Lanny’s November Dividend Stock Watch List

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!

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

  1. I have all 3, though they’ve all been hammered recently. I like the Red Hat purchase and I think it can only help IBM at this point.. I’m also looking at KHC again since they’re down 9+% this morning….

    • Jesse –

      I do really like Red Hat, should impact IBM positively and Red Hat using the money/funding resources that IBM has should essentially boost their service. KHC… agh, they’re something else. They need to cost cut more and really pump up their bread and butter products. Litereally – foreigners at a place I was at, said they hate the ketchup and they bring their own Heinz bottle everywhere they go.

      -Lanny

  2. Couldn’t agree more, I own all three and looking to add. Unfortunately no capital at the moment and as mentioned above KHC has been added to my watchlist as well.

    Recently went on a buying spree and added three companies (IRM among them).

  3. Love T and IRM. IRM gave us a dividend increase recently so it definatly makes sense to add there as that is a safe dividend for a year, most likely. But if you are looking for a real safe dividend ABBV raised today a nice raise. So many good choices not enough money lol.

  4. T is also on my list, but as it is one of my largest holdings it might be hard to buy more of them. IBM also looking nice. Have to say I was a bit sceprical due to their much weaker balance than other tech companies (low equity and higher NetDebt/EBITDA)

    • P2035 –

      T is a big portion of my portfolio, as well. IBM has been just a cash cow, to be honest. Big rev, big buy backs, keeping EPS up, etc.. They’ve been hilarious to watch, now with Red Hat – I’d love to see them break $60B in revenue.

      -Lanny

  5. great list but surprised abbvie and kraft heinz arent on here.

    kraft had a pretty nice dip today as well as abbvie. Abbvie even increased their dividend more! If I had more money in usd id be all over abbvie.

    Ibm seems like a great buy. But i think they did overpay for red hat. Hopefully they dont feel so desperate to make moves in the future.

    Anyways great list look forward to seeing what you buy.

    • PCI –

      Haha, the article was written a few days ago – so before the div increase and the dip from KHC. I need to evaluate KHC more and see if I already have enough of them in the portfolio.

      As in all acquisitions – an overpayment always occurs, you know?

      You’ll see soon enough : )

      -Lanny

  6. I currently own 2 of the 3 with the outlier being IBM. I’ve got T on my preliminary watch list as well, and would like to add a little while it is around $30/share. I don’t anticipate that I will add a lot though. I would also like to add more IRM but need to finish making a portfolio adjustment to free up some capital in my IRA first.

    I’m not sold on IBM as of yet, as like PCI mentioned I think they overpaid for Red Hat and would like to see them get a quarter under their belt after the acquisition. Plus, I am a little heavy on technology right now so that isn’t at the top of my list for new positions.

  7. Hey Lanny, thanks for the new ideas – I’ve been in need of some new additions to the Global Fund, and actually just added Iron Mountain after Bert’s recent coverage of this stock.

    IBM and AT&T look like potentially good value too – I’ll be adding these to my shortlist for sure.

    Cheers, Gary

  8. I sold AT&T earlier in the year. Got bored in the position because it never gave me any share price growth and is too much in debt to give more than a penny raise each year. That said, I can see buying now as you’re getting a lot of cash flow st $30 a share.

  9. Hi Lanny,
    nice choices you are having there I do also have AT&T and IBM on my list. Especially IBM should be a no brainer at this price level. I somehow do not understand why so many people are bashing on IBM.

    Cheers
    Andy

    • DI –

      They are bashing them because of the noise that they are old, slow and sluggish to what the market needs. However, the financial statements are rock solid, that’s the tough part : ) To me, they are a big cash generating machine, but do love to hear other’s thoughts.

      -Lanny

  10. Nice short list. I have started to read more about IBM in recent days. Looks like that yield is tempting many. I am considering T myself in November as it’s still a small portion of my portfolio. I think I’d go with T especially if it’s under $30.

  11. There are a lot of great companies trading at bargain prices with the recent sell off, but these along with ABBV would be the ones that I’m most closely watching. I’ll be adding IRM for the next few months provided it stays in the low to mid $30 range.

  12. Morning Lanny,

    All 3 from a yield % will definitely help accelerate you to your dividend goal. I have owned IRM since March and this is the second dividend increase this year for a total 9% increase for 2018. Additionally, I like the international acquisitions they have been making lately and starting to be very impressed with the management team.

    • Ken –

      I am really interested in receiving a reinvested dividend from IRM, to say the least. They are the massive player and believe they’ll be able to stay competitive, have high profile clients all over the world – while still paying an increasing dividend : ) Every investor’s desires and they’ll be there..

      -Lanny

  13. Hey Lanny,

    All three are on my peripheral view as well. T’s dividend is huge at this point and is hard to ignore. A lot of their business at this point is going to come down to execution.
    IBM is hard to place; it really hit my radar with Berkshire got involved but then fell out of favour thereafter. The Red Hat deal does indeed put them on the radar.
    IRM has a really interesting business model. I remember working with them somewhat years ago when I worked at CIBC at a retail location and we had files for storing. Going to be interesting to see how their business model evolves when looking out three decades and the world further digitizes.

    Take care,
    Ryan

    • GR Broskis –

      Nice quick breakdown of each company. I am not sure what direction eachwill head, for your same reasons. IBM was a great name, powerful growth in the dividend – they still are a cash machine – obviously quite a bit is used in the Red Hat deal, which I would imaginge a heavy injection in performance once it closes.

      IRM is nice to see their transition into more and more digital and yes – I see their trucks everywhere, making stops at businesses, taking away/storing the confidential physical data. I would imagine they are asking their clients to go digital and to use their software/servers for that. Hmm..

      -Lanny

  14. These are all great companies Lanny. While I am a proud owner of two out if the three, at IBM’s current valuation it’s beginning to look very tempting. The current merger with RHT will do wonders for the company. This will allow them to continue to grow their business from operating systems into more virtualization and cloud applications. The future of technology. I will be looking to initiate a position here during this coming month.

    Thanks for the great post on some great undervalued companies. I look forward to watching you purchase them.

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