September 2017 Stock Considerations

With a new month quickly approaching it is time, once again, to lay out my potential stock picks and decide where I’d like to deploy my fresh capital for the month of September. After a pretty big month of buying in my account for August I may have to throttle back some of my investments for September. Don’t get me wrong, I will be buying something next month as I always have no matter where we are in an economic cycle, market cycle or whatever world events are taking place. Consistency with investing is one of the “rules” I hold myself to as a dividend growth investor. With that being said, let’s take a look at the stocks I am considering for the month of September.

 

First up is a name I bought several months ago and am considering once again, Johnson Controls International plc (JCI). JCI is a solid long term dividend paying industrial that has been lagging a bit post it’s Adient plc (ADNT) spin off and continues to look very good to me at current levels. The summer has been cruel for JCI as its stock price lost a lot of ground and is now trading a little above its 52 week low.

 

The summer, especially August, has not been kind to many consumer staples as fear of the Amazon threat grabs all the headlines. Names I am considering in this space include Hormel Foods Corporation (HRL) and General Mills, Inc. (GIS) each trading around their 52 week lows and sport safe relatively high yields. Seeing HRL yielding over 2% is a historically high yield.

 

Next, I am considering a health sector stock that has also been hammered in August, Cardinal Health, Inc. (CAH). This dividend stalwart continues to pay out a safe dividend with a yield that is also relatively high for this stock. At current prices the stock seems fairly valued.

 

I’d also like to note some honorable mentions for potential buys in September should I see a dramatic sell off occur as I’m still on the fence about adding to my positions, at this time, in General Electric Company (GE) and W.W. Grainger, Inc. (GWW). Of course, seeing GE yielding close to 4% and GWW well over 3% might entice me to nibble on those names in any case.

 

What do you think about my potential stock buys for the month of September? As you can see I’m not considering initiating any new positions at this time as I simply want to average down my cost basis on some of my current holdings that appear weaker. Are you considering any of these names for your own portfolio next month? Please let me know below.

 

Disclosure: Long JCI, ADNT, HRL, GIS, CAH, GE, GWW

35 thoughts on “September 2017 Stock Considerations

  1. DHut,

    Those food stocks are my favorite of the bunch. A whole lot of things have been looking more attractive of late, perhaps things are cooling in the market? Who knows. What I do know is that keeping up the good work is what matters in the this game.

    – Gremlin
    Dividend Gremlin recently posted…Recent Buy, August 2015My Profile

    • Hi DG,

      I have read somewhere that the “correction” we have been waiting for has already begun, though they call it a “rotating correction” which is why the market averages are still on the high side. A few weeks ago tech sold off in a hard way, now we are seeing the packaged food staples getting hit hard. Industrials like GE and JCI are also looking weaker. Bottom line, as you stated, “A whole lot of things have been looking more attractive of late.” I agree. Thank you for commenting.

  2. Hi DivHut,
    That’s a nice looking list to choose from. I’ve also been averaging down on existing positions, as opposed to adding new ones. I added to my HRL position just days ago. I also continue to watch CAH and GWW, as they are in my portfolio already. Not sure what to make of GWW though, as they just continue to fall – probably going to wait and watch what happens there.
    Engineering Dividends recently posted…Recent Buy – HRLMy Profile

    • Hi ED,

      While I’d like to add a new tech name or two to my portfolio, I think September will just focus on the weaker holdings in my portfolio and average down on some high quality names instead. Nice to see that HRL pick up. Like MCD a couple years ago I think HRL knows how to adapt to the changing consumer tastes. As always, I appreciate your comment.

  3. Hi DivHut! I like your stock picks. I bought GIS back in July, but it is not out of the realm of possibility that I would add to my position should the opportunity arise. GWW and GE are also floating to the top of my list, especially as I would like to buy my first stock in the Industrials sector. Thanks for sharing! 🙂
    My Dividend Dynasty recently posted…August 2017 Dividend IncomeMy Profile

    • Hi MDD,

      There are some traditional dividend stalwarts trading at compelling levels these days. GIS, GE, HRL and more are all very familiar companies that can be found in almost every long term dividend growth portfolio. I think there’s good reason for that. While it’s in style these days to crap all over the “old guard” companies as “not with the times” I am reminded of MCD of just two years ago when it was written off for dead as a restaurant that was so out of touch with today’s consumer. How times have changed. The time to buy these quality stocks is when everyone else is selling. As long as that dividend remains safe I think, GIS, HRL, SJM and others will come out fine down the line. Thank you for sharing your thoughts.

