Needless to say, the stock market has been a “mean green” this past week and man, the buying opportunities are drying up and fast! It feels like it was just yesterday that we were battling low oil prices and other commodity fluctuations, that was ultimately causing the entire market to head south for the winter. Then, the curveball of the green machine of the stock market kept roaring this week and was breaking some ground – even with some of the major macro economic factors still in play. I can’t make much of it, but I do have a watch list of stocks that I have my eyes on. Come check them out!
The Criteria for stocks on my Watch list
To begin, I wanted stocks that had multiple years of consistently raising dividends, that’s a no brainer, especially with my recent article of the BBL dividend cut, as well as my latest purchase into T. Rowe price, where I bought 47 shares and added over $100 to my forward dividend income. Companies that pay these increasing dividends are an EASY green check mark, though sometimes not always followed… The next criteria I will want is a well-known company, those that are top players in their industry, and you can even insert the Cheers theme song… “where everyone knows your name…”. You got it, I want that type of company. Further, with the S&P trading at approximately a 22.06 P/E ratio, I want something no doubt below that and more specifically below 20. Further, I want a yielder higher than 2.5% with a growth rate at or above 5%. Those are my valuation metrics, which fall in line with the dividend diplomat stock screener. Let’s add a payout ratio of below 60% for good measure.
The Stocks
1.) Pfizer (PFE) – taking a page out of Bert’s book from his monthly watch list and large purchase into Pfizer (PFE), they are on my watch list. Why are they on my watch list? Well… YTD they are down 8% as of the close on the 4th of March. They are one of the most well known pharmaceutical companies in the world. Market capitalization of almost 200B. Additionally, they were my first ever real stock purchase back in 2010, where I picked them up at $14 and change, which they are now trading at $29.70. I haven’t made a purchase since then, but have more than 12 shares via dividend reinvestment, and I’d love to have more. They are yielding at approximately 4.04%, which is currently higher than my overall portfolio yield AND that dividend growth rate has been steady and strong at 7%+ for multiple years, which is also higher than my weighted average dividend growth rate currently. Additionally, I’m calculating a payout ratio of approximately 52% with a P/E of around 13. Bottomline – this fits everything: P/E, Payout Ratio, Yield, dividend growth rate, well known company. #1 on my list for a reason right? A potential $3,000 large investment could be on the horizon here! A $3,000 purchase would add 101 shares and over $120 to my forward dividend income, what’s not to like?
2.) Johnson & Johnson (JNJ) – Ah… what is not to love about our buds JNJ. They are the definition of a dividend aristocrat and always sit #1 in my heart for a dividend stock to invest into for a foundation in your portfolio. Love them. Hard to find a good price, but love them. Why are they on the list? So well known, that’s a given. Their metrics per my calculations are a P/E of 16.72, payout ratio of 47%, a yield of 2.82% (higher than the S&P), the most consistent dividend growth rate of approximately 7% year after year and I’d love to make this a bigger investment in my portfolio. Did I mention they are a dividend aristocrat? Yep. I think, since I own quite a bit (I’ve invested at my cost of $4K approximately here), an investment of $1,750 at $3.95 trading cost on a Tuesday (capital one share builder program) would make sense here. $1,750 investment would add almost 16.5 shares and produce almost $50 extra in forward income, not too shabby.
3.) Aflac (AFL) – The big old insurance company. Reason why this is sitting third, for the record, is out of the 3 here, this is by far my largest position, where I own over 105 shares of the quacker. I have contributed approximately $5K overall into this bad boy and am not looking to make my new-found large investments strategy at play here. They currently yield 2.69% (higher than the S&P’s 2.17%), have a P/E of approximately 9.67, payout ratio of 26%, with a very steady dividend growth rate of 5%+. Further, they are a dividend aristocrat and their financial statements, I believe, set themselves for not only for protection on the dividend end, but still plenty of room to always raise that dividend, hence the aristocrat title. I would perform a similar investment here of $1,750 potentially to add almost 29 more shares and produce approximately $47 more in forward income.
Stock Watch List Summary
There we have it! One company where I can pick up over 100 shares and add over $120 in dividend income based on current metrics, whom they have the best yield to growth rate combination of the 3 listed above, that being Pfizer (PFE). However, making consistent contributions to JNJ and Aflac does not seem like an issue either, as I can see myself doing that over the next 60 days. That’s the other kicker. Their ex-dividend dates are all approximately 60-75 days and there is much time to grab them before their 2nd quarter dividend. I have time on my side here, but as of right now – these 3 companies are where my eyes are lined up. 3 big behemoth of companies, very, very well known, great dividend metrics and history to back them as well. I’d love to buy all 3 if I had the capital, that’s for DAMN sure.
I am curious, though. For the readers – based on the 3 listed above – which do you like? PFE, JNJ or AFL? Do you like PFE because of the slightly higher yield? Do you like JNJ because they are a very good foundation stock? Or do you stick with AFL because of the extremely low payout ratio? I know individuals have different reasons, but I’d love to hear yours. Also – do you already own any of the 3 or all of them? I would love to know!
Thanks again everyone, hope you all had a great weekend, have enjoyed collecting your dividends from February and that you are looking to have a great finish to the first quarter! Bless everyone and cheers! Talk soon.
-Lanny