December 2018 Dividend Watch List

December 2018 Dividend Watch List

The final month of the year is nearly upon us (what a ride these last couple of months have been too) and it is time to look at what companies I will be watching for a possible addition to my dividend portfolio.

During the month of November, I was able to snap up some shares of one company from my primary watch list (Exxon Mobile) and one company that was noted in my additional stocks to watch (Prudential Financial).

I was also able to take advantage of a nice discount on a stock that I had not mentioned (Target Corporation).

Hopefully December will bring more buying opportunities, and here are a few I will be watching:

Williams-Sonoma, Inc.

Founded in 1956, Williams-Sonoma is a specialty retailer with a primary focus on products for the home. They operate under a multitude of brand names, including Williams Sonoma, Williams Sonoma Home, Pottery Barn, Pottery Barn Kids as well as PBteen, and West Elm.

They have a 13-year track record of increasing their dividends and recent years have seen a 5-6%+ annual increase.

The stock price took a pretty good beating around mid-November when they announced earnings. They beat EPS estimates by $0.01 and missed revenue estimates by a narrow $10M. However, their comparable sales only rose 3.1% versus a consensus estimate of 4.0% and the market did not react kindly.

During their earnings call, they explained that the comp sales miss was due to unexpected delays in product receipts as a result of congestion out of China with many importers accelerating their shipments ahead of tariffs. Despite that miss, earnings per share still grew by 13.1% for the quarter and that was at the high end of their guidance range.

With the price decline, Williams-Sonoma has seen their dividend yield bump up over 3.0% and is roughly 13% above their 5-year average yield of 2.68%. Their P/E ratio is well below their 5-year average as well, and those two points combined indicate that the stock may be undervalued.

I’ll be looking to buy at a price below $55.00/share.

Williams-Sonoma Dividend Yield

Target Corporation

As I shared a link to my recent purchase above, I won’t rehash a lot of information on Target here.

I have wanted to add to my position in Target for some time, but was not anticipating I would see an attractive price for awhile. However, I was pleasantly surprised and grabbed some shares below $68.00/share and am looking to possibly add more should the price come back down below $70.00/share.

Their current dividend yield is slightly above their 5-year average while the P/E is below the 5-year average. I’d like to see that yield closer to 3.75% before I add more, so we will see if it happens to come back down a bit.

Target Dividend Yield

BlackRock

BlackRock is another company that I recently added to my dividend portfolio and I would like to continue adding more if the price is right.

While their current dividend yield of 2.93% is nearly 20% above their 5-year average, I would feel more comfortable seeing it closer to the 3.12% level where I bought my initial shares. However, that may be a case of being greedy as even at the current level I believe BlackRock represents a good value.

If I remain patient though, I may see that price close to $400.00/share as it has bounced around a bit over the last couple of weeks.

BlackRock Dividend Yield

Altria Group

After making a couple of purchases in recent months, I have been happy with my current portfolio weighting in Altria and really had not been considering adding more shares.

However, the stock price has been near 52-week lows primarily due to concerns surrounding the FDA possibly looking to ban menthol cigarettes. The market turned south on Altria as a result; however, I believe there is a lot of runway ahead if that even does come to fruition and as a result this may be a chance to grab more shares at a discount.

Their current dividend yield of 5.82% is awfully appetizing and well above their 5-year average that is closer to 4.0% yield.

However, if I am going to go overweight on this position, I’d like to see the stock price closer to $53.00/share to nab that extra juicy 6.0% dividend yield.

Altria Dividend Yield

AT&T

Here is another company that doesn’t need much introduction across the DGI community, and has been bantered back and forth whether the 6.0%+ yield is worth the lack of growth.

I don’t mind having a few positions in my portfolio that deliver a hefty dividend yield at the cost of a nice growth rate, and AT&T has fit that bill for me. With this being another position that is slightly overweight in my portfolio, I have been resisting an additional purchase.

Many people are concerned with their debt levels, and I won’t disagree at all as it is an astronomical amount of debt. At the same time, I am not sure those same concerns take into account that AT&T has forecast that they will have $25B in free cash flow during 2019. The company is a cash machine, and I believe they can begin to service that debt without sacrificing the dividend.

Should we see that current yield of 6.51% inch back closer to a ridiculous 7.0% dividend yield, I will have to take at least a small nibble and add some more.

AT&T Dividend Yield

Wrapping Up

The last two months have presented a nice selection of buying opportunities and I am hopeful we will see more in December. The key is to remain patient and wait for the target price.

I am looking to close out the year as strong as possible and do my best to meet–or even better, surpass–my revised goal of reaching $5,500 in projected annual dividend income. Hopefully some of the above stocks will provide quality entry points and help me get there, but if not there are always other opportunities as well.

What are you watching as the year draws to a close?

20 thoughts on “December 2018 Dividend Watch List”

  1. DD,
    it’s quite interesting to see your December watchlist, since I’m targeting many of these names as well. Confirmation bias, here we go =)
    My fovourites are MO, BLK and I would also add ABBV to your list.
    I’ve initiated a new position in BLK recently, when the price slipped below $400. I’m considering adding more BLK, in case it drops to this price level again.
    Thanks for sharing.
    Alex

    1. Welcome Alex, appreciate you stopping by!

      I agree with you on ABBV, and the only reason that I didn’t include them here is because I already have an overweight position with a fantastic cost basis so not looking to add more at this time. The same could be said for MO and T, but my position there is not as big as ABBV.

