September 2018 Dividend Watch List

Monthly Watch List

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.

In the month of August, I had capital at the ready but the opportunities were not as abundant. However, with the proper patience I was able to make two additions in Cummins and one in Altria Group.

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 Inc.

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.

Honorable Mention

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?

12 thoughts on “September 2018 Dividend Watch List”

  1. Nice names, a lot of new names for me personally. I saw Snap and wondered what it had to do with dividends, or investing in general anyway. Then I started reading and it looked quite good, thanks for giving me some extra names to research, cheers!

    DI

    1. Thanks DI, appreciate you stopping by.

      That is one of the things that I love in the DGI community with people posting about their purchases, watch lists, and monthly summary is that it can open you to new stocks that you had never considered before.

    1. Hi Lanny, these are a bit different than most watch lists that’s for sure but I’m hopeful there will be some good buying opportunities to keep building that forward income. Let me know what you think if you take a look at any of these.

  2. None of those stocks are on my radar, but it seems like you’re being very wise with the deployment of your capital. Right now, I’m focused on increasing funds into my existing position before branching out. I still like reading about other people’s watchlists because every now and again, something might catch my eye. Good luck with the investments DD.

    1. Thanks for the feedback DP! I’m trying my best to be wise with my capital, and I realize these stocks aren’t on the radar for many people—but as long as they are consistent with my guidelines, I’m okay with that.

      Keep up your good work as well!

  3. I’ve still got CMI on my list…. looking for a good entry point. I’d really like to see it dip below $130, but I don’t think that will happen unless the market turns south. So, maybe something below $138 will be enough for me to start a small position. That’s not too far away.
    I don’t recall where, but I remember seeing PRU get some purchase interest recently. I don’t follow PRU, but see that it’s pulled back since market volatility ratcheted up in late January, like many other stocks.

    1. I’m with you, my 2nd purchase of CMI in August was when it dipped down below $137/share and if it gets around that again I may have to nibble a little more.

      I recall seeing PRU on one of Chuck Carnevale’s posts about 12 undervalued stocks, but other than that I haven’t seen them mentioned too many places. I’d like to see if they pull back to around the ~$95 range to lower my cost basis a touch.

  4. Hi Divvy Dad,
    Thanks for a nice list – some companies I have not heard of and they look attractive based on what you wrote. None of them were on my radar so I will need to look into them closer 🙂
    I was currently looking into Illinois Tool Works, Albemarle Inc. and an Estonian company in my local market (Baltic exchange).
    -BI

    1. Thanks for the feedback BI, and appreciate you stopping by! I know these picks are a little off the beaten path, and if I wasn’t focused on adding to existing positions I’d be looking at ITW as well—it definitely seems like it is the DGI darling right now. I’m not familiar with Albemarle.

  5. Having just returned from a road trip to Colorado, we passed many a Cracker Barrel. It’s not our type of food, so we didn’t stop, but I am an owner. I like to have a couple restaurant stocks in my portfolio for diversification (MCD being the other). I used to own Darden, but I sold it when I thought the dividend was at risk. I think I missed that call and gave up some upside along with the nice dividend yield. Tom

    1. Hope you guys had a great road trip! Like you, I haven’t actually eaten at a Cracker Barrel in quite a few years as it isn’t our cup of tea either–I don’t mind it so much but my wife and boys are not fans. EAT is my other restaurant holding, although I am watching them closely as they didn’t increase the divvy on their normal cycle. Trying to give them a little rope but am being cautious–I’d probably be looking to add if they had raised the divvy as expected.

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