    • Hi Passivecanadianincome,

      I have been reading about quite a few GIS and HRL buys as of late. I think it’s for good reason. Both are solid long term dividend payers sporting relatively high yields that are still quite safe based on current cash flow. LB is a name I have been seeing too as that stock has really been battered over the past year. I never looked at adding LB to my portfolio but at current levels it does sport a very, very juicy yield that also looks safe and I can understand why some like it. Thank you for stopping by and commenting.

  4. Don’t you think HRL is a bit expensive?
    Its long term historical PE is around 18. Since it lowered its estimate to $1.54 – $1.58, around $29 would be a safer entry price.

    • Hi anonymous,

      You are correct that $29 would be a safer entry price. Not sure we’ll get there unless some macro event shakes up the whole market. I agree that HRL is not undervalued at current levels but I would say that it’s about fairly valued around $30. At this point, it seems like splitting hairs and I would be willing to nibble on HRL anywhere around $30 – $31 for the long haul. Thank you for commenting.

    • Hi DD,

      Looks like HRL, GIS, GE, CAH, SJM are the names “du jour.” I still want to add a tech name as I indicated in my post a couple weeks ago but with quite a few names in my portfolio running red these days I feel like averaging down in September. I’m leaning towards HRL and GIS but we’ll see how the month develops as some new name can come out of left field. As always, I appreciate your comment.

    • Hi CD,

      It looks like many of our fellow DGI peers are looking at these names too. Whenever you see a solid dividend paying stock facing some near term headwinds it’s time to consider initiating or adding to that position. I still like all the names mentioned long term and all appear to have a safe dividend which is a buy signal for me. Thank you for sharing your thoughts.

    • Hi MR,

      I still can’t believe how much GWW has fallen over the last year. I think the AMZN threat, while real, is very much overblown when it comes to looking at GWW as a solid long term dividend paying stock. Who knows… it may be a buyout candidate if AMZN is serious about entering the MRO space. Thank you for stopping by and commenting.

    • Hi DI,

      It wasn’t that long ago when many of us were “complaining” about having no place to invest. How things have changed over the last few months as more and more solid companies are going on sale. GWW, GE, GIS, HRL, SJM and many others are trading at levels not seen in many years. Thanks for sharing your recent GE pick up. That might be another turnaround story like we witnessed with MCD. As always, I appreciate your comment.

    • Hi dividendgeek,

      Seeing GE with a yield getting close to 4% will capture the attention of many in the DGI game. It will be interesting to see how September unfolds as news headlines we can’t even imagine today will inevitably pop up and somehow affect the market. Thank you for commenting.

    • Hi Evan,

      Something to consider indeed though a PE doesn’t give a complete picture of a company. I remember holding on to my CAT over the years when it sported a negative PE for a time. Industrials are cyclical and JCI has experienced funky numbers since their spin off of ADNT not that long ago. Thank you for stopping by and commenting.

  5. That’s a great selection of stocks to consider. I recently added GIS and GWW to my portfolio although the investment into the stock won’t happen until the first Tuesday in September according to my automatic investment schedule. So I definitely think those are good companies to consider.

    I also agree that consistent investing regardless of fears in the market place is important, of course as long as the fundamentals of the company remain in tact. Looking forward to seeing what you end up choosing.
    Dividend Portfolio recently posted…How I Tackle DebtMy Profile

    • Hi DP,

      Sometimes it’s best not to over think an investment which is why I believe that staying consistent with your buying is important no matter where we are in a market or economic cycle. Buy prudent, of course but don’t forget to buy. Too often we wait for the “best” times to make an investment and fail to take advantage of an investors’ best friend, time. I like your GIS and GWW pick up. Both are popular names found in many long term DGI portfolios. As always, I appreciate your comment.

