There has been a small market pullback of ~5% since mid-September. From my watchlist, and picked out some dividend growth companies that are worth further investigation. Of course, you as your own portfolio manager should determine whether these companies are a right fit to your portfolio based on diversification and allocation needs.
I have shortlisted my watchlist for the month of October. This list is for do-it-yourself investors who are looking for income growth and steady price appreciation for their long-term portfolio. Here is the shortlist:
- Wal-Mart (NYSE:WMT) – $72.9
- Target (NYSE: TGT) – $62.13
- Exxon Mobil (NYSE:XOM) – $85.51
- Coca-cola (NYSE: KO) – $37.28
- International Business Machines (NYSE:IBM) – $178.72
- Qualcomm (NYSE: QCOM) – $66.35
Exxon Mobil and Coca-cola are repeats from my August Watchlist. In fact, they have gotten cheaper! Realty Income (O) was removed from this list although its price remained essentially the same. It is because I believe 15% of the distribution is still withheld for REITs for a Canadian even if the REIT stock shares were bought in the retirement account. In addition, there are many other companies which grow their dividend faster than Realty Income. That said, Realty Income gives a high yield for US investors, so it may serve the purpose of immediate income. Also, because it pays its dividend monthly, it may serve well for a long-term portfolio by reinvesting its dividends automatically. I also took out Yamana Gold as this month’s list focuses on dividend growth payers. (I still hold my shares of Yamana Gold.)
Wal-Mart and Target
Both Wal-Mart and Target are mega-stores which have been paying a growing dividend for over 38 years! I like both companies, although Wal-Mart has a higher S&P rating, and has more stable earnings. Wal-Mart’s 5-year average dividend growth rate is 14%, while Target’s is 21%. With their current yields of 2.5+%, it’s not a bad time to buy some shares.
With its yield close to 3%, it isn’t a bad time to initiate a position in this blue chip. For the long-term, I think Exxon Mobil is a good investment.
As stated from my August Watchlist article, I added a small block of Coca-cola when it got close to the 3% yield. It is actually at the 3% yield at today’s close.
International Business Machines and Qualcomm
For those who want to venture into the IT sector, both IBM and QCOM are looking good. IBM has been keeping its normalized historical P/E at around 15. It currently sits at around 11. Qualcomm is undervalued according to Morningstar and FAST Graphs.
Valuation, Upside, and Technicals
These are just some quick numbers I bring up from Morningstar. The technical comment is just my quick opinion after I look at the Finviz charts. In other words, this is a quick and dirty analysis. Remember to perform your own due diligence before investing.
|Ticker||* Price||Morningstar stars||Morningstar Fair Value Estimate||Upside to Fair Value||Finviz Technicals|
|WMT||$72.9||3||$74||1.5%||For the past couple days, moving sideways around support of $73. Really need to wait for further price action to see go up or down.|
|TGT||$62.13||3||$64||3%||In a downtrend. May hit support line around $61.8|
|XOM||$85.51||4||$97||13.4%||A second support line is forming in the $85-86 area|
|KO||$37.28||4||$45||20.7%||Still in a downward channel. Bottom of channel in $37 area|
|IBM||$178.72||4||$208||16.4%||Breaking support on the downward channel.|
|QCOM||$66.35||4||$75||13%||Heading towards major support line.|
* Closing Prices of October 8, 2013.
From my latest article on Seeking Alpha, I wrote about Why Building A Cash Position For My Dividend Income Portfolio Makes Sense. I’m sitting on my hands to prevent myself from buying shares in the above companies because I want to keep a cash position. Though, I still think Coca-cola, Exxon Mobil, IBM, and Qualcomm are undervalued now. Wal-Mart and Target are at fair value. As a Canadian, I also have to consider the exchange rate at the time of purchase. My bank is asking for $1.051 CDN for $1 USD today. This means if I bought any US shares today, they would be 5.1% more expensive.
If you like what you've just read, consider subscribing via the "Subscribe Here" form at the top right so that you will receive an email notification when I publish a new article.Disclosure: At the time of writing, I am long KO, WMT, TGT, IBM, and QCOM.
Disclaimer: I am not a certified financial advisor. This article is for educational purposes, so consult a financial advisor and or tax professional if necessary before making any investment decisions.
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