Fun time of the month! I have spent my Sunday morning researching and finding stocks that I like, and heck – some may be the exact same from last month’s article. What matters is that these are attractive, great dividend yielders, easy businesses to understand and are staple names to all! I was very excited the market has took a turn over the last 30 days and have started to open up more value for us dividend investors. Let’s see who is on my stock watch list!
Intro to the watch list
I am getting back in my favorite routine of having specific stocks on my radar. Thank goodness the market tanked on September 9th, this has opened up some value. Heck – my August stock watch list has me very excited in the month of September. Some may ask, “Why?”, and it is quite simple. Those same stocks have fallen, even further! What I will do is compare the prices from last month and then to the price points now, to see which stock is looking even better. When I’m performing my screener – I wanted stocks that had a forward P/E below 18, payout ratio below 60%, dividend growth for over 5 years, as well as – has a business that is easy to understand. Additionally, I wanted those entities that I already had in my portfolio, to make my life and reading pleasure a little easier. Who wants to read additional 10-Ks, Press releases and 10-Qs if you don’t have to? I already read enough of that crap for my own job haha. Without further a-do. The stocks on my watch list.
Watch list stocks
Pfizer (PFE) – From last month’s article, PFE had a price of $35.29, during my review. The price point as of close on September 9th is $34.10! Talk about a drop. That represents a further decline of 3.37% and are that low $34 range where I am strongly considering them. What is the best part? The yield is now over 3.50%, at 3.52%, which is fantastic. They’ve been growing their dividend for at least 5 years with the last increase at approximately 7.14% – which is awesome. Further, based on forward earnings, I am calculating out a price to earnings (P/E) ratio of 14.40. This then places the payout ratio at roughly 49% (we now know how important this metric is to us dividend investors). In my eyes – the P/E is low, the yield is above average, above the S&P yield, the payout ratio is right in the middle and they have the track record plus room to grow. Further, they are looking to grow as a business and are always going to be in pantries and health-care related entities. Given that I missed the ex-date for the 3rd quarter dividend, this one will be on my radar, as I love them over the 3.50% yield range, plus they have an increase coming in the 4th quarter as well!
Target Corp. (TGT) – At the time of August’s review, TGT had a close price of $74.10. Guess what? Yes, the stock price has further tanked to $69.00!!!! WOW! That represents a 6.88% decline in just one month’s time span, holy crap! The dividend yield is “safely” at 3.48% (up from 3.24%!) and is well over 1 full percentage above the S&P 500 yield. Further, the P/E ratio based on forward expected earnings is 13.64, definitely a great sign of undervaluation. In addition – who doesn’t love shopping and just browsing at Target?! I know the lady loves just simply walking through, and yes, she does own a Red card. I know Bert knows what I’m talking about. Also – this was the last monster purchase I made back in June and I wouldn’t hesitate to checkout some more of them. They are a dividend aristocrat, have grown their dividend for 40+ years and recently had an increase of ALSO 7.14% – take a note from Pfizer (PFE) or something? The payout ratio also rounds out to 47% and is in that sweet spot I like. To conclude – an above average yield, already own them, low P/E ratio, great payout ratio and it’s a great/easy to understand business. I love them at the price they are at, and would be very aggressive in hoping they cross the 3.50% yield barrier. Again, high on my list! Why can’t I just have every stock?
T. Rowe Price (TROW) – And again – during the August evaluation, TROW had a close price at $69.10. One month later, they are now at $67.48. Bodda bing, bodda boom. This represents a 2.34% drop. Enticing. Another dividend aristocrat with a long as heck growth history, they are now sporting a P/E ratio of 16.00 based on forward earnings. Not as undervalued based on the Pfizer and Target above, but they are close and they are below the average P/E for the S&P 500. Further, the yield is at roughly 3.20% (up 7 basis points from last month), not as great (again) as the other two, but above 100 basis points above the S&P 500 yield with a payout ratio of 51.18%. I had invested $3,130 into them in the first swing and a $1,750 purchase would be nice here, to inch closer to that $5K total investment. Last month I talked about the $67 range for them, and here we are – smack dead where I wanted them. Decisions, decisions I tell ya!
AT&T (T) – Ah… my favorite telecommunications stock. We all know I love having the dividend stocks I own, pay for the bills that I have, and T definitely fits the bill. I already own over 156 shares of this big guy, but the share price has dropped recently. The September 9th close price is at $39.71 and the yield is 4.84%, almost back to the traditional 5% range it was in. I am calculating a forward P/E of 13.88, with a 67% payout ratio at the moment, so not too shabby for this dividend aristocrat. Further, with the DirectTV deal, I am hopeful that the $0.01 annual increase will for sure continue, and maybe if we are fortunate, a $0.02 increase could be in the future. Due to owning over $6K and this being the bigger position out of the total 4 stocks here, I will more than likely wait on investing more into T, unless it gets into the lower $38’s, then – damn, may be too hard to not.
Watch list summary
The big decisions and debate with the four stocks above! I could always do an even spread with the top 3 of PFE, TGT and TROW, say $1,750 a piece? I could just go on a bender and buy a few thousand with of TGT. I just do not know! What I do know is that you cannot go wrong with investing into one of those stocks on my watch list. That I know. This is what makes it exciting, building these positions, adding forward income and decreasing your team to financial freedom! Can you taste it? Let’s get closer to the prize! I know I am trying to do everything I can to get there.
What do you think of the stocks on the watch list? Think they are undervalued? Would you buy them? See any new opportunities from the last 30 days? Waiting to make a move, hoarding cash or are you buying? Please post and I cannot wait to read what you have to say! Thank you for coming by, as always.
-Lanny