My Buy Watchlist for June

Even though valuations continue to grind higher, I am always looking for new companies to add to my portfolio. There are currently two candidates on my June watchlist: VF Corp (VFC) and The Travelers Companies (TRV).

I wrote about VFC earlier when I put the company on my February watchlist. In that post I listed all the reasons why I like the stock - and wanted to increase my existing position at the time.

With the stock close to $50 again I am tempted to add more of this dividend champion. VFC provides a very decent yield of 3.8% at the moment, while boasting 44 (!) years of dividend increases.

The second stock on my watchlist (TRV) would be a new position in my portfolio - and also my first insurance company.

The Travelers Companies, Inc., through its subsidiaries, provides a range of commercial and personal property, and casualty insurance products and services to businesses, government units, associations, and individuals in the United states and internationally. The company operates through three segments: Business and International Insurance, Bond & Specialty Insurance, and Personal Insurance.

The company is a dividend contender with 13 years of dividend increases. While the current yield is relatively modest - 2.37% - the five dividend growth rate is a nice 11.92%. 

Another reason why I am putting TRV in my crosshairs is low payout ratio of just 28%, leaving much room for future dividend growth.

In addition to these two companies that would further boost my forward dividend income I am also interested in buying a book: ‘Black Edge‘.

The book is marketed as ‘the story of the billionaire trader Steven A. Cohen, the rise and fall of his hedge fund, SAC Capital, and the largest insider trading investigation in history—for readers of The Big Short, Den of Thieves, and Dark Money’. 

While this has nothing to do with my strategy of DGI I am sure it makes for very interesting reading.

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

New Buy: Analog Devices Inc. (ADI)

With record breaking S&P and Nasdaq performance I find it increasingly hard to find dividend growth stocks within a suitable buy range. The majority of companies on my watch list are too expensive for my taste at the moment.

Case in point: I had my eyes set on a utility to add to my portfolio, NextEra Energy (NEE). In recent weeks I saw the price climbing and climbing - well above the 130-135 range I was looking for. For comparison - the stock was trading at a much more attractive price of 120 at just the beginning of the year.

However, leaving NextEra aside for now, I came across a buy opportunity in the Internet of Things (IoT) realm - one of the industries of the future.

On May 15 I bought 20 shares of Analog Devices Inc. (ADI) for a total of $1,583. 

In this post I explain the reasons why I made this addition to my portfolio and what this means for my forward dividend income. 

Analog Devices, Inc. designs, manufactures, and markets a portfolio of solutions that leverage analog, mixed-signal, and digital signal processing technology, including integrated circuits (ICs), algorithms, software, and subsystems.

It offers data converter products, which translate real-world analog signals into digital data, as well as translates digital data into analog signals; high-performance amplifiers to condition analog signals; and radio frequency ICs to support cellular infrastructure. isolation in patient monitors; and smart metering and satellite applications.

‘Analog’ might sound like your grandfather’s tech - but is actually a vital component of the IoT. Analog technology plays an important role in growth segments such as the ‘connected car‘ or the ‘intelligent factory‘.

As can be seen in the chart below the share price has steadily increased over the past year, from below 60 to around 80 dollars. Lately the appreciation stalled somewhat over concerns that the company’s tech would be left out in the next generation iPhone.

Given Analog Devices‘s attractive dividend features I used that modest pullback to initiate a position.

ADI is a dividend contender with an impressive 15 year streak of dividend increases. The current yield is  2.29% – lower than the average 3.5% yield I strive for in building my portfolio.

The payout ratio is at 61%, leaving room for continued dividend growth. The 5 year dividend growth is a decent 10.24%.

Comparing Analog Devices‘s Earnings per Share (EPS) in the last quarter versus the same quarter in the prior year shows a 32.69% increase. Current year EPS versus last year equals a 30.68% increase.

The stock is by no means cheap. The Price/Earnings (P/E) ratio is 26.8, above the 5 year average of 23.6, but slightly below the industry’s 5 year average of 27.3.

In their May 13 report CFRA marks Analog Devices Inc. as a 4 star buy with a 12 month target price of $87 - about 10% above my buying price.

Given Analog Device’s yearly dividend of $1.80 per share this purchase increased my forward annual dividend income by $36.

What do you think about Analog Devices? Are you still able to find attractive buys in this market? Leave a comment/reply to share your thoughts!