Watchlist (December 22, 2012)

by FI Fighter on December 22, 2012

in Stock Watchlist

Well, it’s been over a month since I last purchased a stock, so I guess you can say I’m starting to get a little antsy. I am still committed to building the dividend portfolio, but unfortunately, the market hasn’t dipped, or pulled back as much as I would have anticipated. The Fiscal Cliff seems to almost have come and gone without moving the needle even the slightest bit. Luckily, there’s still one more week to go until the end of the year, so maybe we’ll have better luck as we come down to the wire?

Here are the stocks I will be looking to purchase this upcoming week:

Vodafone (VOD): I’ve been watching VOD probably since November, following closely after the presidential election. VOD tested below $25 in early November, but surprisingly, even though the market has picked up since then, VOD still remains attractively priced at $25.13. I came very close to pulling the trigger on some VOD this past Friday, so if it stays around the current level, or can dip below $25, I will definitely look to add. I currently own about 52 shares.

VOD_Watch2

Apple (AAPL): Shares of AAPL have taken investors on a rollercoaster ride for quite some time now. Since touching $700 back in September, AAPL has dipped to as low as $525, before surging back up to $590, only to see its shares dip to under $530 again. AAPL is currently trading at $519.33. In general, I like AAPL because it represents a blend of capital appreciation with dividend growth potential.

Of course, there are better paying (and growing) dividend stocks out there. However, at the moment, AAPL is very attractively priced. There are also rumors that AAPL may eventually split, and become a full-fledged dividend growth stock. With so much money in the bank, it’s also difficult to imagine AAPL going away anytime soon. The market for ipads and iphones may be close to saturating in a few years, but AAPL still has room to grow. A deal with China Mobile still hasn’t been reached, and next year should finally mark the year that iTV launches. And Apple fanboys are extremely loyal, so AAPL should remain a cash cow for the foreseeable future. Intel (INTC) used to be a growth stock, and has since transitioned into a high-tech favorite within the dividend growth community. Perhaps the same will hold true for AAPL in the future?

AAPL_Watch

LinnCO (LNCO): LinnCO is another company that I have been following since November. I currently own about 64 shares and would like to add some more. I really like LNCO around $35.50, but missed the opportunity last time around, since I didn’t have sufficient funds in my account. LNCO rebounded to $38.70 in early December, so it’s nice to see that it has pulled back slightly since then. If it drops to below $36.50, I will be tempted to buy.

LNCO2_Watch

Southern Company (SO): At present, I still only own one utility company, Exelon (EXC). EXC has not been performing well this year, and I nearly swapped it out of my portfolio last month. Which company would I have exchanged it for? The Southern Company. SO has a reputation for being one of the best run utility companies in the States. Further, the stock price has fallen greatly since the early run-up during the first part of the year. At one point, shares of SO reached $48.59. SO tested the $42 level back in November, and I was tempted to add then. It is currently trading at $43.32. If it can drop below $43, I will feel inclined to add some shares.

SO_Watch

AT&T (T): The last stock on my watchlist is a company that has a reputation for being one of the top income generating stocks on Wall Street, AT&T. By now, everyone knows that the dividend growth rate of T has been abysmal in recent years, with quarterly payouts only being raised about $0.01 each year. Further, the competition in the telecom space is intense, with Verizon Wireless also holding significant market share.

So, why invest in T? T is a dividend aristocrat, for starters, having consistently raised its dividend for 28 consecutive years. So, it’s clear that he company is committed to the dividend. It’s also a large cap, with significant market share. Since I already have shares of VOD, which allows me to invest in Verizon Wireless, adding T would allow me to further diversify between telecom companies.

The 5.35% yield is also enticing. T pays such a high yield, that even if it continues growing its dividend at it’s low 5 year 4.8% growth rate, it’s yield-on-cost (YOC) would still be superior, until Year 10, than that of Johnson and Johnson (JNJ), which has a 5 year dividend growth rate of 9.4%. The current share price is $33.67. I would look to add at $33.00, or below.

T_Watchlist

Summary

As a whole, I think the market is still somewhat pricey. But, there are still some deals to be found. The whole Fiscal Cliff scare hasn’t created the market sell-off event that I was dreaming about, but perhaps things will get more interesting as we head into the final week.

At present moment, it doesn’t appear that a Fiscal Cliff deal will be imminent soon. As such, I am anticipating a market dip sometime early next week that will provide a good opportunity to do some last minute buying as we near the end of the year.

If this pullback doesn’t occur, then I’ll still stick to my strategy of adding solid companies to the portfolio on a regular basis. I do anticipate making one last purchase this year, regardless of what happens. However, I’m also keeping the bulk of my funds in cash right now. I still believe that another sell-off event is in the works… if not this upcoming week, then sometime in January, perhaps? December has been a somewhat boring month, so I’m hoping for some more excitement in early 2013 😉

What stocks are you currently watching? Are you anticipating any more moves between now and the end of the year?

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{ 12 comments… read them below or add one }

1 HighyieldsoldierNo Gravatar December 23, 2012 at 12:54 am

SO and T are on my short list of stocks to buy this year. I already bought some of both over the last few months. I will add more in 2013. Apple intrigues me, but Im not ready to pull the trigger yet. The tech sector is mindboggling to me, and things move so fast I dont believe any of these companies, INTC or Apple truly has a real, concrete, time tested moat. Who knows what will be popular next year, or five years from now? They are a cash cow(speakng of Apple) but isnt a large portion of their stash in overseas banks? For them to pay big dividends, they would have to repatriate the money, paying a tax to do so, then pay their shareholders, incurring another tax.

