Month: July 2018

My Dividend Growth Stock Watch List for August

With earnings season well underway, stocks are making their volatile moves again.

Given my investment strategy, I am much less concerned about day to day gyrations of the stock market. However - I am always looking for new companies to add to my portfolio.

I therefore regularly compose watch lists with stocks to research further, and with the potential to become this or next month’s new divided growth stock purchases.

There are currently two candidates on my August watch list:

Starbucks Corp. (SBUX) and Legg Mason Inc. (LM).

As can be seen in the graph above, Starbucks stocks took quite a hit recently, albeit recovering somewhat after.

I currently own 75 shares of SBUX in my portfolio and with a current price of around ~$50 I am considering adding to my position and making it a nice even 100 stocks.

SBUX provides a decent yield of 2.81%, and is a Dividend Challenger with 9 years of growing dividend pay-outs.

It’s current P/E ratio is ~17 - quite favorably compared to the 5 year average.

Most appealing however is the recent acceleration in dividend growth, with this year coming in at a great 44%.

Now of course there are reasons Starbucks took this recent hit with investors.

However, I still believe SBUX - given it’s moat, innovation, China store roll out and digital transformation - is a sound long term dividend growth investment.

The second stock on my watch list is Legg Mason.

Like SBUX, this asset manager is hovering around 52 week lows (chart above).

It’s dividend features look appealing though. LM boasts 8 years of growing dividends, with an attractive current yield of 4.01%. 

It’s current P/E ratio is around 11, close to half (!) of the 5 year average. The dividend growth rate is attractive as well - with a 5 year average growth of 21%.

Both SBUX as well as LM are close to 52 week lows, have attractive P/E ratios and dividend features.

After additional research, I might add them to it my portfolio next month.

What do you think about these two companies? What is your watch list for this month? Leave a comment/reply to share your thoughts!

New Dividend Growth Stock Buy: Delta Airlines, Inc. (DAL)

Of all the investment opportunities out there, I have a special place in my heart for dividend growth stocks. As a subset of those, I like the ones on the list of Dividends Champions, Contenders and Challengers even better.

But the most personal love goes out to those dividend growth stocks that I perceive to be undervalued.

My most recent dividend growth stock purchase falls - in my opinion - in that last category.

On July 18 I bought 20 shares of Delta Airlines, Inc. (DAL) for a total of $1,060.

In this post I go over the reasons for making this addition to my portfolio and what it means for my forward dividend income. 

 

Delta Air Lines, Inc. provides scheduled air transportation for passengers and cargo in the United States and internationally.

The company operates through two segments, Airline and Refinery. Its route network is centered on a system of hubs, international gateways, and airports in Amsterdam, Atlanta, Boston, Detroit, London-Heathrow, Los Angeles, Minneapolis-St. Paul, New York-LaGuardia, New York-JFK, Paris-Charles de Gaulle, Salt Lake City, Seattle, and Tokyo-Narita.

The company sells its tickets through various distribution channels, including delta.com and mobile applications/Web, telephone reservations, online travel agencies, traditional brick and mortar, and other agencies.

It also provides aircraft maintenance, repair, and overhaul services; staffing, aviation, and professional security and training services to third parties; and vacation packages to third-party consumers, as well as aircraft charters, and management and programs.

As of February 9, 2018, the company operated a fleet of approximately 800 aircraft. Delta Air Lines, Inc. was founded in 1924 and is headquartered in Atlanta, Georgia.

DAL‘s current dividend yield is 2.74% – below the average 3.5% yield I strive for in building my portfolio.

The company is featured on David Fish’s list of Dividends Champions, Contenders and Challengers - with an modest 5 year streak of growing dividend pay-outs.

The 5 year dividend growth - given the short history - is yet TBD, but the 1 year dividend growth comes in at 72.84% (!) - which is incredible. It’s also much higher than prior year’s 50%.

The Current Trailing Dividend Payout Ratio is also at an attractive level, and sits at just 30%.

DAL’s Earnings per Share (EPS) over the last five years shows an 32.99%  increase. Projected EPS growth for the next 3-5 years is 18.67%.

The Cash Free Flow Growth Rate over the last 5 years is 17.69%.

The trailing 12 months Price/Earnings (P/E) is 11.32, which is a little lower than it’s 5 year average of 12.37. It is also lower than the industry’s 5 year average of 13.67.

EVA Dimensions (an equity research firm) states in their July 20 report that DAL’s DAL’s Performance Risk Valuation score is at the 60th percentile of all firms in its industry, which leads to a recommendation to Buy, i.e., to continue with its prior rating until a more significant or sustained move is made into the Overweight rating category. DAL is still viewed as more attractively priced in relation to its true value than all but a few of the stocks in its industry.

Ford Equity Research projects that DAL will perform in line with the market over the next 6 to 12 months. This projection is based on their analysis of three key factors that influence common stock performance:
earnings strength, relative valuation, and recent price movement. Ford’s 52-Week Price Range is between $45.21 - $60.13

Jefferson Research states that DAL  is showing strong Cash Flow Quality, Operating Efficiency and Earnings Quality, and Valuation suggests a lower amount of price risk, but Balance Sheet Quality is weak. When combined, DAL deserves a HOLD rating. The Balance Sheet rating improved on the strength of better receivables and inventory positions. Though this dimension and all of the others were either stronger or unchanged at worst, it was not sufficient to raise the overall rating.

Given DAL’s annual dividend of $1.40 per share, this new purchase increased my forward annual dividend income by $28.00.

What do you think about DAL right now? Are you buying other dividend growth stocks? Leave a comment/reply to share your thoughts!