A new month is upon us and I am eager to continue to buy stocks that make sense and add to my portfolio. 2018 has been off to a crazy start and I’ve thoroughly enjoyed following the madness of the stock market and eagerly awaiting these crazy dividend increase announcements. The dividend growth engine has been strong post tax reform, that is for sure. Today, I found three companies that have caught my eye. I will be watching these three dividend stocks closely. Here is my March Dividend Stock watch list!
Dividend Stock #1 – Altria Group (MO) – Now that the large tobacco company has a yield above 4% once again, the company has shot onto my radar. With an ex-dividend date that should be in the middle of March, I still would potentially have several weeks to initiate a position before missing the April dividend. The company is down 10% during the year and I am really starting to like the current valuation levels. Their forward P/E ratio of (~16.1X at the time I am writing this article) is currently below both the market and their rival Philip Morris.
The company also has a solid track record of increasing their dividend. Like so many other companies during the year, I am expecting a double-digit percent increase for MO. Management aims for a target 80% payout ratio and currently the company’s dividend payout ratio is in the mid-60% range. This has left a lot of room for dividend growth in the coming year, which is why I am expecting great things in the current pro-dividend growth environment. After seeming off-limits for such a long time due to their valuation, I am very excited about the prospect of finally initiating a position in Altria.
Dividend Stock #2 – PepsiCo, Inc. (PEP) – Yet another company that has found its way into my watch list that was considered too expensive for the past several years. I classified Pepsi as one of my “Always Buy” stocks years ago because of the company’s strong dividend track record, dominance in their industry, and their strong diversified brand portfolio. In fact, the company’s diversified food and beferage portfolio and lower payout ratio were always what separated Pepsi from their rival Coca-Cola in my opinion.
Pepsi popped on my radar after their stock price fell despite announcing a large 15% dividend increase and $15b share buyback program in February. Starting in June, the company’s quarterly dividend will increase to $.9275 per share compared to the current $.805 per share payment. Even with the increased dividend, the company’s forward payout ratio is approximately 63%, which is a hair above the 60% payout ratio threshold we use in our Dividend Stock Screener. The company’s forward payout ratio is ~19.2X at the moment, so PEP is not the cheapest stock out there. However, if the price continues to slide or we happen to have a wild downward swing like we experienced in February, I would be happy to initiate a position in the beverage in snack giant.
Dividend Stock #3 – Realty Income (O) – This stock has gained a lot of traction on our website and in the dividend growth investor community due to their recent slide. Heck, I have purchased the stock three times in 2018 and Lanny even joined the fun with a large purchase in February when he added 41 shares to his position. We’ve touted the reasons why we are interested in the Monthly Dividend Paying company plenty of times here over the last few months, so I won’t bore you with the details once again. But just know that the company’s strong diversification in the real estate industry and their 20+ year streak of annual dividend increases are the primary drivers for why I love this company. If the price remains in the high $40s and low $50s price per share range, I may just have to continue adding. My current position is 92 shares, so I would love to push my position over 100 if the price is right!
What do you think about the companies on my watch list? Are you watching MO, PEP, or O? If not, what stocks are you watching instead? Would you prefer KO or PEP at their current prices? Have you added to Realty Income in 2018 as well?
-Bert
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