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2 FI FighterNo Gravatar December 23, 2012 at 10:15 pm

David,

Thanks for the comment. Yeah, I’ll confess, tech companies also scare me. AAPL just seems really cheap right now, so I’ll be watching to see if it can dip under $500. If so, that price point will be hard to resist, even if it is a bit more risky.

AAPL hasn’t raised a dividend yet, either, so who really knows what the dividend growth rate will be? I don’t want to make AAPL too large a holding in my portfolio, but I’m comfortable owning some high risk/ high reward stocks.

Best wishes!

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3 Brick By Brick Investing | MarvinNo Gravatar December 23, 2012 at 10:50 am

I too have been waiting for a pullback in the market that never came. It would seem that all the fiscal cliff drama has already been priced into the market but I’m not so sure. If we did come to an agreement I would say “fine.” However, if we do not come to an agreement I believe A LOT of individuals who thought “things would work out” will panic and make the market move. Only time will tell. Great watchlist of stocks, I have a few I’m keeping my eye on as well. Your picks gave me a couple to look into that were not on my radar.

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4 FI FighterNo Gravatar December 23, 2012 at 10:19 pm

Marvin,

Yeah, the whole fiscal cliff drama, or lack of drama, has been a little disappointing. As a long-term investor, I’m still looking for that “great opportunity” to load up. However, if the market doesn’t cooperate, then that’s also fine. My strategy is to make periodic investments, if the value is there, regardless of market conditions. But, at the same time, hold back most of the cash reserves, waiting for a big dip. So, I’ll probably make a purchase soon, regardless of what happens with the cliff.

btw, which stocks are you monitoring? It would be good to get some of your ideas as well!

Take care!

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5 Average Dividend YieldNo Gravatar December 23, 2012 at 11:00 am

Some interesting stocks on your watch list. In Nov I bought VOD @ $25.20; I’ll probably add more if it dips below $23. VOD has been unloved for a couple years now. I’d be very happy with them if they could keep a dividend growth rate of 3% to 4% per year, which shouldn’t be a problem “when” the european economy picks up. After all, long-term CAGR = dividend yield + dividend growth rate.

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6 FI FighterNo Gravatar December 23, 2012 at 10:22 pm

ADY,

I like VOD as well, and it looks pretty cheap right now, even at $25. If it falls to $23, then that’ll be even harder to pass up!

Any recommendations for stocks that you’re watching this upcoming week?

Happy hunting!

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7 JC @ PassiveIncomePursuitNo Gravatar December 23, 2012 at 12:18 pm

I’d really like to get some VOD and VZ exposure to go along with my T position to diversify my telco/semi-utility position. I would love to get into VOD sub-$25 and that just might come tomorrow. I’ll have to check in more on LinnCo. I probably need to get some true utility company exposure to bring my yield up, guess that means I’ll be researching SO soon. Thanks for the update.

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8 FI FighterNo Gravatar December 23, 2012 at 10:25 pm

JC,

Haha, I’m looking to do the opposite of you, and that’s to get some T exposure to go with VOD. 😉 Since my VOD position is still so small, I’m ok with adding more before grabbing some T. Though, short-term, I’ll probably just pick up whichever one I think is better valued. Long term I want to own both.

SO is one of the best utilities out there. I’m also looking to get some more exposure here. EXC is my only utility, and frankly, it isn’t behaving much like one.. sigh.

Happy hunting!

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9 Six figure investorNo Gravatar December 23, 2012 at 3:56 pm

I’m looking to add to PM. When it reaches a 4% yield i get interested. With a lOng term dividend growth rate of 8% (conservative) , its a good value. I also like PAYX here because the mgmt is great and its a play on long term economic growth ( most dividend screens wouldnt pick this one up).

Apple is an interesting case in the company you talked about. Under reasonable estimates for earnings over the next 5 years they are going to be flush with 100s of billions of cash, even after paying divs. Its a good problem to have.

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10 FI FighterNo Gravatar December 23, 2012 at 10:30 pm

SFI,

Thanks for the input. PM has been on a tear, and has a dividend growth rate that is amongst the best, of all companies. I haven’t done much research on PAYX yet, thanks for bringing it to my attention. Do you like this better than ADP?

AAPL is very interesting. I already have some, and my allocation is probably as high as I want, but if it falls below $500, it’ll be hard to resist. The future dividend growth is uncertain, but the potential (plus capital appreciation) will make it a compelling buy.

Happy hunting!

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11 Dividend MantraNo Gravatar December 24, 2012 at 12:18 pm

Fighter,

Great list of companies here. Definitely some higher yielders up there. I sense you’re looking to add to your overall portfolio yield with some of these names?

What’s interesting is that with all of the talk of higher yielders being richly valued due to investors flocking to dividend stocks as an alternative to fixed income, I find that the lower yielding stocks don’t have much value either. It’s interesting. And utilities have been particularly weak this year, so go figure.

I find PM very attractive here, with a 4% yield. VOD looks pretty strong as well. Both companies are having European issues with VOD’s weakness in southern Europe and possible further packaging regulation affecting PM.

I wanted to pick up some more KMI personally, but it shot back up before I had a chance.

We’ll see what kind of opportunities Mr. Market presents us before the end of the year.

Best wishes!

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12 FI FighterNo Gravatar December 26, 2012 at 4:14 pm

DM,

Yeah, this time around the watchlist features a bunch of high yielders. This wasn’t intentional by any means, but I do love high yield 🙂

PM was hit pretty good again today. This might provide that good opportunity you need to add some more shares. PM’s yield and dividend growth are hard to beat. KMI is one of my favorites, but I agree, it may be best to wait for this one to come around again. VOD is looking really appealing as well, and I nearly pulled the trigger today. I decided to go with SO, but will keep VOD on my radar.

Happy hunting!

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