Bert's October Stock Watch List

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Includes: O, T, TGT, WMT
by: Dividend Diplomats

My last two articles have been reviewing my past performance, checking in on my goals through the end of September and reviewing my September dividend income. Both of the articles were showing that my portfolio and dividend income are trending in the right direction. With three months to spare, I'm looking to keep that momentum going. So I took some time tonight to prepare my October stock watch list and see if I can pinpoint a few stocks to keep a close eye on over the next several weeks.

Stock #1: Wal-Mart (NYSE:WMT) - Haven't I been on a Target (NYSE:TGT) shopping spree? And I'm not talking about our weekly grocery shopping trip to Target. The spree that I am referring to is that over the last several months, I have initiated and subsequently increased my Target position to 80 shares. Well, I also have had an eye on their main competitor in Wal-Mart as well. A fellow Dividend Aristocrat, Wal-Mart is currently trading at a slightly higher P/E ratio (~15X earnings); although this multiple is still lower than the broader market. WMT's dividend yield is just below 3% and the 5-year average dividend growth rate is 7.5%. WMT's stock finally got off their recent price increase based on an announcement that was headlined by a slowdown in expected physical store expansion during the next fiscal year. However, I am not that concerned because of the company's focus on growing their digital presence in an age that favors shopping from a computer versus visiting a physical store. The strategy should pay off in the long run, in my opinion!

Stock #2: Target - Do I really need to give a further background on Target here on our website? We have covered the stock recently… for good reason. It continues to pass our dividend stock screener, trade at a discount compared to the market and sport a dividend yield nearly 100 basis points higher than the market. Plus, the company is approaching a consecutive annual dividend income streak of nearly 50 years, aka half of a century. Do I need to add any more Target to my portfolio? No, as I mentioned earlier, I already own 80 shares and it is definitely one of my largest positions in my portfolio. But let's be honest, I would love to add another 20 shares and own 100+ shares. It is pretty darn tempting if you ask me. The ex-dividend date is in November, so I still have some more time to think about this one.

Stock #3: Realty Income (NYSE:O) - Now, remember, this is my stock watch list. Just because a stock is on here doesn't mean I am going to buy it tomorrow. Realty Income has made the cut based on the fact their stock price is down 11% over the last quarter and the fact company is always increasing their monthly dividend. They are right on the cusp of becoming a Dividend Aristocrat and man do I love their monthly dividend. We all know the story of O and their status as one of the top REITs in the dividend growth investor community, so I don't feel like I need to elaborate on the company's background too much or why they would be a great fit for my portfolio. Their yield is approaching 4% and if the price continues to fall, I may not be able to resist holding off on buying too much longer. The good news is that I still have room in my Roth IRA annual contribution for one more purchase before I max it out for the year. Talk about a great fit for that final purchase!

Stock #4: AT&T (NYSE:T) - AT&T, the final stock on the list, is a company I have not considered adding to my portfolio for a long, long time. But thanks to Lanny's amazing sales pitch that began with his September stock watch list and many, many conversations behind the scenes, I am open to the idea of adding to my position in the company (Despite the fact I recently ditched them as my cable and internet provider). They pass every metric of our stock screener, trading below the market, offering ~5% that is nearly double the market, and they have slowly and steadily increased their dividend for a long time. As you all have read here if you have followed along, I am all on board with the philosophy of building massive positions for my portfolio going forward and watching the dividend snowball roll quickly. I've done that with my last two purchases of Target and Cardinal Health (NYSE:CAH). Currently, my cost basis in AT&T is only $2,000 and despite the fact that I am staring a 33% gain in the face, I would love to double my position here. Doubling my position would provide me with $66 in quarterly dividend income and add 1.5–2 shares every three months (depending on the price). Now imagine how nice it would be to have that kind of a position as one of the foundations of your dividend growth portfolio?

What are your thoughts on my October stock watch list? Have you purchased any of the four stocks recently or are you planning to? If not, why not and what stocks are you focusing on instead?

- Bert