October 2018 Dividend Watch List

The month of September did not present a wealth of buying opportunities for me, at least outside of the REIT purchases that were made with the funds from my pension rollover.

With the dawn of a new month, I am keeping my eye on a selection of stocks that I currently own but would like to add to if the price is right. This month I will continue to focus on adding to existing positions rather than introducing new positions to the portfolio.

Here are the stocks that are on my radar.

AbbVie

AbbVie is one of my longer-term holdings as I have held it since the spin-off from Abbott, and I’ve been rewarded handsomely with a cost basis of $19.08/share.

With a current yield of 4.08% and 6 years of increasing dividends, I am watching this one closely for a potential add. While this is currently one of my larger holdings, it will be hard to resist adding a little more if we see the price test the sub-$90/share level again.

They have a solid double-digit growth rate over the last 3 years and have a payout ratio of approximately 48% right now. With estimated EPS growth of 15% in the coming year, there is upside here despite concerns about their pipeline and looming biosimilars.

General Mills

General Mills has been beaten down throughout 2018, and quite a few people are leery of investing because there is a sense that the company doesn’t connect with the millennial generation.

However, their 14-year history of dividend increases and 4.49% dividend yield are certainly enticing. Their payout ratio has been creeping upwards and currently checks in around 64%. Combined with subpar EPS growth this year and next, this does not come without a degree of risk.

In the event that the price moves down to the $40-41/share range, I will have a hard time saying no though.

Genuine Parts Company

Genuine Parts Company is a Dividend Champion with an impressive 62-year history of increasing their dividend. They have been working to sell off S.P. Richards, which is the part of their business that distributes industrial replacement parts, however the merger with Essendant appears to have fallen apart. The S.P. Richards company has not produced well for GPC, and I believe selling it off will benefit them in the long run.

At a current dividend yield of 2.90% they are trading slightly above their 4-year average yield of 2.65%–indicating that they may be slightly undervalued. I’d like to see the dividend yield up around the 3.0% or even slightly higher to have a bit more margin of safety, but it is hard to be disappointed with their long-term history.

Kellogg

While Kellogg is another unsexy company, they do have a respectable 15-year history of increasing dividends and currently carry a 3.12% dividend yield.

While their dividend growth is not overly impressive–checking in around the ~4.0% mark over the last 1, 3, and 5 years–they are quite consistent. The forecast over the next two years is for slightly reduced earnings growth of around 4-5%, which is better than that of General Mills, and their payout ratio around 50% gives them some flexibility.

I’d like to see the price down around $68/share before I begin to nibble and should it find it’s way down below $65/share I will begin to take bigger bites.

AT&T

AT&T has been a love/hate for many in the DGI community, as quite a few people were adding shares prior to the Time Warner deal while it seemed an equal number of people were frustrated with the lack of upward movement in this stock during this amazing bull run.

While this is one of the handful of holdings that I have over 100+ shares, I am watching closely to see if there might be an opportunity to add more shares close to $32/share or better.

There is no doubt that they took on a massive amount of debt with Time Warner, but they also generate a wealth of free cash flow. I believe they are positioning for a move upward (maybe just wishful thinking on my part) but even if they remain in this range, it is hard to be disappointed with the 6.0% dividend yield.

Verizon

Talking about AT&T, it is hard not to mention Verizon in the same breath. The two companies are in a race for 5G rollout while neither will impress you with their dividend growth.

However, with their dividend yield checking in at 4.54% it is another nice income producer. They did recently announce that they will be offering early retirement packages in an effort to reduce their workforce, so it will be interesting to monitor how the market responds.

While I believe they may be slightly undervalued here, I’d like to see the price down around $50/share or better to improve my margin of safety.

Additional Stocks to Watch

In addition to the handful above, I will continue to keep an eye on a few from my September Watch List such as Prudential Financial and Snap-on as I would like to add more at the right price.

Rounding out the list is one that I’ve made a few additions to in recent months–Altria Group–as I believe they still represent a good value at these prices, and then one that I’ve wanted to add but don’t currently think they are a great value at the present price–Exxon Mobile.

I’d like to see XOM down below $80/share and preferably closer to $77-78/share before I consider adding, so I don’t anticipate any activity on this one right now.

Wrapping Up

Overall, September was pretty quiet in terms of adding new capital–again with the exception being the basket of REITs that I purchased. The stocks that I was watching really did not present a lot of great buying opportunities, and it is important to remain patient and not over-reach to make a purchase.

Hopefully the new month will provide some more attractive buying opportunities, and I certainly have a nice handful of stocks to watch for possible purchases with capital at the ready to strike.

Are you watching any of these stocks right now?

What is on your watch list for October?