3 Stocks I’m Watching (May 1, 2012)

by FI Fighter on May 1, 2012

in Stock Watchlist

As I stated in the previous article, I am still waiting for a pullback before adding to, or initiating any new positions. With that said, here are a few stocks that I am eyeing closely. Should the right moment present itself, I will most likely load up on:

Emerson Electric is a dividend aristocrat, having increased its dividend every year for the last 55 years. Talk about consistency! The last increase was over 15% and the current yield is 3.25%. Today, shares dropped $3.36, down 6.40% after earnings missed and forecasts were lowered. This is the type of stock, that if owned, would allow me to sleep comfortably at night. Although the stock is somewhat more volatile with a beta of 1.22, I could tolerate the periodic highs and lows, knowing my money was invested in an industry leader. I am looking at an entry point somewhere below $49.

Like Emerson, Procter and Gamble is also a dividend aristocrat, having increased its dividend every year over the last 56 years. Here is another blue-chip behemoth that dominates its respected industry. PG closed today, trading at $63.57. It is down 5.01% since last Thursday. I am looking at a re-entry point below $63.

BP is a company that needs no introduction. The Deepwater Horizon disaster in 2010 caused BP’s shares to plummet in value, which may now only be starting to recover. BP reinstated its dividend in 2011, and now yields an impressive 4.50%. With a low P/E of only 5.29, and a Forward P/E of 6.15, BP appears to be undervalued. It was down today, closing at $42.70. I would be interested in initiating a position below $42.

Summary:
Two of the stocks that I am eyeing can be viewed as somewhat ‘defensive’ plays. EMR and PG, in particular, are not exactly the type of stocks you would expect to appreciate significantly in value over a short period of time. Instead, they are solid, stable, reliable dividend paying stocks that will serve you well in the long run. As such, these ‘safe’ stocks are usually priced at a premium, evident by their historically high P/E. Even at their discounted rates, the P/E is still high (EMR, 15.74 and PG, 19.80). Still, opportunities to buy solid blue-chip companies at bargain-bin prices don’t appear too often. This may be an opportune time to load up!

BP, on the other hand, has more potential to appreciate in share price, but its high 4.50% yield also makes it an attractive dividend stock. BP inherently carries with it more risk, but the upside is great, especially if you see oil prices increasing in the future. All in all, I believe these three stocks are approaching attractive valuation levels, and will be looking to add them to my portfolio.

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{ 2 comments… read them below or add one }

1 Dividend MantraNo Gravatar May 3, 2012 at 6:31 pm

Great watch list here. I like all three as well. I’m long PG and EMR and also looking to add to both positions at opportune prices.

BP is interesting. It is very cheap and that dividend is very enticing. I’m currently just looking for some kind of guidance on what the U.S. government will ultimately fine BP over the Deepwater Horizon disaster. I highly doubt the U.S. would cripple BP because of relations with the U.K., so this could make a nice play right now.

Best wishes!

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2 FI FighterNo Gravatar May 4, 2012 at 5:47 am

DM,

So glad you decided to stop by! That’s kind of the beauty behind dividend investing; you can buy in at opportune times and just let time and compounding work their magic. I’m pretty confident PG and EMR will still be powerhouses many years from now. So, we should do just fine with these investments 🙂

Yes, BP was, and continues to be an interesting story. The dust hasn’t fully settled and there’s still a lot of uncertainty surrounding it. Looks like the trial was postponed until January 2013 as well, so we’ll see. Another stock I’m considering is LINE, though it currently appears to be overpriced, sitting near its 52 week high. Up to this point, I haven’t looked into MLP’s, so I’m gonna be studying up on them in the near future.

Best of luck to you as well! I’ll definitely be following you over at: http://www.dividendmantra.com/

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