Lanny’s December Dividend Stock Watch List

November has had a solid run-up in share prices.  However, we all know there are diamonds to be found, diamond dividend stocks that is.  Therefore, it is time to pour a hot cup of coffee and begin my dividend stock research.  Time to tune in for Lanny’s Dividend Stock Watch List – December Edition.

Dividend stock watch list

The market is up 2.9% from October 25th through November 22nd (29 days, including the 25th).

What occurred during the month to have the market slightly increase?  Well, the brokerage/wealth management firms went to $0 cost per trade, which caused quite a bit of excitement amongst the market.  In addition, this was an earnings release period for the quarter-ending September period, for a majority of companies.  Their earnings have been relatively strong, from those that I have been reading.

See – Why I Don’t Time or Predict The Market

However, as the saying goes, one can always find diamonds in the rough.  Therefore, with using the Dividend Diplomat Stock Screener, there is always an undervalued dividend stock up for grabs, just need to look hard enough.

Here is a display of what the market did in the last 30 days:

Capital is necessary to make any dividend stock purchase that is on this watch list.  How do I do it?

I save anywhere from 60-85% of my take-home pay and strongly believe Financial Freedom does not happen by hitting a home run on an investment.  Nothing matters more than your savings rate on your journey to Financial Freedom, plain and simple.  Therefore, I work my butt off to make sure expenses remain in-check and that my savings rate are meeting our investment and financial independence goals!  Then, you rinse and repeat.

See – 5 Ways to Save $500… TODAY

Royal Dutch Shell (RDS)

WHOA.  Rewind the tape please!  I have owned Royal Dutch Shell (RDS) for almost 10 years and they are THE SECOND LARGEST oil company in the world, based on revenues.  Further, Shell is down approximately 10% from their 52 week high and they still haven’t recovered quite a bit from the downturn in oil.  Why do I like looking at them right now?

Shell has reported 8 strong quarters in a row and I anticipate the same results for the 4th quarter. They will generate between $350-$360 billion in total revenue for the year and will maintain costs at around $320-$330 billion. Therefore, they’ll have that 8-10% margin built in before taxes.

Shell is currently trading at $58.44 and there is an estimate of earnings per American Depository Share of approximately $5.00.  Therefore, you are looking at a price to earnings ratio of 11.7; which is significantly below the S&P 500 or the stock market on average.

In addition, based on the $5.00 average, their payout ratio is looking better.  The annual dividend is $3.76 per year or $0.94 per quarter.  The dividend payout ratio is at 75%.  For a large oil company this actually is not the worst I have seen.  In fact, they are better than Exxon Mobil (XOM), whom currently shows OVER 100% for their payout ratio.

Shell has had their dividend on pause over the past 5.50 years, dating back to 2014.  The dividend growth was just not there and instead of cutting their dividend during the oil & gas downturn, they chose to maintain it and work on their expenses and balance sheet. They have shown over the past 24 months that there is a better picture to increase the dividend going forward, starting in potentially 2021.  In the meantime, as a current shareholder, I have been enjoying the higher than normal dividend yield (fluctuating between 5.50% to 9.50%.

Given that Shell yields 6.43% makes a compelling argument to acquire more shares, as they continue to improve their financial footprint and gear up for 2021.

Delta Airlines, Inc. (dal)

Delta (DAL) is back on my Dividend Stock watch list, as they were just on my previous one for this November.  The price has increased approximately $2 since last month, but they still offer a compelling argument for a dividend stock investor.

First, they are trading at $56.11, far from their 52 week high of $63.44.  That’s a 11.55% drop from their high, which allows DAL to currently yield 2.87%.  Based on this, Delta also yields significantly higher than their 5-year dividend yield average of 1.94%.

In addition, the analyst expected earnings are $6.99 (average from 17 analysts).  The annual dividend is $1.61.  The dividend payout ratio is a crazy-low 23%.  Below the floor of 40%, but that’s due to their double digit+ dividend growth.  DAL’s most recent increase was 15% to their dividend and the year before that… the same, 15%.  Delta has 5+ years of consecutive increases.

Therefore, since their payout ratio is lower, Delta has ample room to grow their dividend.  The 5 year average dividend growth rate is 40%+ but the 3 year growth rate is slightly lower at 39%.  This is due to DAL increasing their dividend 50% a few times earlier in that time frame.

Lastly, DAL’s price to earnings ratio is a significantly low 8.03.  This is far below the S&P 500, on average.  They’ve historically been low and that’s partly due to the volatility within the airline industry – one bad move, plane, news/press and the impact to Delta’s financial statements can be tremendous.  This is not even considering the price of energy to perform the necessary transportation, as well as increasing wages/costs.

