Lanny’s December Dividend Stock Watch List

Well, I just finished plowing my driveway, and I definitely had to, in order to even be able to pull into my driveway.  We didn’t have really any snow until last night, let’s just say winter has come by with a roaring hello!  As the coffee is brewing and I am setting up my organized area to focus on writing, the stock watch list has come to mind.  I have been monitoring high quality dividend stocks since the election and I am currently making my list and checking it twice, trying to find out which stocks on my watch list are naughty or nice.  Come on in and check them out!

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The watch list stocks

Even though I’m recently coming off of a topic about maximizing my tax-advantaged accounts, which are primarily made up of mutual funds, I always will have a high priority to individual dividend stocks and will always have my watch list!  Bert has found out that your goals are there and you can always leap over them like he has been doing, and to have the right watch list helps focus your attention on the assets to put on your balance sheet.  Comparing my current watch list to November’s, it has had a complete turnover, which is hilarious!  But enough of this, let’s see who is on my radar!

1.) Johnson & Johnson (JNJ) – Even though I own almost 42 shares of this beast of a dividend aristocrat, their share price has moved downward lately.  Over the last month they are down almost 7% in share price, which of course, bumps their yield up.  On Friday’s, December 9th, close-price, JNJ was $112.26.  The average analyst earnings expectation for next year per yahoo.com finance is $7.14 per share.  Based on this, their price to earnings (p/e) ratio is only 15.72; far below the S&P 500 and below where they have traditionally been over the better part of a year or two.  Their dividend is $3.20/annually, which computes to a 2.85% yield and a 45% payout ratio based on forward earnings expectations.  They are closely approximating their 5 year dividend yield on average and JNJ has been one of the more reliable aristocrats as of late, given their 6.67% increase this year, which is right on par with their average dividend growth rate.  Most readers know that I call JNJ, good “old reliable” when it comes to increasing their dividend and at the growth rate that they will typically announce the increase.  Ah, always so easy to find out why JNJ is a top 5 foundation stock for those that want a dividend portfolio, or even any portfolio, for that matter.  These guys are strong on my watch list as they fit the metrics on the Dividend Diplomat Stock Screener.

2.) Diageo (DEO) – As of late, I’ve been watching my favorite “social beverage” company.  I don’t own too much of them, but I did pay almost $115 per share when I did make the first move on DEO.  They now trade at $103.88 or a 9.5% drop from where I first purchased them, which always entices me.  They are getting worked downward due to currency effects, which is common among most international companies given the increased/constant increase strength of the U.S. dollar.  What I like about them is their brands, such as Smirnoff, Captain Morgan, Baileys (hey, I’m Italian, don’t hate! Even though it is Irish…), Crown Royal, Guinness, Kettle One, etc..  Further, their performance is strong and brand loyalty is there.  Hard to say right where their yield is, but they are roughly at 3.25% and pay only twice a year, as most UK companies do.  P/E is under 20 and payout is around the 60-65% mark, which is a tad high.  I would like to see them around the $97-$99.99 mark (Yes, the illustrious – “just below $100 mark”!).  I’ll keep my eye on them and my eyes on what drinks my friends, family and people that are out are drinking!

3.) Pfizer (PFE) – This big pharmaceutical has been a rollercoaster ride themselves!  Analysts are expecting $2.63 earnings per share next year, which at the close price of $31.70 equates out to ~12 on the P/E scale.  At $2.63 EPS, their payout ratio is also 45%, similar to JNJ above, given their dividend is $1.2 per year.  What’s interesting is how consistent they’ve been with their dividend increases, which I expect one at the end of this month.  They’ve been on a track record of 2 cent increases on their quarterly dividend, which has computed to be in that 7-9% increase range.  A 2 cent increase to their quarterly dividend would be 6.67%, which is what I am expecting them to announce this upcoming week, so stay tuned for that.  They also have strong brand products and have quite a few leaders in their respected categories.  They are yielding about 40 basis points higher than their 5 year historical (~3.80% vs ~3.40%) and are becoming attractive again; even though I bought them in the $14’s as my real first dividend stock purchase light years ago!  With that said, JNJ and PFE are the two that are hard on my list, with Diageo, though listed at #2 above, are sitting behind these two big companies.

The watch list summary & Conclusion

What are you seeing in the market?  I know Unilever (UL) has been purchased each way to Saturday and people are definitely gobbling them up.  Any aristocrats on sale in your eyes?  Having a strong December to finish out your goals?  Do you like my 3 above and/or are there things I should consider when evaluating these 3 companies?  Love to hear, of course.  Please share your comments below and I’m excited to see what everyone thinks!  Have a great weekend and stay hungry everyone!

