September 2015 Stock Considerations

What a wild ride August has put us through. The month has shown us that no place was safe to hide as the Dow, S&P, NASDAQ and practically all commodities swooned violently and recovered somewhat before closing out on the 31st. The seeming financial contagion has seen its roots take hold across Asia as China’s Shanghai Composite Index fell a whopping 12.49% while Hong Kong’s Hang Seng ended the month down 11.94% and the Nikkei declined 8.23%. Of course, European markets performed poorly as well, and the American markets saw its biggest monthly decline since 2010. What does all this mean for a long term dividend investor? Sale! After such a poor performing August multiple stocks across various sectors are looking a lot more attractive. Many industrial names are suddenly sporting much better valuations as well as yield along with a few consumer staple names that are starting to make my consideration list for September.

 

August was a light month for new buys in my portfolio as only one purchase was made the whole month. I’m looking to buy more in September, especially if the market continues to provide opportunities for me to average down on some quality dividend payers I already own.

 

With that being said, let’s take a look at my September 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 and the energy sector weigh on this cyclical giant. With a current dividend yield sitting around 4% this industrial name is hard to ignore.

 

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%.

 

Sticking with the industrial theme, Dover Corporation (DOV) is another September 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.

 

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 12.3 which is well below its five year average of 15.4 has a current yield of 2.41%. Of course, current commodity price headwinds persist for this name but with the current market swoon ADM prices have become a lot more attractive.

 

As usual, no month of potential stock picks would be complete without the mention of my three favorite Canadian bank stocks, The Toronto-Dominion Bank (TD), The Bank of Nova Scotia (BNS) and Royal Bank of Canada (RY). It seems that all five of the large Canadian banks have seen substantial declines in August driving the current yield for all three of these stocks to well over 4%, a yield which is hard to ignore especially since it’s well covered by present cash flow. Of course, I always qualify these stock considerations with the premise that Mr. Market may have other plans for my portfolio but more often than not I stick with my list each month.

 

What do you think about my September 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

30 thoughts on “September 2015 Stock Considerations

  1. Keith,
    You and I have complementary stock picking skills. We do not hold any of the stocks that you are considering. On the other hand, they are all solid companies and I know that most are bargains right now.

    Looks like you are mostly considering industrials and financials. In the last couple of weeks, we have added to positions in those two sectors with purchases of UNP, UTX, and TROW. I believe that we will both see the benefits in the years to come.
    All the best,
    KeithX

    • Hi KeithX,

      Perhaps our two portfolios should merge into one ‘super’ dividend income machine. Granted, there is a lot of overlap between many DGI portfolios because, let’s face it, we all pretty much invest in high quality names exclusively. From your picks I do like TROW and I also have TRV on my watch list. Another industrial name that has come to light recently is ETN. You know the saying, “too many great companies, too little capital.” As always, I appreciate your insight.

  2. Nice list, DivHut. I have to re-check ADM to see if I want to add there .. its been a while since I bought it and now that its down in the low 40s, I think it might be a good time.

    Thanks for sharing your watchlist.
    R2R
    Roadmap2Retire recently posted…Recent BuyMy Profile

    • Hi R2R,

      ADM has been a very small position in my portfolio for a short while. It’s still a relatively new position for me and with its recent decline I started to like the value and yield a lot more. The reality is that these days we are presented with many options of where to deploy our fresh capital. Many industrial and consumer names that looked untouchable just over a month ago are now looking a lot more enticing. Thank you for stopping by and commenting.

  3. Solid list DivHut. I’m looking at ETN as well. A lot of the industrials are looking good really good here. Hope to get a chance to check out DOV and ADM throughout the month. Hopefully capital availability will allow me to make a purchase in September but it’s looking really tight. Have a great September and looking forward to see what you buy.
    JC @ Passive-Income-Pursuit recently posted…Dividend Growth Investing at Work – A Double Helping of Dividend IncreasesMy Profile

    • Hi JC,

      Thanks for sharing ETN. It’s another great industrial play with a long dividend history that looks quite appealing. I like the relatively low PE compared to its five year average even for a cyclical play. The yield looks quite juicy too. Always great to bounce new ideas off one another and see where we each deploy our fresh capital. DOV is certainly hurting quite a bit because of its oil and gas services unit but still looks quite solid long term. Thank you for stopping by and commenting.

    • Hi DG,

      Thanks for sharing your considerations. I wrote about GPC a while back and do like TROW in the financial space. After CB was bought out by ACE I will be looking for another financial play next year. TROW and TRV are looking interesting to me. Not familiar with FTT at all. The Canadian stocks that I like are all banks. Thank you for your comment.

    • Hi BSR,

      Ah, the allure of the oil and gas industry. Can’t blame you. It’s been a very long time since we have seen the energy stocks at these prices, values and yields. I guess the only question is whether these oil majors can continue to pay out their dividends while you wait for prices to recover. A calculated risk that many are taking with you. Thank you for stopping by and commenting.

    • Hi Tawcan,

      Like energy, it seems that there is no bottom for the Canadian banking stocks in the near term which is why I have been buying into the sector almost every month for a year. These days we are being presented buying opportunities in other sectors as well such as industrial and some consumer staples. As you stated, “running out of cash” which is a first world problem but still a problem nonetheless. It’s amazing how everyone in the DGI community is so focused on investing. It’s great. Thank you for commenting.

