Lanny’s August Dividend Stock Watch List

It’s that time of the month, where I have my calculator, the pen & pencil & I start analyzing what I love most, dividend stocks, and to see which companies have a chance to be on my watch list.  I like to come out with the watch list towards the end of the month, as I line up my capital troops to see where they may be deployed.  I did not make any investment stock purchases in July, yet, and the capital lineup is getting bigger.

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The Dividend Stock Watch List

What’s the goal here?  To Just Go For It – dividend investing style, of course.  This month’s watch list shows quite a bit of promise and has changed slightly from last month, but also nice to have three different industries within here.  All three companies are in my portfolio, which I am sure you can remember, I love adding to current positions if I can.  Let’s take a look at the stocks (which are heavily vetted by our Dividend Diplomat Stock Screener) that are on my watch list!

AT&T (T): Can’t get enough of the big telecom here?  I know T was both on my July AND June dividend stock watch list, but guess what – they were at $38.79 at the date I wrote that article in June, and were at $37.95 in July.  Guess what?  They are now trading at $36.51 as of July 21st or another 3.79% drop!  Did anything really change?  No, no.  But – their yield has sweetened a little bit more to 5.37%, which is “lovely”.  AT&T, as we know, is a massive telecom player here in the states, is a dividend aristocrat by increasing dividends over 25+ years strong and also has the ability to buy the latest technology to stay ahead.  With the price to earnings (P/E) now at 12.55, they are in a very “sweet” spot.  There has been a LOT of rumbling going on with the big merger/acquisition of Time Warner (TWC), with news articles talking about the bumps and bruises T has faced to close this deal and I believe President Trump had initially stated he wouldn’t let this go through, but now may have a few other thoughts.  Time will tell.  However, I’m more curious on what they’ll do about that dividend this winter : )  Further, as you’ll see in #3 below, the ex-dividend date was just a little bit ago, so there is quite a bit of time between now and the next dividend date.

Grainger (GWW): Now, I purchased Grainger, not once, but twice.  They still have an under 16 price to earnings, based on earning analyst expectations of $10.38 for the year and their payout ratio is below 50%, a nice sweet spot for dividend investors.  They’ve been shaken up lately, with transitioning to a more mobile/online friendly customer platform.  However – I was JUST watching the news last night and there was a long discussion about hwo Amazon (AMZN) will find it difficult to compete with expertise on their platform, which is what Grainger (GWW) brings to the table for warehouse/operations, as well as higher quality products & smarter decisions for consumers (since consumers still like to “feel” the tools and supplies they are buying).  Therefore, I believe if GWW makes a solid transition to mobile/online with their unique specialization and higher quality, they should still bode well into the future.  Heck – revenues were even up in their latest quarterly earnings release.  With a yield now over 3%, at 3.10%; keeping this one again on my radar.

Cisco (CSCO): I purchased Cisco back in mid-June at $31.525 per share and they’ve only gone up slightly to $31.84 since then.  Their dividend yield is still at a ripe 3.64% and with an earnings expectation of $2.38, their P/E ratio is also favorable, at 13.38.  Their payout ratio is less than 50%, and their latest dividend increase was over 11%.  A great combination for success for a dividend investor.  I only own $1,250 or so worth, and could see myself doubling this position, for sure.  Are they at a solid price point?  Yes.  However, their ex-dividend date was only about 3 weeks ago, therefore, we have quite some time before they go ex-again.  Not saying that’s a reason to hold off, by any means, but something to consider, now that there is more time in between now and capturing the next dividend.

The watch list summary & Conclusion

Why am I watching these powerful dividend beasts above?  Well, I recently wrote about the power of $50,000 in dividend income and this is definitely a stream, with today’s tax situation, that I would love to have more of, obviously.  Further, as I described in my earlier post, I need to close that gap on my dividend income goal this year and these stocks on the watch list could help me get there.  On a different note, the three stocks on the watch list I’ve listed out above, all have yields that are at or above my overall portfolio yield, something I’ve been lacking in my recent purchases of Kroger (KR) and CVS Pharmacy (CVS), whom had yields below my average.

