry’s perception still hasn’t really recovered from the 2014-2016 bear market in energy and the distribution cuts from most MLPs during that time.

  3. Hi Lanny,
    Thanks for the list. It is quite hard to find opportunities at the moment!
    CVS was my most recent buy as well.
    I like ADM most from your list and would love to initiate a position in this company.
    It will be interesting to see what you end up buying 🙂
    BI

    • BI –

      Thank you and CVS is hard not to at least look at. Huge. Aetna. Big player and I can see their cash flow being very positive for a decent amount of time. Purchase article coming soon… stay tuned : )

      -Lanny

  4. Not a fan of cvs or oxy at any price, as I simply don’t have confidence in their business over the long term. ADM is a pretty good company so maybe that’s one to consider.

    Personally, I think there are higher quality stocks out there that are above your yield threshold. Check out txn, avgo, and lmt.

    • Andy –

      Thank you and appreciate your comments for sure. I do like Texas Instruments, for sure. Looking forward to continued research. CVS is a forward-long-term play, if they can stick with the plan to de-leverage a bit. I was also trying to solidify sector/industry positions.

      -Lanny

  5. Hey Lanny, would you ever consider just accumulating cash for a while, until you find something that seems like better value? Or just contribute some smaller amounts? Your strategy seems to be to regularly pump cash into dividend stocks, which I don’t think you can go wrong with in the long run, but you’ve got to be happy with where you’re putting your money 🙂

    Cheers, Frankie

    • Frankie –

      Thank you and stacking cash is what I have been doing : ) Outside of the 401k automatic investments through payroll.

      This market… has to cool down at some point, agh!! Patience is a virtue, right?

      -Lanny

  6. Somehow , i dont like CVS . It has dropped more than 50% from peak value. The fear of dividend cut is always is there for this stock.
    The only hope is the yield is all time high and 5 year dividend growth is excellent.

    • I4I –

      Thanks for the comment. I wouldn’t say the risk of dividend cut is “always” there. Would you have said that two years ago? With an adjusted EPS of $7.08 (press release) and a dividend per year of $2.00 – can you show me where the risk of a dividend cut is? That’s all, not here to argue, but here to understand those statements.

      -Lanny

  7. Interesting list of which I only own ADM. I’ve been expanding (see my post from yesterday) my position in ADM recently. I haven’t considered CVS but they seem to be in everyone’s crosshairs at the moment. What to do, what to do 🙂

  8. Interesting list. Thanks for the legwork.
    When you get the chance, can you also please run a check on Schlumberger (SLB)? With their recent price declines, the dividend yield currently stands at about 5.55%. Thanks….

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