    • Hi FV,

      Interesting point about the ADM tailwind with a growing middle class in China and India. No doubt macro issues such as reliable food sources and clean water will continue to be an area of growth and stability for decades to come. As always, I appreciate your comment.

  4. Hi DH,

    I am only making one large buy this month and that’s $1000 worth of KO in my Loyal3 to max out at 100 shares and finish this position for now. The rest of the month I am flipping ADM with all my dividends and I will buy 1 share of JNJ with my BBL money at the end of the month.

    With so much chaos going on I think it’s time to recession proof my portfolio. I want to point out that ADM lost half of its value during the 2008 recession but still maintained and even increased its dividends by cutting cost and buying companies. I like how they are carving up South America to hedge against the strong dollar while still making money trading with China (China and Brazil has a trade pact with no or little tariff while the money still comes back to the US).

    • Hi TBDI,

      Almost every stock I own today I held through the 2008 recession and I know what it’s like to see some stocks drop by 30%, 40% or even 50%. It wasn’t fun but my main concern was maintaining my dividend growth and thankfully every company I held continued to pay dividends and most even continued to grow their distributions so I know exactly what you mean by “recession proofing” a portfolio. For me that meant loading up on many consumer staples as you are planning to do with KO. Thanks for the additional input regarding ADM. It definitely seems like a company that’s poised for continued long term growth even if there is a hiccup or two along the way. As always, I appreciate your comment.

    • Hi EL,

      After one of the worst performances in August I’m sure a lot in the DGI community will be looking to pick up some high quality names at discounted prices. After all, the yield on many solid dividend payers are well over 3% and 4%. I wonder if EMR will continue to be popular as they also plan a spin off in 2016. It’s nice to see some industrial and consumer names trading at better values/yield than just the usual energy names we have become accustom to. Thank you for commenting.

  5. Hi DH,

    I like your list of stock considerations for September. With the market acting the way it’s been, it’s definitely a great time to go shopping for stocks if you have the capital. I haven’t done any research on the Canadian banks; do they also have a history of dividend increases?

    • Hi ACI,

      With these wild gyrations in the market these days we are being given the chance to buy into many different high quality companies and various sectors. For a long time the central dividend investing theme among the DGI community has been energy. Now, we have great buying opportunities in financial names, some consumer staples and industrial companies. Regarding the Canadian banks, I think that you will see between one and five different banks in almost every DGI portfolio. The popular names are TD, BNS, RY, BMO and CM. Those five large Canadian banks have been paying dividends for well over 100 years and have a history of raises as well. During the financial crisis none of the large Canadian banks reduced or eliminated their dividends, which, unlike the large U.S. banks did. Thank you for stopping by and commenting.

    • Hi R2R,

      It’s been a while since we have seen many of these industrial names at such great values and yield. Of course, no one really knows when the bottom will come in. We saw this same thing happen in energy as many have bought in to the sector only to see continued declines for over a year. No sense in trying to time the markets. As long as there is value and good yield that is sustainable then it’s time to buy in and get paid to wait. Thank you for stopping by and commenting.

  6. Nice list of considerations there. I hold positions in all except the Canadian banks listed. This last month has really brought a lot of great companies into the more attractively valued space. Good news for us value based investors, bad news for the short term buyers. Hope you have a wonderful September, if nothing else, the weather should be cooler.

    – HMB
    HMB recently posted…Recent BuyMy Profile

    • Hi HMB,

      After that wild August I think we are ready for more volatility should it come. It’s nice to know that people in our DGI community did not sell in a panic rather used the volatility to pick up more shares at much better prices and value, not to mention more attractive yield. Unless something major happens I see myself sticking firmly to my September considerations. Let’s face it, they are all solid long term dividend payers and over the next ten or twenty years I have a feeling that I’ll be happy from a dividend and capital appreciation perspective with any pick I make from the list. September is still quite hot. The heat never bothered me. I like it on the warm side. Here’s to more great buys as we look to close out 2015 soon. Thanks for commenting.

  7. I think you should switch it up and go for some of those industrials. I own all of them except DOV.

    I’m enjoying the volatility, though I haven’t had the capital to invest and won’t until next week. Hopefully we’ll get a minor correction next week.

    Too much to ask for?

    Sincerely,
    ARB–Angry Retail Banker
    ARB recently posted…The Nasty Customer That Got To Me TodayMy Profile

    • Hi ARB,

      The market has certainly given us some new buying opportunities in industrial and consumer staples. While I still like the large Canadian banks I also am looking at several industrial names too. Correction or not, the goal is to constantly be investing. Let’s see what September has in store for us. Thank you for commenting.

  8. Nice watch list DivHut! I own two of the three in EMR and ADM and love both of the stocks. Great dividend growth investments that are trading at a very nice discount right about now. EMR still has my eye as the yield is ~4%. What a great time to pick up some great dividend growth stocks. I love when the market gives us these kind of opportunities!

    Thanks for putting the list together.

    Bert
    Dividend Diplomats recently posted…Lanny’s Recent Purchase – JNJMy Profile

    • Hi DD,

      As you know I like to outline a road map of potential buys at the start of every month. I’d say that I generally stick to my stock considerations about 99% of the time. It kind of takes the emotion out of investing if you already like a particular stock, do the research and think it’s a good fit for your portfolio. I still have my eye on EMR and ADM. Hard to argue when the yield of a dividend stalwart starts hitting around 4%. No doubt, August has definitely opened the doors for new stock opportunities. Thank you for stopping by and commenting.

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