Are any of these names on your watch list?  Are you nervous about what AT&T (T) is doing with their merger/acquisition move of Time Warner?  Do you think this deal will go through and/or do you think this will impact their ability to pay their current dividend going forward?  Think Grainger (GWW) is a sinking ship at all with Amazon’s (AMZN) space online?  Would love to hear your thoughts on these stocks above and also, what YOU are looking at!  Thanks everyone for checking out my watch list for the month, check back soon, good luck and happy investing!

-Lanny

 

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42 thoughts on “Lanny’s August Dividend Stock Watch List

  1. Nice list. Previously i didnt hear of grainger until some bloggers startes talking about it. Now they have some ads on the radio and created a massive warehouse just down the road from 2 massive amazon warehouses…. =) i dunno much about a t and t but seems like a solid telecom and great dividend. Cisco still seeems like a great deal.

  2. Lanny,
    I recommended all 3 of those stocks (T, GWW, and CSCO) to a friend recently along with ADM, GPC, SON, and some others – naturally he bought XOM, which is not the worst move. Still those are some quality stocks there, most of which I am keeping a keen eye on as well.
    – Gremlin

    • Gremlin –

      Strong recommendations overall there. What’s wild is the burst AT&T(T) went on, aka holy crap. Honestly, I was going to purchase them next week, now, I will not haha. However, CISCO is still up for debate for me, may be buying more shares here shortly. Keeping an eye on ADM/GPC as well!

      -Lanny

  3. Always a fan of T and CSCO. Was looking at starting a position with KR after the last dip but think there is still better value out there. GIS has been thrown out a lot lately trading at its 52 week low. With an over 3% yield, it looks to be a good buy for the long term. Seems like a lot of value in the market right now. Would love to buy more but free capital is limited right now so kind of sitting on a buying freeze temporarily.

    • Daze –

      Wish KR would have stayed low after the AMZN announcement, somehow I’m up double digit percentage on them, it’s insane. GIS has been wild. I do like CSCO – price unchanged for QUITE some time… curious what that price does tomorrow.

      Buying freeze is okay – very volatile out there. Stay hungry Daze.

      -Lanny

  4. Well, T is already in my portfolio and I add to that position every month. CSCO is currently on my short list of stocks to add to my portfolio. I needed to find a 5th stock, and, even before I read your post, was contemplating adding GWW to the mix. I am somewhat concerned about the Amazon threat so to speak on GWW, but I do feel that the company has strong fundamentals and is currently undervalued. I’m still deciding, but clearly, I think these three stocks are worth their place on your watch list.

    • DP –

      No way, you add every month, huh? That’s a fun idea, you have to love that yield.

      I hear you on GWW, let’s see how big their shoes are in their stance. CSCO – very enticing to me at the moment as I respond back to comments here.

      Oh and my favorite two words – LETS GO!

      -Lanny

  5. CSCO would be my choice out of those three. Very healthy balance sheet and cash flow generation. The yield is elevated compared to historical levels to reflect some reasonable uncertainty, but the company has the war chest ($36B NET cash position) to comfortably weather almost any storm that may lie ahead, and still raise its dividend at double digit rates.

    I know I am in the minority in the DGI blogosphere, but I really dislike T. It has the balance sheet of a utility, it’s priced like a utility, but it doesn’t enjoy the regulatory blessed monopoly of a utility…it faces a lot of competition in all of its business lines.

    I realize it yields 5%+ which in this environment is guaranteed to get a lot of attention. But investors will be lucky if that distribution keeps up with much less outpaces inflation. The 1yr, 3yr and 5yr DGRs are 2.10%, 2.20% and 2.20% respectively, and there’s not much reason to expect that to improve.

    But considering the bloated balance sheet and market competition, there is a reasonable chance it gets worse. That is an asymmetric risk that’s very unappealing to me.

