Dividend Stocks to Buy: February 2014 Watchlist

With the recent dip in the market, it is time to shop for some blue chip companies for good yields and growing income.

For this month, I came up with these dividend payers.

Blue Chip Dividend Stocks

These are companies which have grown their dividends for over 15 years. Most generate revenue from different parts of the world.

  • Chevron (NYSE:CVX) – yield: 3.57% (next expected dividend raise: Q2 2014)
  • Coca-Cola (NYSE:KO) – yield: 2.95% (next expected dividend raise: Q1 2014)
  • International Business Machines (NYSE:IBM) – yield: 2.14% (next expected dividend raise: Q2 2014)
  • Procter & Gamble (NYSE:PG) – yield: 3.11% (next expected dividend raise: Q2 2014)


Chevron logoChevron is a big oil company, which pays an attractive dividend of over 3.5%, higher than its 5-year average of 3.3%. It’s paying out 31% of its earnings for its dividends, indicating there’s room for it to grow. Furthermore, Morningstar gives it 4-stars, meaning the shares are currently undervalued. I usually try to get some Chevron starting at the 3.5% yield, and that’s what I did recently. Furthermore, if history is telling, then, having raised dividends for 26 years in a row, CVX will be increasing its dividend in Q2 of 2014, which is very soon!


Coca-cola logoCoca-cola should be a familiar brand name for all who lives in a first world country. It sells non-alcoholic beverages via its wide-reaching global distribution system to over 200 countries. Its recent 10% acquisition of Green Mountain Coffee Roasters, and long-term relationship with the company will help add a kicker to Coca-cola’s growth. It is now selling at 18% discount according to Morningstar. Value Line projects KO’s price to be in the range of $50 to $60 by 2016-18. That is an upside of 31.8% to 58%, while starting with a yield over 3%, as Coca-cola is expected to raise its dividends in Q1 2014. See Value Line’s full report on KO (pdf).

International Business Machines

IBM logoIBM pays a lower dividend of 2.14%. Some investors have been staying away from IBM because of its lagging revenue growth. But, it is still generating free cash flow. It is using some of that to perform share buybacks. As a result, its earnings per share continues to grow as the number of outstanding shares reduces. This should translate to continued dividend growth and steady price appreciation. Morningstar indicates IBM to be selling at a 17% discount. Value Line projects IBM’s price to be in the range of $235 to $285 by 2016-18. That is an upside of 32.6% to 60.8%, while earning a 2% dividend for the wait. See Value Line’s full report on IBM (pdf).

Procter & Gamble

Procter and Gamble logoProcter & Gamble has 50 Leadership Brands which are easily recognized brand names, including Tide, Pantene, Pampers, and Duracell. PG generates 90% of its sales and profits from these 50 brands. 25 of these brands are billion-dollar brands, generating over $1 billion in sales every year! Procter & Gamble now yields 3.1%. Allocating capital here now, keeps our purchasing power in pace with the recent inflation rate of 3%. With the 3-year average dividend growth rate at 7.7% and 5-year average dividend growth rate at 8.5%, analysts estimated earnings around 8%, but relatively high payout ratio of 63.6%, I expect PG to continue growing its dividend between 5 and 7% annually. We’ll see if I’m right when it raises its dividend in the second quarter this year.

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 * Yield Morningstar stars Morningstar Fair Value Estimate Upside to Fair Value Finviz Technicals
CVX $112.05 3.57% 4 $130 16% Chevron’s price is bouncing off from a support line, and recovering from being short-term oversold.
KO $37.95 2.95% 4 $45 18.6% Near-term support is in the $37 area, and resistance in $39 area.
PG $77.31 3.11% 4 $89 15% Bounced off from a support line
IBM $177.25 2.14% 4 $208 17% Bounced off from a multiple bottom, indicator of bullishness

* Closing Prices & Yields of February 7, 2014.

My Action

In this market dip, I initiated a position in Procter & Gamble and added to my positions in Coca-cola and Chevron. I did not buy them at the lowest prices as being able to do so is based on chance (though it can be helped with technical analysis). My focus was to get more shares of these blue chip dividend growers at a good yield.

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Disclosure: At the time of writing, I am long KO, PG, CVX, and IBM.

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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