  6. Cardinal is intriguing! It seems like they are righting the ship with the sale to MDT of the patient care division. I’m not sure what to think of them offing the China portfolio. Seems a bit oversold due to all of the considerations, but that could be a huge winner if they can quell investor questions and bring that share price back. The dividend seems safe, although the net profit margins don’t have much wiggle room. I have considered a position here myself in the past but never pulled the trigger. I’m interested to see what you decide!

    • Hi DA,

      CAH is one of those stocks that gets hammered (oversold) after less than stellar earnings reports and that is usually a good time to pick up some shares. I still like it long term and, as you stated, the dividend is still safe which is my primary concern. I don’t ever plan to make CAH a huge part of my portfolio but there’s definitely room for it among my holdings. Thank you for sharing your thoughts.

  7. Hi Divhut,

    Love the list. A lot of the usual suspects. General Mills is very tempting for me right now. Haven’t looked too much at JCI recently so that is an interesting selection. The one that is not on your list that I’m following is Archer Daniels Midland.

    • Hi DS,

      I like ADM a lot and own a nice position. If it drops closer to my average cost I may add more but not at current levels. For now my focus is on averaging down on some of my current positions already in the red. As we get closer to 2018 it will be interesting to see if we finish the year on a high note or not. As always, I appreciate your comment.

    • Hi MDD,

      Seems like most of us are looking at similar names to potentially buy in September. CAH has made a bit of a comeback in recent days but GIS, GE and HRL still look pretty week. We’ll see where I ultimately pull the trigger. Thank you for commenting.

  8. I’d take CVS over CAH in the health sector right now. Obviously different business models, but GoogleFinance considers them “related companies” fwiw.

    The current yield is slightly lower, but not by that much, and the difference between the current yield and the 5yr average is actually wider for CVS.

    Plus I’m not convinced the CAH dividend is in all that great of shape. Their free cash flow fell off a cliff this year, bringing the payout ratio (as a function of FCF) over 70%. Combine that with a leveraged balance sheet and management projecting YoY earnings declines, one could reasonably imagine a cash crunch is looming.

    I’m not suggesting CAH is going to cut the dividend necessarily, but there isn’t much elbow room on the cash flow statement, which leads me to suspect that the dividend growth rate will be tepid at best.

    CVS, on the other hand, is a cash cow. With only 20% of FCF going to the dividend it’s in a much better position to grow the distribution at the rate you would expect from a sub-3% yielding stock.
    catfishwizard recently posted…Why I Don’t Give a Crap About the Dividend Payout RatioMy Profile

    • Hi catfishwizard,

      Looking at CAH and CVS objectively it seems that CVS is the better value these days. No denying that. While a strong dividend candidate I never considered that stock for my own portfolio as I saw it as a retail play and not a “related company” to CAH or any other health sector stock for that matter. I’m still averse to owning retail in my own long term portfolio. Perhaps it’s to my detriment as I potentially am missing out on some bargains in the space, TGT and WMT come to mind. CAH seems to have run up a bit from its recent low which might point me towards HRL or GIS this month. we’ll see how it goes as September is still new. Thank you for stopping by and sharing your thoughts.

  9. Those are mostly all high up on my list as well for potential buys. HRL, GE, GIS, and CAH would all be excellent candidates for lowering my cost basis. Just not sure any buys are in the cards for me this month with a big tuition payment due and recovering from vacation expenses from last week. At least my portfolio was working while I was gone and we are going into a quarter ending month!
    Dividend Daze recently posted…Real Estate vs Dividends – What is better for Retirement Income?My Profile

    • Hi DD,

      Buy what you can when you can. There’s no rule that states you must buy dividend stocks, especially if it will put a strain on your own monthly budget. Seems like most of us are looking at the same group of stocks for the month. CAH seems to have run up a bit from its low but I’m still looking at GIS, HRL and maybe even GE. The portfolio works 24/7 for you! An awesome benefit of the DGI way. Thank you for stopping by and commenting.

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