    If they can get the Time Warner deal to go through, that will get them closer to the kind of vertically integrated monopoly you’d be looking for (distribution AND content). The deal is going to be costly though. It’s going to take a lot of cash they don’t have (so more debt) and it will be dilutive to current shareholders. Hope it’s worth it!

    Just my two cents. Like I said, I know I’m in the minority on this one.

    At the end of the day you’d probably do pretty well to invest in any or all of these.

    • I suppose many investors just want to be seated on the right table. No doubt people use way more data before, and telecom companies aswell as digital REITs will benefit, but man, the competision is hard. Playing one card here is dangerous!

    • catfish –

      Appreciate the post and am pro CSCO as well right now.

      On the AT&T front – the combo, at the time of the price when the article was written, would have had a 5.40% yield + 2.00 %growth or a 7.40% dividend power rating, not the worst, not the best, but solid enough. Agree, though, on the fierce competition out there, but AT&T is the big giant out there.

      I think CISCO has more value here, at the moment, and have the resources to scale operations in the ever changing technology environment. Let’s just say I’m looking forward to owning more shares.

      -Lanny

  6. Always nice to see what you are considering going forward. GWW had a nice dip a few days ago. Seems like with any earnings miss or weak guidance daily deals can be found. From the names you mentioned it’s GWW for me. I still have limited interest in tech though I like QCOM potentially. Thanks for sharing.

    • DivHut –

      Oh yah? Liking GWW, eh? They are down about $13 from my last purchase. Do you feel like they can drive up margins?

      I’m feeling Cisco right now, but GWW is up there, obviously, on my list. Appreciate the post DH.

      -Lanny

  7. Good list. I am watching T very closely and am considering adding to my position. GWW and CSCO are on my stock radar. I am still in “reload” mode after a pulled the trigger on GIS earlier this month. Looking forward to adding more great companies to my portfolio.

    • Dynasty –

      Digging the name. How big is your position? Love the yield, but we just missed out on an almost $4 lower price. Given today’s close price – CSCO is big on my list. Pumped! Let’s stay consistent, hungry and keep going hard at this. The only way.

      -Lanny

  8. Nice. I´m keen on buying T too, aswell as adding to CSCO. Going to pass on Grainger just beacause Tanger Factory Outlet gives me the same kind of exposure. Margin of safety above 40%! However, I already own 3 telecom companies from before, so might pass this one now. Better deals in the market.
    My watchlist is:
    – Veidekke, http://veidekke.com/en/
    – CSCO
    – HRL
    – BRK.B
    – GIS
    – CMP (compass minerals inc)
    (Added Tangery factory outlet yesterday)

    • Stockles –

      Agh, the dang T price really has popped today and yesterday, makes me so frustrated!!! 3 Telecom companies, eh?

      I do like HRL & GIS, as well, HRL’s yield is going to start climbing a little bit more. Hope to grab some at some point. I like the list though, no doubt.

      -Lanny

  9. Nice list, Lanny. Of the 3 you mentioned I like CSCO and GWW the most (I own some GWW). CSCO might be a steadier play at this point considering the uncertainty surrounding GWW these days… however, that uncertainly could mean more upside potential should things stabilize.

    • ED –

      Thank you very much for the comment. Glad you like CSCO, I’m starting to show my bias here with my comment responses, as T exploded and I still want to read more about GWW’s transition to online.

      And yes, uncertainty typically means potential opportunities. Love this stuff!

      -Lanny

    • P2035 –

      Killing me with your purchases! CSCO is on mine as well, lets get after it, the only way. I was like PFE, actually, as they were creeping into the $32s, but today, the course changed.

      -Lanny

      • Other Duke here. GE was the first stock I ever bought, and I finally added another chunk last week, bringing the name into my top 10 holdings. I look at GE as a battleship, takes a loooong time to turn around. I think the 5-10 year timeframe looks good for the industrial giant, especially when oil eventually rebounds. Healthcare will continue to be a stalwart as the baby boomers age in the meantime, and an increasingly global world underpins the aviation bull case. According to my FCF analysis, the dividend is very safe. There’s no longer risk of a 2008 financial crisis slashing the divvy post-Synchrony, and new management has doubled down its commitment to growing and maintaining shareholder distributions. I see this one as requiring a lot of patience in the short and intermediate terms, but long term the current price points are attractive.

