Lanny’s January Dividend Stock Watch List

Who is ready to buy some stock this year?  Now that the tax-reform dust is settling in, the market has had two weeks to react in 2018, things are looking interesting.  The REIT and utility industries have taken a little bit of a back seat thus far, this year, and it’s time to wipe the sleep from your eyes to see if there are buying opportunities.  This month, there are three stocks on my dividend stock watch list and I hope you enjoy, gain useful information and leave feedback.  Sip on the coffee and check out the list!

Dividend stock watch list

Since I really am anxious to share the three dividend stocks on my watch list, I’m going to jump right on into them.  I’m going to describe why each dividend stock is on my watch list, talk about what’s impacting them, as well as using our metrics via the Dividend Diplomat Stock Screener.  The stock prices I am using will be from January 12th and will be based on the most recently financial data released.  Enough of boring you – check the three below!

1.) Dominion (D) – An approximate $50 billion dollar market capitalization utility, Dominion is a massive player.  Dominion is one of the nation’s largest producers and transporters of energy.   Dominion generates, transmits and distributes electricity for sale in Virginia and northeastern North Carolina.  Additionally, they conduct business activities through a regulated interstate natural gas transmission pipeline and underground storage system in the Northeast, mid-Atlantic and Midwest states, regulated gas transportation and distribution operations in Ohio, and gas gathering and processing activities primarily in West Virginia, Ohio and Pennsylvania.  Why do I like them so much, right now?  They announced a business combination and investors have drilled the stock price down.  Through January 14th, they are down 6.3% already, when the overall market is up almost 5%.  They are earning more money than last year (2017 vs. 2016) and recently announced a dividend increase in October, their 14th year straight!  They currently yield 4.06%, with a forward price to earnings ratio of 21 to close out 2017 and a 2018 forward ratio of 18.8.  Not the most undervalued, but for a high yielding, dividend increasing utility – that’s pretty nice.  For final earnings expected in 2017 to be $3.59, their payout ratio at $0.77 per quarter equates to 86%, which is what you usually see in the industry.  Based on 2018’s expected EPS of $4.04, this equates to a payout ratio of 76%, slightly improving.  Due to the tightening of this moat, their recent increase was only 2%.  I would expect, once the dust settles from the merger with offsets from tax reform, the increase to be approximately 2-4% going forward, until the accretion occurs to earnings.  I would like an approximate $3 slide to the price, to really pounce on this one!

2.) America Inc. (WTR) – Back on the list baby!  Year to Date they are down over 10%!  Who doesn’t need water?  They have over $6B in market capitalization and primarily service the greater midwest (Pennsylvania, Ohio, Virginia, New Jeresy, etc.).  Over 20 years of consecutive dividend increases should capture the eyes of many investors.  Their current yield is right around where the 5 year average yield is, not causing many to pounce on this one quite yet.  Expected earnings to wrap up 2017 looks like $1.36 vs. 2018’s $1.44, equating to P/E ratios of 25.8 and 24.4, which is another sign one can hold off.  Their 5 year dividend growth rate stands at 8.21%, providing a punch of almost an 11% dividend compound factor, when combining the yield, which is not too shabby at all.  Their payout ratio, based on the same expected earnings above equates to 60% and 58%, so at the “top end” of my preferred 40-60% range.  Not too bad.  I will hold off on adding them to my portfolio, for now, but would be interested if they break through another 5-8% correction to the stock price!

3.) Realty Income (O) – It’s safe to say that this shouldn’t come to many surprises seeing this on the dividend stock watch list.  Bert just added a solid 20 or so shares to his position recently, adding to the monthly dividend REIT player!  The monthly dividend income is always fun to receive, as each month (with the power of DRIP, of course) provides just a little bit more than last.  Over the time frame that I have owned O, I have reinvested the dividends, which has added over 12 additional shares to my portfolio.  They are down 7.54% year-to-date and currently yield 4.84% on a monthly dividend of $0.2125 per share.  They now are over 24 basis points higher than their 5 year dividend yield average, showing solid signs of undervaluation.  The 5 year dividend growth rate is over 7%, but the 3 year dividend growth rate is more of a reality, at 5%.  They typically increase the dividend once per quarter, going on 19+ years of consecutive increases.  In the most recent disclosed 10-Q, their adjusted FFO expected is $3.05 (middle of range).  Therefore, at a price of $52.72, their price to FFO is 17.28, which is not too shabby for them.  Currently trading $11 below their 52-week high, we must keep our eyes out on them!

Tough look here and believe that more time for me to evaluate is necessary, except – O is currently sitting in the driver seat, based on the items above.  I obviously want to make every dollar count on using my capital, this is a big decision.

