Bert's March Dividend Stock Watch List

A new month is upon us, and I am eager to continue to buy stocks that make sense and add to my portfolio. 2018 has been off to a crazy start, and I've thoroughly enjoyed following the madness of the stock market and eagerly awaiting these crazy dividend increase announcements. The dividend growth engine has been strong post tax reform, that is for sure. Today, I found three companies that have caught my eye. I will be watching these three dividend stocks closely. Here is my March Dividend Stock watch list!

Dividend Stock #1 - Altria Group (MO) - Now that the large tobacco company has a yield above 4% once again, the company has shot onto my radar. With an ex-dividend date that should be in the middle of March, I still would potentially have several weeks to initiate a position before missing the April dividend. The company is down 10% during the year, and I am really starting to like the current valuation levels. Its forward P/E ratio of (~16.1X at the time I am writing this article) is currently below both the market and its rival Philip Morris (PM).

The company also has a solid track record of increasing its dividend. Like so many other companies during the year, I am expecting a double-digit percent increase for MO. Management aims for a target 80% payout ratio, and currently, the company's dividend payout ratio is in the mid-60% range. This has left a lot of room for dividend growth in the coming year, which is why I am expecting great things in the current pro-dividend growth environment. After seeming off-limits for such a long time due to its valuation, I am very excited about the prospect of finally initiating a position in Altria.

Dividend Stock #2 - PepsiCo, Inc. (PEP) - Yet another company that has found its way into my watch list that was considered too expensive for the past several years. I classified Pepsi as one of my "Always Buy" stocks years ago because of the company's strong dividend track record, dominance in its industry, and its strong diversified brand portfolio. In fact, the company's diversified food and beverage portfolio and lower payout ratio were always what separated Pepsi from its rival Coca-Cola (KO), in my opinion.

Pepsi popped on my radar after its stock price fell despite announcing a large 15% dividend increase and $15b share buyback program in February. Starting in June, the company's quarterly dividend will increase to $.9275 per share compared to the current $.805 per share payment. Even with the increased dividend, the company's forward payout ratio is approximately 63%, which is a hair above the 60% payout ratio threshold we use in our Dividend Stock Screener. The company's forward payout ratio is ~19.2X at the moment, so PEP is not the cheapest stock out there. However, if the price continues to slide or we happen to have a wild downward swing like we experienced in February, I would be happy to initiate a position in the beverage in snack giant.

Dividend Stock #3 - Realty Income (O) - This stock has gained a lot of traction on our website and in the dividend growth investor community due to its recent slide. Heck, I have purchased the stock three times in 2018, and Lanny even joined the fun with a large purchase in February when he added 41 shares to his position. We've touted the reasons why we are interested in the Monthly Dividend Paying company plenty of times here over the last few months, so I won't bore you with the details once again. But just know that the company's strong diversification in the real estate industry and its 20+ year streak of annual dividend increases are the primary drivers for why I love this company. If the price remains in the high $40s and low $50s price per share range, I may just have to continue adding. My current position is 92 shares, so I would love to push my position over 100 if the price is right!

What do you think about the companies on my watch list? Are you watching MO, PEP, or O? If not, what stocks are you watching instead? Would you prefer KO or PEP at their current prices? Have you added to Realty Income in 2018 as well?

Comments

[carrion]

Initiated position in PEP at 107.70 recently

[devlau20]

MO & PM are not competitors. They were the same corporation not long ago. At the split, MO took domestic operations & PM took the international side of the house. They do not compete.

[AlieGee]

I told a friend who came to me often asking what to buy. On many occasions I said to buy the dip at 93. Did he? NO !

[youheardithere]

Buy the dip. This is going back up.

[mrawls6185]

I have all three.

[AlieGee]

Yup ! And all three are good holdings !

[Michal.Holik]

These three are my top3 largest positions. Added recently.
I agree, these three are top picks!

[Drip It]

Small 6% MO divi increase today? Anyone know most? Most expecting much more

[Retired One]

MO has not given out a double digit (10%) Dividend Increase in my recent memory of MO. I think in a really good year they increase by 8.8-8.9%. A 6% Increase may seem smaller than normal, BUT, they may have plans as to where to redirect the Capital in relation to Product Development or Capital Investment. They have a reason for not increasing beyond what they consider “sustainable”. Actually, buying MO today at $62.50 to $62.90 would be a great entry price for a new Investor who may have been watching MO for an entry point. Even though I am an “Old” investor in MO, I just purchased shares this morning on the Dip from 3 days of Drops on the DOW and testimony by FED Chair Powell to Congress.

[Michal.Holik]

There is always a probability that they will increase again, in standard time (08/2018)

[Dividend Latitude]

Drip It,

MO increases the dividend annually in the 3rd quarter. Today's raise was a "bonus" raise. Expect another, larger raise in August.

MO management targets a higher payout ratio than what they have currently, as Bert mentioned in his article.

[Wood3]

PEP agree, or look at ABBV

[m1chael]

Initiated position in O at $49, and MCY at $41.50

[orenato1974]

I bought Pepsi a few years ago at 114 just saving a little money and waiting for a drop to 108 to add more. I bought Mo at 62. A few years ago if it drops to 60 I’ll buy more.

[Gould Capital]

PEP would be my pick of the three.

[Pennywise The Dancing Clown]

Agreed. I avoid tobacco and REITs for the most part.

[User 49180121]

I've been eye balling MO as well. The high payout ratio is kind of concerning to me though.

[auto44]

The high payout ratio keeps the wolves from the door. What wolves>. States attorneys general, litigation attorneys, and anyone else who would like to sue for using a. product they have been warned not to use since I was a kid, many decades ago. Stockholders get the money before they get a shot at it.