        • Totally agree with Jack – and just wanted to add that one huge task they are investing in for the long term is the new IoT market. If it really becomes a billionaire market, and they take charge of it – we can all enjoy the fruits of that labor :D.

  10. Good list…here are some others to consider…all of these yield under 2%, but they are superior businesses that you could buy and own forever, and should have great dividend growth moving forward.

    General Dynamics, Sherwin Williams, Starbucks, Stanley Black & Decker, McCormick Company, Costco.

    • Andy –

      Thanks for the post – GD, Starbucks, McCormick have had some great pullbacks, especially SBUX as of late. Their growth rates are phenomenal and something for sure to consider. If you have low yield – needs to be paired with high div growth, so you are spot on and I dig it!

      -Lanny

      • Finally picked up MKC last week myself, after coveting the name for years of patience. I’m in the minority that likes the recent deal, with French’s and Frank’s adding two #1 brands in their segments to an already legendarily strong business.

  11. I just bought 3M, Unilever, and Home Depot this week, which were all new positions and used up all my cash. That turned out to be a bit of bad timing as Altria is now looking like a great buy after Friday’s pullback, but I don’t have any cash.

    • Al –

      Nice and dangit, they had such a surge towards the end of the week. XOM does look enticing, as well, since they’ve had a couple of dollars pull back as of late. Thanks for the comment.

      -Lanny

  12. T is my second largest position in my div portfolio and by following my own overweight rules, I can’t really add any more to it at this time. Also, not worried about the merger, it will go through and T would come out as a media giant. Also own CSCO and love the dividend increase, though the stock price has been stuck in low 30s for sometime.

    I have several stocks on my watch list, however I’m not buying anything at the moment and instead patiently waiting for a correction while raising more cash. I think, conditions for a perfect storm is brewing and it will come sooner than later.

    • Mr. ATM –

      Thanks for the comment and definitely need to stick to your rules/plan.

      I hope you are right with the perfect storm. Have any debt that you are using our cash on? Any other investments outside of stocks that you are looking at??

      -Lanny

  13. Big believer in $T and $CSCO. Both control a lot of parts of things that we use every day and will continue to use. $GWW, I’m not as confident, they are very late to the game of online transition and might be a little too late.

    • D4F –

      Thanks for the post and definitely have decent positions in T and may have just purchased more of CSCO today!!! I did lay off on GWW, to see if their revenue continues to expand, but to see what they do on the margin side of things. Appreciate the input over there!

      -Lanny

  14. Hi there Lanny,

    I also have T and CSCO on my watchlist for august. Probably will pull the trigger on CSCO. Too bad T is going up again 🙂 Would have loved to buy some more at $36ish.

    Also got Union Pacific (UNP) on my radar but want to do more research on the company before I’m even going to consider initiating a position.

    • Stash –

      I understand your pain point on T, their recent surge crushed me haha, most people would love a stock increase, not us dividend investors.

      Interesting. Haven’t heard from UNP in a while, I will have to give them a look Any reason why they are on your radar right now??

      -Lanny

      • Hi Lanny,

        Whenever David Fish updates his list of dividend champions, contenders and challengers, I like to put some filters on it to see what companies show up. The filters I used are the following:

        – Years of dividend increases: => 10
        – Yield: >2% and <5%
        – Payout ratio: <70%
        – P/E 30b
        – Chowder rule => 12
        – 10-year DGR: => 7%

        This will return 7 companies: NEE, TRV, MO, IBM, TGT, UNP, CVS

        I’m not really interested in utilities, tobacco, insurance or retail at the moment, so that leaves IBM and UNP. I already own some IBM and am not sure if I want to add more to it, so that makes UNP the sole survivor of my filter. And I really like trains :).

        Kind regards,

        SD

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