-Lanny

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

  1. Nice list. Good to see JNJ on there as well. It was one of the first companies we bought some shares of. Haven’t been watching closely lately, but sure sounds interesting to check up on them again. So, thnx!

    Both health care as consumer staples are providing some good opportunities in the market as of late. Healthcare is a sector we already own a lot of assets in, so we would like to add some consumer staples companies to our portfolio.

    We bought UN not too long ago (as Dutch investors we couldn’t miss out) and are also into Heineken, Nike and Starbucks. We missed out on SBUX earlier, and their price gained a lot the last few months. But we still like their business model and growth opportunities a lot.

    • Thanks Divnomics –

      Appreciate it! I do like consumer staples during these times especially. I love SBUX, so much, I wish I personally/individually owned them. Just a great company.

      Thanks for sharing Div – let us know what you do! Have a great Sunday.

      -Lanny

  2. Awhile back Deo was getting bought quit a bit seems to have lost some sentiment lately if I had the money I’d buy all those but alas I don’t so I have to pick and choose what I want after researching

    • Doug –

      Same, I am pretty limited to capital, so this would be a one company purchase for me too. Not quite at the price levels I want for any of them; but if JNJ gets into the mid $105 range, would be very enticing. Thanks for sharing Doug, talk soon.

      -Lanny

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  4. I like the list Lanny. I’ve been selling puts on DEO. JNJ, I’m hoping it will fall a few more dollars, possible put to be sold here. PFE, I’m thinking of adding 100 shares on the next price blip. As for UL, I like it but I’m waiting for a price closer to $35.

    Thanks for sharing your picks.

    • IH –

      THanks my man. Pumped. And I am sure you’ve been doing okay on the puts. DAYUM – 100 shares would be a massive move. Agree on UL – I think I’d like to see it trigger below $37; just with currency – I need to do more research there/reading. Thanks for sharing.

      -Lanny

  5. Overall, a great watchlist. I’ve had DEO and PFE on my radar for awhile, along with JNJ. I’ve been hoping JNJ would come back down to $100 but it doesn’t look to be coming down to that point anytime soon, barring something unforeseen. I’m thinking PFE may be on my very short list this coming week.

    • Agent Dividend –

      If JNJ came down to $100… steer clear of me! HAH! But excellent. Let’s keep our eyes open and know why we want these companies – they make sense/easy to understand, and highly relevant in households, etc.. Thanks for sharing the thoughts AD!

      -Lanny

  6. Nice list Lanny. I also featured Jnj and Deo in the latest post. In addition to them, I see value in the precious metal space and reits, in the near term. Each have a inflation hedging component and have fallen out of favor lately for various reasons. I know that I would prefer any of the investments mentioned, to companies like Catepillar or General Electric at these prices. Hope you are having a great weekend.
    Bryan

    • Bryan –

      Very nice, glad we have some similar names that we are on the look out for, makes me feel better a bit! Precious metals eh? I do see that REITs have dropped due to the interest rates. CAT has quite a bit run up, so watch out for that! I appreciate the post Bryan, have a great weekend as well my man!

      -Lanny

  7. Great considerations, Lanny. I like to think of JNJ as the ‘ol reliable’ as well….its definitely one of those companies that *needs* to be there in every portfolio. Go with the best of hte breed and build up the portfolio. DEO is also looking interesting now….Ive been watching those two companies closely looking to pull hte trigger.

    Best wishes
    R2R

    • Roadmap –

      Thank you, very much. Too funny, we both are watching a few of the same, glad we are thinking alike here. And yes – why the heck should we not build the best of the breed? I like that phrase. Let’s keep it going!

      -Lanny

    • Pollie –

      Love JNJ! Has to be the best dividend company out there, dead serious. I can’t find anything fundamentally wrong with them, only if their price is too high : ) Thanks for sharing and – I agree, DIS & MMMM are a tad on the high side for my liking.

      -Lanny

  8. Are you worried at all about legislative impact on anything related to drugs in the next few years? It seems like it’s the easiest political target these days with everyone calling for drug prices to come down and that’d be a big bottom line hit to anyone in the drug supply chain including the drug producers.

  9. Loved the article! I recently purchased JNJ, the price is definitely right. Not sure about DEO, I prefer to keep my stocks US based to avoid currency fluctuations which can undo any dividend growth. Thinking about adding HRL, very tempted, near 52 week low. Thoughts?

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