With half of September over, it’s time for me to take a look at some potential stock picks for my long term dividend growth portfolios. The last few months have seen me make one or more small buys as I continue to nibble on stocks as many of them remain on the expensive side from a valuation and yield perspective. Of course, sometimes all the planning and calculations made for potential stock picks can get thrown out the window when the market drops unexpectedly as we saw last week. Because of that big drop I took advantage and nibbled on four positions already in my portfolio which included, The Coca-Cola Company (KO), General Mills, Inc. (GIS), McDonald’s Corp. (MCD) and V.F. Corporation (VFC).
I had mentioned over the summer that I am looking to diversify my dividend income as much as possible so as to not become too reliant on just a handful of stocks for the majority of my dividend stream. With that being said, I am looking to initiate a new position or two from my watch list and add further diversification to my portfolio.
My first consideration for the remaining half of September is a dividend stalwart in every respect, Cardinal Health, Inc. (CAH). As I’m a fan of the consumer staples for their predictability and reliability in their space, so too I am a long term fan of the health sector for the same reason. With a decent current yield of 2.39% and low payout ratio of 31.9%, CAH has room to continue to pay and raise its dividend based on current cash flow. My primary concern for any stock I own is dividend sustainability. The stock has faltered a bit in recent weeks and is currently sporting a PE of 17.4 which is well below its five year average. While the current yield may not be ‘super juicy,’ its ten year annualized dividend growth rate of 21.76% is.
Another new stock I am considering for my portfolio is T. Rowe Price Group, Inc. (TROW). This financial stock sports a more attractive yield of 3.22% with a moderate payout ratio of 46.7% based on current cash flow. Again, this dividend appears to be safe based on current cash flow which is what I’m always after with all my holdings. As with CAH, TROW sports an attractive current PE of 16.2 which is below its average of 20.0 making it an interesting potential pick these days. Of course, having a annualized dividend growth rate of 23.73% doesn’t hurt either.
In the same financial vein, I am also considering an American bank that has been quite popular among the DGI community as of late, but not in the media, Wells Fargo & Company (WFC). Finally, in the financial sector I am considering initiating a new position in The Travelers Companies, Inc. (TRV). It’s been a long time since I added a new stock to any of my portfolios and with TRV’s yield of around 2.36%, low payout ratio of 28.4% and a PE of 11.0 which is in line with its five year average, this insurer suddenly looks like a decent buy. Other names I’m considering include, W.W. Grainger, Inc. (GWW) and V.F. Corporation (VFC) as well, which have been on my ‘considerations’ list throughout the summer.
What do you think about my potential stock picks for September? I’m considering three new positions as well as some of my old favorites. Are any of the above names on your monthly watch list? Please let me know below and I welcome any suggestions too.
Disclosure: Long KO, GIS, MCD, VFC, WFC, GWW