Bert’s March Dividend Stock Watch List

The first quarter is racing to a close here!  It has been over a month since my last stock purchase, T.Rowe Price Group, and I am starting to get the itch to buy again!  The market has presented a few opportunities that caught my eye over the last few weeks.  Here are the three stocks on my March watch list and hopefully you will be writing about another purchase article soon!

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I have three stocks on my March watch list, one company that I currently own and two companies that I do not.   While I don’t have enough capital to initiate a large position in a company (considering that I have been aiming for larger investments recently), I am considering initiating a new position and growing it over time.   Quick note, the prices used in this article are as of Friday March 24, 2017’s close date.

Stock #1 – Cisco Systems (CSCO) – Does it really surprise anyone that Cisco is on my watch list?  Lanny laid out a great argument for the company in his recent dividend stock analysis.  Thanks for the research Lanny!   I’m not going to regurgitate his analysis, so please see his article for greater detail.  But here is what I like about the company:  they dominate their industry, a strong dividend yield (over 3.25%), a low payout ratio, and an impressive dividend growth rate.  Historically, I stay away from technology companies and am very hesitant to invest in the sector.  Because of that, my exposure to technology is very low and the only tech company I own is IBM.  Based on this analysis, I think adding shares in Cisco would be a great second addition to the sector!

Stock #2 – Target Corp. (TGT) – I don’t think this should surprise too many investors in the dividend growth community, as the recent performance and struggles of Target Corp. has been pretty well documented since their earnings release at the end of February.  In the last month, the company has fallen over 18%.  In 2017, the stock has fallen over 25% and now the company is yielding ~4.5%.  The company’s P/E Ratio is now  Just incredible.    The company has some kinks to iron out and I do not expect this to be a quick turnaround.  But management is taking the corrective actions and has invested significant capital to re-vamp stores and the shopping experience over the next few years.

In the short-term, the earnings outlook for 2017 was reduced by management to $3.80 to $4.20 per share.  Even with the reduced earnings outlook, assuming the low end of the range, that would place Targets forward P/E ratio at 13.97x and their forward payout ratio at 63% (Just barely above the 60% threshold we use in our dividend stock screener).   In my mind, this may be a great opportunity to add to my current position in a Dividend Aristocrat and even push my position over 100 shares!

Stock #3 – Realty Income (O) –  I initiated a position in Realty Income for the first time in 2016 at a price of $57.61 per share and couldn’t be happier.   Now, I am receiving approximately $8.50 per month from the darling of the dividend growth community.   Currently, Realty Income has increase 4.7% YTD and is trading at $59.46 per share.  If the stock has increased and isn’t a screaming buy based on the metrics, then why is it on my watch list?  Since my purchase on November 1, 2016, Realty Income has increased their monthly dividend payments three times!  Are you kidding me?  They are knocking on the doorstep of becoming a Dividend Aristocrat as well, since they have increased their dividend for 21 consecutive years.

Now, their monthly dividend is $.2110/share, or $2.532/share annually.  In their most recent earnings release, their AFFO/share for fiscal year 2016 was $2.80 and stated that management expected AFFO per share for 2017 to increase to $3.00 – $3.06/share.  After the dividend increase and their most recent earnings announcement, their forward payout ratio is 84%.  But since Realty Income is a REIT, we expect a high payout ratio.  Overall, while I am enjoying the $8.50 monthly dividend I am receiving, I would love to add to my position and increase that amount to allow the power of dividend growth investing to flex its muscles.

What are your thoughts on the three companies on my March stock watch list?  Are you currently watching them at the time?  If not, why and which companies are you watching instead?  Are you in “wait and see” mode with Target as they finalize the plans of their turnaround?  Am I being too optimistic about the company’s prospects?

-Bert

DISCLAIMER: I DO NOT RECOMMEND ANY DECISION TO THE READER or ANY USER, PLEASE CONSULT YOUR OWN RESEARCH.   THANK YOU FOR YOUR UNDERSTANDING.
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45 thoughts on “Bert’s March Dividend Stock Watch List

  1. Looks like some great pickups Bert! I’m also a big fan of CSCO and recently picked up shares of TGT. I haven’t hopped on the O train quite yet but I know I will eventually. Great Update!

  2. I personally added some extra TGT to my portfolio a few days ago. My biggest investment in March was in Europe (via VERX), but I couldn’t resist the sell off in TGT. Nice and safe dividend yield, plus last don’t forget that they are aggressively buying themselves. Last September they announced a $5 billion share buyback program. Based on current share price that means around 16% of the shares out there! The only reason I didn’t buy more is that I don’t want it to have too much weight in my portfolio.