Dividend stock watch list conclusion

I haven’t personally purchased a utility such as energy, electricity, water, you name it – in forever; so that entices me, especially since we are using those resources on a daily basis.  I love the monthly dividend stream that Realty Income gives back to shareholders and being able to really juice that up, as Bert did, would be very interesting.

What do you think?  What is YOUR top stock here?  Any preference on one over the other?  Which would you put money into, today, regardless if you have capital or not?  I would love to hear from you!  Thank you again for reading the article, I appreciate it, as always!  Keep on saving, good luck and happy investing!

Facebooktwittergoogle_plusredditpinterestlinkedinmail

29 thoughts on “Lanny’s January Dividend Stock Watch List

  1. Overall, appears to be a solid list.

    I’m not deeply familiar with each name besides knowing of the companies. I do like utilities as I recently mentioned, so WTR seems appealing (but don’t let past experiences be the only reason you consider any holding, as I mentioned in my recent f-ups).

    #3, O, is very popular for a number of reasons that you, as well as Bert, mentioned.

    Thanks for sharing. – Mike

    • Mike –

      Thanks for the post, and understand the past performances don’t always bode for future.

      O has been damn popular as of late, all REITs have taken a punch. O JUST increased their dividend 4%, pretty impressive with their high yield.

      -Lanny

  2. Hi there. I think WTR looks a bit over-valuated. Utility with P/E over25 and dividend yield with just over 2% looks a bit not so attractive.
    Whats regarding D it looks a bit better. Just made a comparison of some of biggest utilities including D. What I don’t like in D is that they are highly leveraged. Their Debt/EBITDA is over 8, which is a bit high even for Utility, but yes they have very good dividend yield and their forward P/E is below 20, but present P/E is 22. Personaly I have bought AEP as they have P/E both forward and present around 17 and div. yield of 3,5%, but they leverage is almost x2 lower with Debt/EBITDA of 5,3. High debt is also something to bare in mind. SO looks a good buy and if you don’t mind the risk EIX looks the most attractive, but they might have problems with California fires claims and end up like PCG, so its a risk.
    O is a good buy, high dividends, but if investing into REIT I would go for OHI with they HUGE >9% yield. Sadly as EU citizen I cant buy US REITs due to EU regulations 🙁 That’s why I bough into AEP.
    If picking from these 3 I would go for O.

    • P –

      Love the comment and THOROUGH thought on here! I agree, there are better utilities than D – even Duke and others seem better. REITs are getting hammered, with OHI and their 9% yield – I just scratch my head how and how the heck can they keep growing that bad boy?! Love the perspective and analysis.

      -Lanny

      FYI – Love AEP as well

    • p2035, are you sure that you can’t buy US REITs as a citizen of EU? I am also from EU and I have few shares of O, VTR and OHI for more than 2 years now. If there are any restrictions I would definitely want to know. Thanks

      Tomas

      • You cant buy them since 2018.01.01 but if you own them there is no problem. You can also sell them. Only new purchases are prohibited. Your droker should inform about that regulation. I dont know how other brokers do but my broker said it is due to that mifid2 eu regulation thay took force this year.

  3. Lanny, I would have to vote for O. I haven’t even considered the other two mentions, and I DCA my way into O and so I really like the stock. I do plan on adding a company to my portfolio soon. I’ve already made the purchase, but just waiting on the transaction to clear. It’s none of the ones you’ve suggested. Looking forward to seeing what you choose.

  4. Great list Lanny! O is definetly the popular one right now (and deservingly so). Utilities are also quite attractive now. I bought ED and added to SO as well. Looking forward to collecting those dividends! Thanks for sharing. 🙂

  5. Hey Lanny, I have definitely started the year buying some great dividends stocks (in Australia) – just getting the new Fund up and running. I’m not usually big into utilities, but if you can get them for a price you’re happy with, and they have a great market position then why not!

    But why do you think Dominion fell so much after the acquisition announcement? Sounds like a decent business they bought, and will apparently be immediately earnings accretive?

    • Frankie –

      Thanks for the post – and I agree, as long as you buy at the right price for the utility, bodes well. I believe D fell so much due to amounts paid – may not have been as a strong performing business as D and potentially the costs associated with taking care of those new/upcoming customers. OR… maybe others just saw poor things with the acquiree. Who knows, haha, dangit! I wish/want the answer!

      -Lanny

      • Yeah just noticed that SCANA’s share price went the other way after the announcement – jumped over 20% in one day! The market obviously thinks SCANA’s getting the better value through the stock-for-stock merger! Either way, as long as the combined business keeps churning out the dividends for you guys!

  6. Soooo many Utilities and Reits are hitting 52wk lows. I bought some EPR, O, SKT, and VTR. Now I’m just pushing my shopping cart down the Utility isle trying to figure out which ones I’m gonna put in my cart and bring up to the check out counter.

Leave a Reply

Your email address will not be published. Required fields are marked *