Lanny’s October Watch List

It’s been a while since I’ve come out with a post.  Just for the readers – I’m a public accounting firm in a top 10 firm that audits SEC registrants and the last week I’ve been in the middle of our own regulators inspection process on the audit work that we perform – therefore, my days have been approximately 12-15 hours long, depending on the day, been a whirlwind, but thank God for Bert, the other Diplomat for continuing to write away.  Thank you Bert.  I’ll also do a spin off with him and write about my October Watch List.  Let’s see what stocks are high on my list and which one’s I would actually consider to invest into.  “There’s only one October!”

Watch List

Who do you think is on my watch list?  Do you think it is Seagate Technologies (STX) who have been beaten down since my latest stock analysis article on them?  Also – Western Digital (WD) just announced the purchase of SanDisk (SNDK) for $19B… talk about timing.  OR do you think a stock is from Bert’s recently posted watch list?  Heck – do you think Emerson (EMR) makes my list again after I purchased them for the third time?  Go ahead Bert, talk about them being on your 5 always buy stock list, but hey – who owns more shares, BROTHER.  Enough with the banter and fighting, let’s see what stocks are on my watch list.  Well, without further ado…

The Stock(s) on the watch List

This is going to sound awful.  There just aren’t as many opportunities out there for me in my eyes.  One could point to Emerson (EMR), AT&T (T) or even Norfolk Southern (NSC), and heck – even big blue in IBM, but something about those positions all being large in my portfolio doesn’t bode well at the moment and also having purchased them all at lower prices than where they are at (outside of IBM), just doesn’t sit well in my stomach.  There is one stock and Bert knows that I’m cautiously watching them….

Walmart.

Stock price performance this year, after Bert talked about their decline, is down 31.72%.  This is not ever a reason to buy a stock, and the decline was primarily due to slashed revenue forecasts with increase in wages for Walmart’s employees.  I won’t bore you with the same chart he did, but just want to talk about it fairly more.  Bert has already stated that they satisfy our stock screener, so I will not bore you with those details.  The price, however, from date of writing this article on close of 10/22/15 is $58.63 or a quarter less almost than Bert’s just recent post.  

Why do I like them?  Hard moat to break down that they have built.  Their distribution and supply chain is by far the most advanced here and their ability to keep stores adequately supplied at the appropriate time is phenomenal.  Also – during recessionary times, they perform quite well.  They are a low cost provider of groceries, goods, and even some services.  They also employ over 2.2M individuals on a consolidated basis.  Obvious competitor is Target (TGT), and both are dividend aristocrats, as a heads up.  As of right now, Walmart simply has a much better yield and price to earnings valuation.

Further – they sit on billions of dollars in cash, which the cash generated can more than adequately cover the dividends, dividend growth rates expected and even how to make it things easier for the customer.

My entry point, however, is not there yet.  currently at $58.63 it yields, on a $1.96 per share, 3.34%.  The growth rate and dividend yield on the investment, does not currently hit over any of my weighted averages on my dividend stock portfolio.  That is the con there, but as Bert made a mention – it does fulfill the stock screener, so it definitely looks tempting.  Given the payout ratio being less than 50%, a low price to earnings ratio, strong current and quick ratio allocations, the dividend going forward appears sound.

Another item to note, is that Walmart (WMT) is also yielding almost 70 basis points higher than it’s 5 year historical yield, which puts us back to even consider 2010 still or still depressed stock prices.  This makes it even more tempting.

Overall, given the 3.34% dividend yield and lower guidance on earnings, something more needs to occur outside of the flash adjustment to stock price.  I would like to see it break the line of $58 per share personally.  However, they have been only tweaking down little by little.  With a very random year end in January, we will have to wait on the increase until 2016, to see if they either are gong to keep a decent dividend growth rate, or if they are going to land on the list of companies that have had dismal dividend increases this year.  If they break the line of $58 per share, it gets them into the 3.40% territory and it starts looking like a better dividend stock and buying at a slightly undervalued position.  I would then inch down 5%+ subsequent to my initial pruchase if the market wants to keep pushing down on WMT.