      Like you, I initiated my position in BLK at $396/share and would ideally like to add more in that range.

    1. Thanks Tom, for whatever reason I always seem to have one or two that aren’t widely discussed across the DGI community but I do think this collection provides some good diversity. Now I will patiently wait to see if my price points come to fruition.

  2. I own T, but I’m concerned that a number of people in my circle have started referring to it as “the next GE.”

    I’m not one to make buy/sell decisions based on the latest investment gossip, but T does seem to have transitioned into a company that makes acquisitions for the sake of making acquisitions a-la 1990s-2010s GE.

    1. Welcome Christopher!

      I’ve seen the same comments mentioned in a couple of Facebook groups that I am in, and I don’t see that path for them (although I am sure that is what people invested in GE were saying too).

      I do think they need to tighten up their strategy and vision for the future, and I would like to see them hold off on any acquisitions until they start getting that debt level down.

  3. Hey DivvyDad,
    I was going through your watchlist and the first three companies are all in my notebook watchlist as well 🙂 I noticed the price dips in WSM & TGT recently. BLK was in my watchlist a month ago but the price really got off from the recent lows and I didn’t use the opportunity then. Perhaps it will come down to $400 again.
    Looking forward to see what you are going to buy to reach that revised goal and further improve your amazing progress this year!
    BI

    1. Great minds think alike, right? 🙂

      In watching BLK, I’ve noticed it has had some pretty big swings day to day so I will be looking for that price level as well.

      I’ve got a few additional stocks on the radar too in case these primary targets don’t pan out in terms of entry points, but I want to remain diligent with my strategy and be patient to get the right price.

  4. I own 3 of the 5 names you mention. Of your list, I believe MO is the most attractive opportunity at the moment. How can you go wrong with a future Dividend King yielding 5.7% that grows its dividend by high single digits each year like clockwork? If I wasn’t committed to adding to my IRM position a bit more, I’d certainly be looking to lower my cost basis in MO.

    1. Glad to hear we are fellow shareholders on three of these companies Kody! With MO recently announcing their interest in buying a stake in Juul, I like how they are positioning into the e-cigarette space and that can even be a bridge to the cannabis space in the future too. Hard to resist that yield!

      Btw, I agree with you on IRM too and am hoping I can move some funds soon to take advantage of that while the price is still around this level.

  5. Divvy D –

    Solid list and is a hard choice. AT&T is appetizing because of the yield – if your position isn’t as large – not a bad time. I understand with MO – don’t want to be so overweight, but damn, their metrics are crazy too right now! Decisions… decisions.

    -Lanny

    1. Thanks Lanny, and I love having difficult choices like this right here. And that usually motivates me to scrounge up as much capital as possible to buy them all and not have to make choices, haha!

  6. Hi,

    you are having a nice list especially MO would be a great buy at the current price level. I haven’t heard anything from Williams Sonoma so far, need to have a closer look at them.
    Cheers
    Andy

    1. Thanks Andy, I’d be interested in hearing what you think of WSM if you take a look as it is always nice to gather different perspectives.

      MO is one of those companies that has faced a lot of headwinds over the years, but their management team is top-notch and has done a fantastic job of navigating that. Given my weighting right now, I am being a little more selective on the price but like them a lot here.

  7. Many terrific companies you’ve highlighted, DivvyDad. I own TGT, BLK and MO, and have taken a good look at WSM in the past. T is not in my wheelhouse though due to its slower growth. If you are looking for current income though, T can fit the bill.
    Your price points look good to me. TGT and MO are two that I could see making adds to given their current weighting in my portfolio.

    1. Thanks ED, and you’re right about T with the slow growth. I am comfortable having a couple of positions in the portfolio where the yield churns off a nice amount of cash but it doesn’t grow much. Certainly I don’t want too many like that, but slow and steady is okay selectively for me.

      Appreciate the feedback, and hopefully the coming month brings us opportunities to make some adds!

  8. Great picks to invest in! I like the quick but well detailed information about the companies that you provide. Even though recently I mostly switched to investing in ETF’s vs DGI stocks, I’ve been thinking about using some credit to purchase AT&T and Altria for their generous dividends. Great to see you like these companies and these prices too. BlackRock is also a solid choice and was a true steal around $380! Good luck pulling the trigger this month!

    DI

    1. Thanks DI, glad you like the structure! I need to stop by to see if you’ve shared more insight on your decision to switch up from DGI stocks towards ETF investing (I have a couple of assumptions).

      Appreciate the feedback!

  9. Hey DD,

    Some interesting food for thought in here.
    MO has been popping up on a lot of radars lately and I have shortlisted it for a closer look.
    WSM is one for which I am familiar with the stores but have never actually investigated it; I didn’t even realize it was a public company, to be quite honest. If their store layouts are an overall indication of how the company is run, I could see this being one I would be interested to get involved with.

    Take care,
    Ryan

    1. Thanks for the feedback and for stopping by Ryan! Yeah MO has definitely been quite popular lately with their decline in price and some of the latest rumors about them circling Juul and now a couple of cannabis companies for possible investments and/or acquisitions. I am quite impressed with the management team at MO.

      Interesting note on WSM, as I am a bit the opposite in that I have a general familiarity with their stores but cannot say that I have shopped there (with the exception being Pottery Barn, although that was mostly window shopping as I am not one to pay those kind of prices but they do have nice things).

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