Armanino foods of distinction (amnf)

You read that name right, folks!  It’s been a while since I’ve talked about them and even longer since I’ve purchased the company, dating back to June of 2018 or almost a year and a half ago.

Taken from that purchase article, here is a very brief background: Officially a corporation in 1986, their primary products are Pesto, Pasta and Meatballs.  What’s not to love?

Armanino’s (AMNF) stock price has risen approximately 25% from the last 52 weeks but they are now trading 9.76% from their 52-week high of $3.79.  This could partly be due to their 3rd quarter sales and income figures falling slightly behind last year’s 3rd quarter, primarily due to business in Asia.  AMNF has stated this has been due to timing and the limited ability to determine spending patters over on that side of the world.  We’ll have to see how the 4th quarter does.

Earnings per share through 3 quarters came in at $0.1579 for an annualized figure of $0.21.  Based on a share price of $3.42, this equates to a price to earnings of 16.28, which is below the stock market on average. I wish I would have bought more back in 2018, to say the least.

Why do I like them right now? Their dividend yield currently is at 2.92%, based on their $0.10 per year or $0.025 per quarter dividend AND they recently grew their dividend 11% in 2019.  That is a GREAT combination of yield and dividend growth, to say the least. In a year where dividend growth has slumped, AMNF has come through.

In addition, their growth history is looking down at 6 years in 2020, and their 5 year dividend growth rate is steady at double digits recently.  Further, their payout ratio is at 47.6%, which is in the middle of the 40%-60% sweet spot.  I would anticipate a dividend increase from $0.025 to $0.0275 in 2020 or 10%, keeping up with the quarter of a cent raise.

Grab a plate of Armanino Foods and enjoy the taste, I say!

Dividend Stock Watch List Conclusion

The best part about all 3 companies above is that they all are currently part of my dividend income portfolio.  Prior to making any purchase, I definitely will make sure to run them through the Dividend Diplomat Stock Screener once more.

Out of all 3 dividend stocks above, Armanino (AMNF) maybe #1 on the list, as they are the smallest position in my portfolio.  Then I may add a few shares of Shell (RDS), followed by Delta (DAL).  Always trying to stay consistent in my stock purchases, regardless of the market noise that’s occurring!

As you have noticed, I have trickled many articles on this page.  The goal is to educate new dividend investors out there, or to sharpen the terminology for current dividend investors.  As always, stick to your investment strategy and dividend stocks will be there.  What do you think of these stocks above?  Thank you, good luck and happy investing everyone!

-Lanny

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10 thoughts on “Lanny’s December Dividend Stock Watch List

  1. Thanks for the update Lanny. I’m not all that sure what I’ll be targeting for my “Christmas” presents, but as of now there isn’t much that I think is worthy of a larger buy since capital is a bit tight. I’ll probably do some more DCA each week through the end of the year with possible additions being MMM, CSCO, DLR, V, MSFT, BDX. ROST doesn’t look too bad either, but like most things I’ve been eyeing it’s the high growth/low yield co-hort that’s trading at better relative valuations.

    • JC –

      Of course, wanted to catch this before everyone is pounding Turkey and napping, haha.

      It is HARDER than ever to find undervalued companies, for sure.

      I love MSFT – and have never owned them. BDX I believe just increased their dividend today – did you see that yet?

      -Lanny

  2. Nice choices. I’ve been a big fan of AMNF for a few years after another blogger did a glowing write up. And they have not disappointed. One thing I like about them is that at 3.48 a share, so if I have a few spare dollars, I’ll buy a handful of shares. That has resulted in owning nearly 1,600 shares now. In fact, I was about to get some more today or tomorrow since I have $54 of cash in my account and have a dry spell with incoming dividends for a weeks or so.
    I just posted my December list. I’m eyeing RCL, AMP, and PAG.
    take care,
    John

    • John –

      Thanks for the comment – they have been far from a disappointment, that’s for sure. You may have read Jason’s article at Mr. Free @ 33 for his write-up on them, potentially. Love their low price, easy to understand business model and Italian Food (HAHAHA).

      I’ll hop to yours and read your write up on the 3 companies, always looking to see what others are seeing out there. Stay hungry CW!

      -Lanny

  3. Thanks for the ideas of what to watch in the last few weeks of this year. Shell is a company that I feel I don’t own enough of and the the valuation can’t get much more appealing than it is now, so that one is definitely on my list. I’ve also read quite a bit of praise on DAL in the DGI community in recent months and the valuation seems pretty reasonable. Like CW, I’ve also read a lot of positive write ups on AMNF.

    • Kody –

      Of course. Tried to mix it up, if I could, with what is out there.

      Added a couple of shares of Shell to my position, nothing significant by any means, but just by way of how much cash was sitting in my investment account.

      You can’t go wrong with these 3 right now. Bring on the divvies!

      -Lanny

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