Wow, another quarter of 2015 is in the books. Can you believe how fast time flies? Here we are entering the home stretch of the year when our annual dividend income pictures begin to look a lot clearer as we begin to assess our income goals for the current year and see how close we come to achieving said goals or if we are fortunate to have surpassed our intended goal. Looking forward to October and the final quarter of the year it’s time once again to assess where my fresh capital will be deployed.
As we have witnessed in September, the market has continued to function with its increased volatility which started in August. Triple digit moves in the DOW have become a lot more common as market swoons and rebounds seem to occur every few days. Because of this volatility I am finding many great opportunities within my portfolio holdings to average down on some very high quality dividend payers at better prices, value and yield. It’s my intention to add to my existing holdings in October and not initiate any new positions for the month. With that being said, let’s take a look at my October stock considerations.
First on my list is Caterpillar Inc. (CAT). A dividend stalwart that needs no introduction, CAT has fallen dramatically out of favor as troubles in China, the energy sector and mining weigh on this cyclical giant. With a current dividend yield sitting around 4.71% this industrial name is hard to ignore. I have held CAT through the great recession and did not sell one single share. I think it’s important to note that if you plan on holding a cyclical industrial like CAT long term, you must expect price swoons from time to time. With a current PE of 11.2 which is well below its five year average of 18.2, CAT is clearly showing signs of near term headwinds. In my book, it’s a great time to add to this dividend machine.
In similar vein, another industrial giant that has been taken to the wood chipper and has caught my eye is Emerson Electric Co. (EMR). Another dividend “giant” with aristocrat status, EMR is sitting near 52 week lows and also sports a relatively high dividend yield approaching 4.26%. Like CAT, EMR is facing the same cyclical headwinds that is typical of an industrial company. With a current PE of 12.2 which is also well below its five year average of 20.2, EMR is looking a lot more enticing than in recent months.
Sticking with the industrial theme, Dover Corporation (DOV) is another October consideration of mine. A company with a very long history of dividend raises is no doubt feeling a bit of pinch because of lower oil prices as demand for their oil and gas services are weakening in the near term. While not the highest yielding of the bunch, DOV looks a lot more attractive in recent months as valuation is coming more in line with present cash flow. Currently yielding 2.94% with a current PE of 14.1 DOV is slightly below its five year average PE of 15.7.
In the consumer goods space Archer-Daniels-Midland Company (ADM) is making my radar screen as well. Another dividend aristocrat which is currently sporting a PE of 11.5 which is well below its five year average of 15.4 has a current yield of 2.70%. Of course, current commodity price headwinds persist for this name but with the current market swoon ADM prices, value and yield have become a lot more attractive.
Of course, no potential pick for the month would be complete without my acknowledging the large Canadian banks in my ROTH, The Toronto-Dominion Bank (TD), The Bank of Nova Scotia (BNS) and Royal Bank of Canada (RY). I am still a fan of the large Canadian banks but with $1,165.00 remaining for my 2015 contribution it appears I have room for just one more buy before we ring in 2016.
What do you think about my October stock considerations? Are any of the names mentioned on your potential buy list as well? Please let me know below.
Disclosure: Long CAT, EMR, DOV, ADM, TD, BNS, RY