Lanny's December Dividend Stock Watch List

Includes: CAH, DAL, WTR
by: Dividend Diplomats

It's beginning to look a lot like "investmas," as the dividend stocks are on this DD's radar! I am attempting to sleigh ride my capital, making my list and checking it twice, as I'm trying to find out if the dividends are naughty or nice. Yes, I had to throw that in there for the Christmas spirit, but there are a lot of interesting opportunities out there for my portfolio! The cold weather has not only been hustling its way in, but also has chilled down the stock market in certain areas. Come on in and read more on who is on my Dividend Stock Watch List this Holiday Season!

Dividend stock watch list

Since I really am anxious to share the three dividend stocks on my watch list, I'm going to jump right on into them. I'm going to describe why each dividend stock is on my watch list, talk about what's impacting them, as well as using our metrics via the Dividend Diplomat Stock Screener. The stock prices I am using will be from Black Friday and will be based on the most recently financial data released. Enough of boring you - check the three below!

1.) Cardinal Health (NYSE:CAH) - Yes, this healthcare entity is still high on the list. The company remains down 22% year-to-date, due to headwinds within the healthcare reform, Amazon (NASDAQ:AMZN) entering the space, and pressure over the opioid crisis. This dividend aristocrat (aka, paying dividends OVER 25 years!) has simply been the dog of the group! Currently yielding 3.28%, this entity is far pumping out dividends greater than its five-year yield average of 2.10%; it's amazing. Further, the payout ratio currently resides at approximately 53%, with a dividend growth rate over the last five years of 15.20%. The price to earnings, based on an annualized non-GAAP EPS of $4.16 (see 10-Q release as non-GAAP EPS was $1.04), equates to 13.55. This is a clear sign of being undervalued. I want to note $0.40 of those non-GAAP earnings were from an acquisition, so keep that in mind. Ex-dividend date is December 29th, so keep your eyes peeled in these upcoming few weeks. This one was on Bert's November dividend stock watch list.

2.) Aqua America, Inc. (NYSE:WTR) - Whoa, curveball here right? Well, I strongly believe that at some point, water is going to be a very interesting topic in the future. Water as a natural resource is critical to life, and I believe that there may be a strain on this resource. There have been many more instances of droughts, especially in California, and it doesn't end there. Icebergs, as well, are becoming less and less, as well as the overall coverage of water. It's actually very interesting. Therefore, companies that control water supply, I would believe, should have pricing power over consumers/us. Not only that but also we all use and need water! WTR is a $6B market capitalization entity, based in Pennsylvania, serving the midwest. It is on pace for $1.40 in earnings for the year. Further, it has dividends since 1939 and has over a 19-year growth streak! As of 11/26/2017, its share price is $36.57 and it currently maintains a $0.8188 dividend per year. Therefore, using the DD stock screener, the metrics are as follows: 26.12 price to earnings (p/e), 2.24% dividend yield and a 58% payout ratio. In addition, its five-year dividend growth rate is 8.21%. Slightly overpriced at the moment and would love to see this stock around the $32-33 range. However, this is water and our requirements for the resource aren't going anywhere!

3.) Delta Air Lines, Inc. (NYSE:DAL) - Back on the list baby! This is my sleigh for this ride on the watch list. Delta, based on its third-quarter 10-Q, has an annualized EPS of $5.53. Its dividends per year are $1.22 and it currently trades at $50.11. Let's break this down Dividend Diplomat style! First, its dividend yield is a solid 2.43%, not the highest but higher than the overall market. Next, its payout ratio is at 22%. So damn low, I expect dividend increases to be well over the double digits going forward; you have to love the sound of those jingle bells. In addition, its P/E ratio is 9.06? Say what?! Deck the portfolio with shares of Delta! I am loving what I am seeing right now. I purchased them a few months ago and am thinking it may be time to buy more of this wonderful airline!

Those are three stocks on my "Investmas" list this Holiday Season. We have one stock in CAH that is over 3%, and the other two stocks are in the low-to-mid 2% range. Three different industries with airline, healthcare and water. Talk about diversity right there. I love the three industries due to the necessities of each. This is very interesting. I obviously want to make every dollar count on using my capital; this is a big decision. Hmm… decisions, decisions… to stick with the theme - who is naughty and who is nice?

Dividend stock watch list conclusion

Okay, time for the round up. Three solid stocks above. WTR has a slightly higher price to earnings that I would hope, but it is similar to Consolidated Edison (NYSE:ED) (which is a Top Foundation stock), as it is a primary resource that is being used by individuals, families, companies - each and every day. Therefore, I don't expect prices to really ever be on a great decline and to go with the flow of the market. However, there is a better yield from Delta with better valuation. Though metrics are stronger with Delta, it is in the airline industry, which is always going through some form of negative news/press and is accustomed to customers going with, typically, the lowest price. Then that leaves Cardinal Health, the bargain dividend aristocrat. Is it priced this way for a reason? Amazon having them shake in their boots? Tough choices here.

What do you think? What is YOUR top stock here? Any preference on one over the other? Which would you put money into today regardless if you have capital or not? I would love to hear from you! Thank you again for reading the article. I appreciate it, as always! Keep on saving, good luck and happy investing!