    • Nice pickup Roadrunner! I know, I’m thinking of adding a small amount here with the same mindset. I think the buybacks are very telling and a reason why we always watch them. Thanks for the additional insight! It is one of my largest holdings too, so I have to keep that in mind as I make my purchase.

      Thanks,

      Bert

  3. As much as I want to add to Target, I just dont think that is the best choice. I bought a small position in TGT about a week ago but CSCO seems like the best value to me. (Taking into account dividend growth, etc)
    -Regards, MrStockFox

  4. Hey Bert,

    nice watch list you have. TGT is also on my radar for the next couple of weeks. But I think there will be a further decline in the stock price. I will stay a little cautious as TGT is already my largest position.

    Cheers

    • Thank you! I don’t think Target’s stock price is moving anywhere anytime soon. Seems like this is not going to be a short term situation and investors are going to need to practice patience as we wait for management’s strategy to unfold.

      Bert

  5. Interesting picks to consider for March. None of your choices would make my list as I don’t really invest in tech, nor retail nor retail REITs. Not that these companies would make bad choices they just don’t suit me. Other names that have been getting cheaper and more interesting to me are GIS, GE, HRL, with nice yield too, though all three are making some nice moves today. Thanks for sharing… look forward to seeing where you deploy that cash.

    • haha it looks like our watch lists couldn’t be more opposite in March. Hey, gotta respect it, you know what sectors you like and don’t like. Why force yourself to invest in an area that you cannot stand?? I almost added GIS to this list as well, but I was hesitant based on the metrics, payout ratio, and debt levels. Great company, but I’m going to wait for it to fall a little more before making any action. KRL is also an interesting one! Make sure you keep us updated with how you allocate as well.

      Thanks for the comment Divhut!

      Bert

  6. Some nice choices there. I have TGT on my list too. Others on my list include OHI, QCOM and TROW. The market overall does seem pretty over valued, so am torn between waiting on the side-lines or jumping into a deal like TGT is offering currently.
    Looking forward to seeing what you do with your cash, and hoping to see some good buying opportunities soon.

    • I just bought TROW last month. I love the company! OHI is a company that a ton of dividend growth investors own; however, I have never gotten around to adding them into my portfolio. What is holding you back from jumping into Target…other than the prospect of future dividend growth stocks that may become discounted. What is hard is that you could be waiting a long time while on the sidelines versus putting the cash to work and re-building your savings during that time period.

      I’ll keep you updated with my choices 🙂

      Bert

      • Bert – I hear you on putting cash to work part. The problem is, even though i am in my 30’s i think and invest like a 60 year old :). Very risk averse, and i know this means more often that not i leave money on the table. Case in point is i did not buy FB when it was at $19 thinking that it was going down to under 10.

        With target, even though i own some shares – their future does not seem guaranteed. What with amazon already selling everything under the sun, and walmart really getting serious about their online sales. That said – i will be doubling my share count if it gets to $50 or under.

        • Nothing wrong with investing like an old guy! I love the non-sexy, lower risk dividend stocks. I would have laid off of FB as well, and saved my money for the long-term focused dividend growth stock. nothing is better than a company with a history of paying out dividends in the long term!

          I hope you are wrong about Target and they will be able to hang/compete with Amazon and Walmart in the long run 🙂

          Bert

  7. I like all of these companies. As I was telling Lanny on the analysis, CSCO was the first dividend stock I ever owned and it has done very well for me. I recently added more shares to my stake in TGT and while I would love to add more now, it already makes up too much of my portfolio so I’m looking else where. O has been on my watch list for quite some time since I currently don’t own any and it pays monthly. Even though the price right now is good, I still feel it is slightly overvalued so guess we will just have to wait and see where it goes from here. Either way, no matter who you pick from these three from your watch list, you will not be disappointed. Great picks, thanks for sharing.

    • T was the first dividend stock I purchased and it will always hold a special place in my heart/portfolio. Have you added to your position at all over the years? I agree that O is not the cheapest stock out there right now; however, I do not think the value is terrible and I really want to add to my holdings. It would be pretty sweet to have a massive position.

      Thanks for the comment!

      Bert

      • I agree, O is an incredibly fun stock to watch grow. Especially if you have a massive position. Hopefully I can initiate a position soon before the price goes up. I wish I was able to add more to my shares of CSCO over the years but sadly it was just the one time. Got a great price of $27.9 back in 2015 and was able to DRIP a few shares since. I will add more to these shares in time but for now, I am holding off and trying to add completely new positions for diversity sake. Thanks.

