Here we go! The final two months of stock market action for 2018 and it wouldn’t be the same without releasing what is currently on my radar, at the moment. A few easy one’s that most are looking at, right now, but hopefully a fresh new look at a company or two, in the mix. I know the stock market has been significantly all over the place, what an investor still can do is evaluate a company based on their financial statements and stock price and make a decision to buy or not to buy. Always remember, price is what you pay and value is what you get. I have been saying that to so many people lately, they think I’m crazy. Without further-ado here is my November dividend stock watch list!
Dividend Stock Watch List
This is not a complete revamp nor are these any new companies that I don’t already have in my portfolio. Does that matter? Hell no, as my dividend portfolio is in need of dividend paying and growing companies! If they are already in my portfolio, even better. Further, trying a new format, where I’ll bullet out a few quick metrics from our screener, in order to efficiently show why they are on my radar.
1.) AT&T (T) – Big Telecom here and with the yield over 6.5%, it’s hard not to take notice of this bad boy. Earnings expectations are $3.58 for 2019, based on analyst expectations, to which there are 31 of them, so that’s a fairly solid average. Here are a few metrics, with them producing $2.00 in dividends per year:
a.) With a price point of $30.47 (as of 10/30), that’s an 8.5 price to earnings ratio – significantly lower than most companies and low for AT&T.
b.) They are yielding 6.5% with that $2.00 dividend, currently streaking well over 25+ years (yes, they are a dividend aristocrat)
c.) Set to increase that dividend in December – I’m expecting either a .005 increase or .01 – nothing more than 2%, though, which is their long-term average.
2.) International Business Machines (IBM) – Big Blue is making a big splash here, especially after announcing their $34 billion acquisition of Red Hat (RHT), the software company. They are most known for their Linux platform, which my tech-nerdy days – is a great open source platform. This will allow them to keep up with what’s occur in the marketplace. Expectations are $13.94 next year, to which IBM currently pays a $6.28 per share dividend. Here are a few metrics, below, as of October 30th price of $115.40:
a.) With a price point of $115.40, this equates to a price to earnings ratio of 8.28 – extremely low for IBM and it’s the lowest I have ever seen.
b.) They are yielding the highest I have ever seen, at 5.44%. Their price has taking it’s punches and has had the legs taken out from underneath. They still earn incredible revenue and making amazing money. Will the acquisition slow down the dividend growth? That’s the question. Why?
c.) Their dividend growth streak is at 19 years. I find it hard to believe they’ll slow that down – they mentioned they won’t and will only pause share repurchases. However, the growth expectations I have is the low single digits, in the range of 3-5%, for the next 2-3 years.
3.) Iron Mountain (IRM) is back on my watch list. I am down by over 7% in my total purchase spree of them, however, I still am big on what they bring to the table. They just announced a dividend increase of 4.00%, stretching that dividend growth to 5 straight years. After their 3rd quarter earnings, they are almost 11% higher on revenue and are making higher net income than ever before. Additionally, their yield is significant from a REIT standpoint, but their year-to-date AFFO was $689 million, which we will get to that in a second, on 287 million shares. Here are the metrics:
a.) With a price of $31.61, their Price to AFFO ratio is 13.17, which is fairly undervalued.
b.) The payout ratio on the AFFO going forward is ~78%, therefore, still has wiggle room to continue dividend increases in the future.
c.) Revenues are going up! This is what I like to see from a REIT and from any business, as costs can be controlled to an extent.
Dividend Stock Watch List Conclusion
No new names, no problem. The one area I have to look out for, though, is that I own a significant amount of shares in AT&T (T), I personally have over 200 shares and that number comes closer to 300 shares, when combining my wife(!). Therefore, not sure how much more I’m willing to add there. IBM, though, is the interesting kicker. Technology is already a low part of my portfolio and IBM represents only 1.39% of my taxable account. Their yield has swelled, but I like their financial position. I could see me doing a little bit more at some point to that big blue company. Some say their better days are behind them, but making a big acquisition of Red Hat – has fueled the engine. IRM is a company I wouldn’t mind chipping in another $500-$1,000 into, and average my price of purchase, as they also represent just a small piece of the portfolio, currently held in the Roth IRA, for more tax advantaged purposes.
What do you think of the 3 dividend stocks above? Like IBM right now? Think the yield is too good to be true? Could you see a cut at all happen? I am very curious on your thoughts and considerations. Lastly – what else are you watching? As always, good luck and happy investing everyone!