Summary of watch List

This is an approximate $190B valued company.  This is one of the largest companies trading on the NYSE and is showing much better valuations than they have had in the past.  I don’t want to get too greedy, but something about the price… would love a small decrease.  My first position if the price becomes even more attractive would be around 15-20 shares total and to do that one to 3 times, similar to what I had performed for Emerson.  This would help build the position and start becoming a nice cash king for the portfolio.  No, there aren’t any others on my list and I have been sitting fairly tight with no investment since Emerson, I know it’s wild – how am I going to hit the remainder of my goals as I had explained in my 3rd quarter check up?!  I feel like Walmart (WMT) is showing/examplifying the top benefits of a downturn in the market on a dividend stock – when it comes to P/E, Yield, purchasing power, etc..   Enough with what I think, what do YOU think?  I feel like there is still room to inch slower, what does your gut tell you?  Should I get some now if you think otherwise?  Thanks all, pumped to hear about your thoughts, considerations and comments, talk soon!

-Lanny

 

DISCLOSURE: I DO NOT RECOMMEND ANY DECISION TO THE READER or ANY USER, PLEASE CONSULT YOUR OWN RESEARCH. THIS IS ACTUAL DATA, ANALYSIS, HOWEVER I BASE NO INVESTOR RECOMMENDATION.  THANK YOU FOR YOUR UNDERSTANDING.
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11 thoughts on “Lanny’s October Watch List

  1. Ciao Lanny,

    On my radar too, at 58.50 I am in. It seems that there is a resistance there as the stock keeps going near and bounces back. The yield, the company and the fact that they actually seem to have a plan put in practice (e-commerce restructuring) are good enough reasons to invest in them considering that they start with a strong position already as you correctly pointed out…

    ciao ciao

    Stal

  2. Hey Lanny,
    I’m really not even a dividend investor, at least not yet 🙂 But I can’t resist getting your take on the market and seeing how you all are doing with your portfolio. Let’s just say I know what I don’t know.
    I totally understand the long hours at the firm, ugh…
    Laura Beth

    • Laura,

      Thanks for coming by – much appreciated – hoping we can lure you into this investing path! Joking, but if you do find it fits your needs, then awesome!

      I am up YTD around 7-8% and the dividend growth on the portfolio has been much smaller this year than last year. However – just staying consistent in the market by purchasing strong companies on dips on the overall market if that makes sense. Buying great companies for more income for less is always fun, for sure.

      Also – the hours never end… ever. Public accounting?

      -Lanny

  3. Lanny,
    I bought some WMT earlier this week. I think the dividends will be safe. The dividend growth will low and slow in the next few years since the earnings will be flat. I think the overall return on investment based on yield and growth is in the 6-8% range in the next few years. The question is – can you find another company to invest in (with ROI in 10% range) For me, I already cycled through and added to my other positions. So this week, it’s time for WMT.
    D4s

    • Div4Son,

      Nice job picking up some WMT – safe dividends for sure. Growth will be low, but if you can get 3-5% DGR right now on them, I think that’s fine. WMT is on a slow decline – but today showed more promise at down 1% or so today, would love to see it break below $58…

      -Lanny

  4. I have a random question, on average whats the growth of your portfolio per year. or last year? Thanks just want to know so I could get an insight on whats good or bad.

    • Victor,

      The dividend growth rate on my portfolio last year was mid 7%. This year – its low 6% – I’ve noticed some of the companies I own paying less of a dividend increase this year… earnings pressure!

      -Lanny

    • R2R,

      EMR, CAT and WMT = love all 3 of those without a doubt R2R. WMT keeps sliding slowly, think there will be further pressure downward, looking to see it break below $58, that’s for sure.

      -Lanny

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