Wednesday, March 2, 2016

Dividend Growth Stock Considerations for March 2016

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.

Bank of Montreal (TSE = BMO); Target Price = $70

Due to a busy week at work, I missed an opportunity mid-February to complete my position in BMO. Having initiated the position in the bank in November of 2008, I am anxious to finally complete it. There is lots to like about the Bank of Montreal such as a dividend yield of 4.8% at my target price, a 1-year dividend growth rate of 5%, a payout ratio in fiscal 2015 of less than 50%, and A+/Stable, Aa3/Negative credit ratings. Although it is not the cheapest Canadian bank, the trailing P/E of 10.5X (at my target price) represents a good value for a bank ready to celebrate their 200th anniversary next year.

Cisco Systems, Inc (NASDAQ = CSCO); Target Price = $24 (up from $21 last month)

Cisco is another of my 'almost full positions' that I would like to complete this year. My desire to complete this position peaked after the company announced a 24% dividend increase in February. The Canadian dollar has finally started to climb a bit against its US counterpart lately, making US stocks slightly more affordable. My target price would lead to a dividend yield of 4.3%, which is well supported by the company’s strong balance sheet (AA-/Stable and A1/Stable bond ratings). 

Canadian Utilities (TSE = CU); Target Price = $32.50

After they released a sub-par earnings report last Friday, I came within a nickel of re-initiating a position in Canadian Utilities Limited. The company's 44-year streak of raising their dividend (the longest of any Canadian company) was extended in January when they boosted their payout by 10%. My target price represents a dividend yield of 4%, a level I can live with in order to gain exposure to the utility sector which is currently missing in my portfolio.

Tanger Factory Outlet Centers (NYSE: SKT); Target Price = $30

I hesitated between Tanger and Digital Realty Trust as I would actually like to own both of these two US REITs. However, Tanger wins out for featuring better dividend growth in the last year (16.7%  vs 3.5%) and paying a special dividend. Given my two full positions in Omega Healthcare REIT and Realty Income REIT, I would like to add another US REIT that has asset holdings unavailable on the Toronto Stock Exchange. The distinctive asset categories of Tanger (outlet malls) and Digital Realty Trust (data centers) would help further diversify my REIT holdings. 

As always, despite focusing on the above names, I keep an eye out for special opportunities that present themselves from time to time on the North American markets. With my cash holdings eclipsing 3% of my portfolio value, I stand ready to deploy my liquid powder into income producing stocks, but will wait for fair entry points.

What companies are on your watch list this month? 

2 comments:

  1. Cisco... could be the tech company I am looking for in my portfolio. This or Apple or MSFT. But for me to buy this guys the dollar will have to pick up much more than that. I'm very low on US dollars. Low as in totally fried!

    Thanks for the post. Nice companies! (How about ATCO? Pretty cheap...)

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  2. Maybe we should do a joint ATCO vs Canadian Utilities post some day? Pour moi, CU c'est plus interessant avec un dividend plus haute et un streak plus longue. That said, ATCO is better diversified...I totally understand why you own it.

    Like you, I'm very careful which companies I invest my limited US dollars in...especially paying $1.37 for them now...but I think Cisco is worth the price. Meme si notre dollar augment vitement, je serai content avec un position complete en Cisco.

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