Sunday, January 31, 2016

Dividend Growth Stock Considerations for February 2016

After volatile market conditions in January 2016 that prompted me to make three quick buys before I could get around to posting a watch list, I wanted to be proactive in case February presents me with fantastic opportunities. The stock considerations below help me focus my research and monitoring efforts on a handful of companies. Included is a target price that would act as a buying trigger for me if it was met.

Toronto-Dominion Bank (TSE = TD); Target Price = $50

Five years after initiating my 'almost full position' in TD Bank, I am ready to complete my position with part of my 2016 TFSA contribution. I expect the bank's management to announce a dividend increase in February when they present their Q1 2016 results. Last year, the bank raised their dividend by 8.5%. The current dividend yield is just shy of 4%, and I am hoping for an earnings miss in February so that I can complete my position in TD at a dividend yield closer to 4.5%.

Suncor Energy Inc (TSE = SU); Target Price = $30

It felt great to initialize a position in Suncor last month and now I am ready to add more of the best integrated oil company in Canada. Although I do not think the company will boost its dividend when they release quarterly earnings, I am always open to positive earnings surprises. Even if some see the energy sector as scary, especially with Iran's production ready to be sold to the international market, I will continue to nibble opportunistically. Suncor's dividend is well-covered by their free cash flow, and I am looking to stick with this company for the long-term.

Enbridge Income Fund (TSE = ENF): Target Price = $26

After trading into and out of Enbridge Income Fund three times in November, and keeping my position when the month ended, I am open to add more shares this month.  The company continues to be fairly priced (P/E ~16X), yields over 6%, and hiked their dividend 10% in December. Another reason I would like to add to this position in my RRSP is the fact I pay my monthly gas bill to an Enbridge subsidiary, and the monthly dividends serve as a natural hedge to my gas bill. 

Cisco Systems, Inc (NASDAQ = CSCO); Target Price = $21

Cisco is another of my 'almost full positions' that I would like to complete in 2016. Currency headwinds and analysts' predictions of management providing unfavorable guidance for 2016 have lead to a recent 10%+ depreciation in this technology titan's share price. Currently yielding 3.5%, Cisco's AA-/Stable and A1/Stable bond ratings show their financial strength and reflect their industry leading position. My target price is close to what I paid when establishing this position in 2013.

As with other months, I always keep some cash aside to take advantage of great opportunities that might occur as market sentiment shifts. Here’s wishing all my readers fruitful dividend growth stock pickings this February!

What companies are on your watch list this February? 

6 comments:

  1. Some great companies on the shortlist, DIH. Looking forward to see which ones you buy. Do you just put in GTC orders on your target price or do you wait to see where things go before putting an order in?

    Best wishes
    R2R

    ReplyDelete
    Replies
    1. Generally I like to wait and see how things go before buying. Of course, if work is extra busy, a limit order a tad under my target price is another option.

      Congrats on your 4 dividend raises last month!

      Delete
  2. Looks like some solid picks for purchase during February. TD looks especially good here although it might be the riskier one of the bunch due to the energy markets and CDN economy right now.

    ReplyDelete
    Replies
    1. TD's US exposure is what makes it particularly interesting to me right now. Your economy will likely out perform ours this year, and TD has the most exposure in the US of the big 5 Canadian banks.

      It's interesting to hear the thoughts of US dividend investors (like you) regarding our banks. Thanks for your input!

      Delete
  3. I still have TD among other Canadian banks on my watch list for Feb. I also like BNS and RY. Seems like the Canadian banks have all taken a nice beating he last year and are sporting some compelling values and yields.

    ReplyDelete
    Replies
    1. It's been 3 or 4 years since Canadian banks were yielding in the 4 to 6% range. I wouldn't hesitate to add to BNS either. Appreciate your perspective Keith!

      Delete