The last two months have been rather busy with deploying new capital into my dividend portfolio, and as kids head back to school across the country I thought it would be a good time to sharpen my pencil and share a few of the stocks I will be watching in the month of September.
With my strategy right now being focused on adding to existing positions, here are the primary stocks I will be watching in September:
Snap-on is a company that I am quite familiar with, as both of my boys work in automotive shops and the Snap-on tool trucks make weekly visits to sell tools and equipment. Their products are not cheap by any means, with toolboxes running as high as tens-of-thousands of dollars and tools selling at a premium as well.
The appeal with the mechanics are that their tools are extremely well made, and they come with a lifetime warranty should there be any kind of issue.
Looking at the numbers, Snap-on has an underwhelming dividend yield of 1.84% but they have a very strong track record of dividend growth–with 1-year, 3-year, and 5-year dividend growth all averaging over 16%. Their payout ratio has consistently been a little under 30% and that leaves them plenty of flexibility to cover the increasing dividend.
Snap-on Incorporated was founded in 1920 and is headquartered in Kenosha, Wisconsin. They are a dividend challenger with an 8 year history of increasing dividends.
Prudential Financial Inc.
Prudential Financial provides insurance, investment management, and other financial products and services to customers throughout the United States as well as internationally.
They appear to be quite undervalued right now, however there are risks coming out of their latest earnings call where they missed estimates by $0.06 and have declined since that time. However, like Snap-on, they maintain a payout ratio in the neighborhood of 30% so they do have some cushion to maintain increases to their dividend.
Right now they have a dividend yield of 3.66% with healthy dividend growth over recent years. Last year their dividend growth did come in lower than prior years at about 7% but their 3-year and 5-year growth has been in excess of 10%.
Prudential Financial was founded in 1875 and is headquartered in Newark, New Jersey. They are a dividend contender with a 10 year history of increasing dividends.
Cracker Barrel Old Country Store Inc.
For those that live in the United States and have ever taken a road trip, you have most likely seen and possibly visited Cracker Barrel at some point. They are known almost as much for their gift shop as they are for their restaurant. As a child, I remember visiting when we would take a vacation (we always drove everywhere) and browsing the toys in the gift shop while we waited for our table.
Cracker Barrel is another stock I’ve been eyeing for a purchase, and narrowly missed having an order filled in August.
They have a dividend yield of 3.34% and have had very nice double-digit dividend growth over the 3-year, 5-year, and 10-year periods. However, the last two years have seen that decline with single-digit growth.
Unlike the prior two companies, Cracker Barrel maintains a higher payout ratio that has generally been in the 55-60% range. While that still falls within my general guidelines, it does not leave as much flexibility for growth if they see earnings decline. Fortunately, they have beaten analyst estimates by a considerable margin in each quarter this year.
Cracker Barrel was founded in 1969 and is headquartered in Lebanon, Tennessee. They are a dividend contender with a 16 year history of increasing dividends.
In addition to the companies above, there are a couple more that I will be keeping an eye on over the month of September for possible entry points.
- Cummins continues to be very attractive to me, and despite making two purchases in August I may look to add a little more if they continue to hover in the neighborhood of $140/share. Their Power Generation unit was just awarded a $490-million contract to provide tactical generators to the U.S. Army and demand for their diesel truck engines continues to look strong.
- Brinker International, EAT, is looking undervalued to me; however, I have a little hesitation as they typically announce their dividend increase in August but there was no raise this year. They are a dividend champion with 38 years of increasing dividends, so I am hopeful they will increase in November ahead of their December payout. They have a low payout ratio but have a considerable amount of debt, so it is possible there will be no increase.
August has been another busy month of deploying new capital, and I am looking forward to continue that in the month of September. While I will be focusing on the stocks above, I will remain fluid and continue to evaluate all of my holdings for possible purchases.
Are any of these on your radar for September?
What will you be looking to purchase?