        • Daze,

          Understandable that you are holding off on CSCO for that reason. Are they one of the largest positions? Or do you think you could add to it at these levels and build a strong position in the company?

          Bert

          • Currently, they are only 1.5% of my portfolio so there is still room to add more and grow. I would love to add more to it, even if it would raise my cost basis a little since it is a quality company. New capital is limited so just have to pick and choose where it goes.

  8. CSCO is at a great place right now, and after raising its dividend recently, I put INTC back on my list as well. Both seem like good value to me. I just have a hard time diving back into CSCO because my cost basis is so low already at around $23, it’s weird “averaging up”, not something I like doing.

    Added some Target recently. If it drops some more more I’ll consider adding one more lot to make it a full position.

    • Agree about CSCO and INTC. I have averaged up in the past. While it is a hard pill to swallow, I have no problem doing it if the current metrics indicate that the company is a buy. Just because your holding is showing a gain does not mean that you should be scared off from adding more if the price is right. Nice to see you added TGT as well!

      Bert

  9. Looks solid. I would love to hold CSCO. I am not entirely sure about TGT, seems like the entire retail business is undergoing a sea of change. It is quite possible TGT will come out strong. As I am investing in a taxable account, I don’t pick REITs in general.

    • Thanks Dividend Geek! Certain retailers have been hit harder than others, that’s for sure. And change is inevitable in the industry as online retailing really begins to make its impact. Time till tell which ones can hang and which other ones will be left in the dust. I feel good about Target though!

      Bert

  10. I do love TGT as a retail play with big upside. Stable business that is investing in their entire model and their shares as well. I think they have a great chance to figure out the current environment and maintain their place in the retail landscape.

    Still wanting O to come down before I start a position.
    SBUX still one of my favorites at this point for long term DGI stock.

    • Cameron,

      Thanks for stopping by! I am very happy to see that TGT is taking what is happening seriously and investing the capital needed to turn the ship around. Much more encouraging than a company that is too stubborn to realize change is needed. My wife owns SBUX and man is it a great company. One I should consider adding to when the price drops down.

      Bert

    • Gremlin,

      Great minds think alike, right? Interesting to see that you are focused on the insurance industry. What has caught your eye with TRV and AFL? Maybe you will be forcing me to make some moves here!!

      Bert

      • Bert,
        What I like about TRV and AFL is their payout ratio; both are below 30% (in terms of standard calculation – not in terms of FCF). In addition, both are sweetly valued. Also both have good history – TRV with steady 10% increases for 12 years (though there was a drop it appears in ’04) and AFL with 34 years of history. However, not going to lie, I have been looking at AMGN pretty hard too.
        -Gremlin

  11. Long TGT after their last hiccup in 2016 and a lot of DGI guys got hurt. I think retail is weak and might get even weaker before it gets stronger. I think TGT will come out on top long term, but that 11 P/E is incredible. I have some cash to put to work on more ideas so not adding any here but… certainly not a bad level.

      • I have my limits set for 10 buys which were above a 20 P/E and slightly below 3% yield. So far this week bought SBSI, GWW and GPC. Waiting for a bit of a tech pullback to fire onto INTC/CSCO/Cualcom

  12. Hey Bert,
    There is a reason why TGT PE ratio is so low… it’s because the company is going nowhere in the future. I’m sorry but the brick and mortar business is on a slow-death-path. TGT hasn’t bee able to find a growth vector in the past 5 years and they have wasted lots of money into their Canadian journey.
    If they can’t conquer new market in the brick & mortar store and they can’t compete with Amazon of this world online, where could they possibly grow? We have seen Sears, Zellers (Canadian), and Eaton (Canadian) all fall, Target will be part of this list in 10 years from now.
    I do like Cisco however 🙂
    Cheers,
    Mike.

  13. With the current valuation of target I’d say it’s a safe bet to load up. You can finally see a reversal trend and target has very good support in it’s current levels. Personally I was hoping to add in the $50 range but I don’t see that happening anytime soon now. I’ve always been skeptical of O but I may need to give them another look with how successful their track record is.

    • TGT is hot on my list at the moment. There is still time to make a decision before their next ex-dividend date, so my move may be towards the end of April or early may. That being said, I like the company in the long run and would love to continue adding to my position in this aristocrat!

      Bert

  14. Just curious. What about 3M? Is there any reason why ya’ll do not purchase 3M stock? Thank you for your website. I just getting started with dividend investing.

    • I love 3M, one of my favorite companies and I am a proud shareholder. However, their stock has been killing it this year and just won’t decrease. Trust me, I’ll be one of the first people knocking on the door when they decide to come back to earth 🙂

      Bert

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