Dividend Stock Watch List - June 2019

Summary

• As I mentioned in last month's dividend stock watch list, I'm going to focus on our four lowest sectors each month.
• Our portfolio hasn't changed too much in the last month, so our lowest sectors are still Basic Materials, Communications, Industrials and Healthcare with a really close (few hundred bucks higher) fifth sector - Consumer Cyclicals.
• In summary, our dividend stock watch list for June 2019 consists of four great stocks: AbbVie, Magna, 3M, and Disney.

Hey, everyone.

It's time once again to start thinking about where we are going to deploy some funds this month.

As I mentioned in last month's dividend stock watch list, I'm going to focus on our four lowest sectors each month. This way, we stay nice and diversified and don't have a sector dominating the entire portfolio.

Our portfolio hasn't changed too much in the last month, so our lowest sectors are still Basic Materials, Communications, Industrials and Healthcare with a really close (few hundred bucks higher) fifth sector - Consumer Cyclicals.

Nutrien (NTR) has rebounded a bit since last month, and the telcos continue to run up in value… So I'm gonna pass on them unless something really changes.

Cyclical Stocks

If I were to go with the consumer cyclical sector, it would be between adding to our position in Disney (DIS) or starting a new position in Magna (MGA).

Disney

I have loved having a position in Disney, and with only 20 shares, I would love to up that position before its streaming service becomes live. I think the company is still relatively cheap with a P/E ratio of 15.3 times earnings, and it has a tonne of potential for growth in the future. Disney also tends to have a very wide moat, but has a very low dividend yield of 1.29%. The dividend growth has been low lately too; this is to be expected though with all the moves it has been making. It is a position that I really enjoy holding though, as I watch the Avengers series and debate a trip to Disney's parks next year.

Magna

Magna would be a new position for me. I have debated this position for a while, and May (one of my longtime followers of the blog. Thanks btw!) recently was asking me my thoughts about it.

I have a couple friends who work for Magna and enjoy the company. It has been raising its dividend the last nine years and has a 10-year dividend growth rate of 15.4%. This is fantastic, and at under 60 bucks a share, it is near a 52-week low and sports a 5.4 P/E ratio. The starting yield if you were to buy today would be 3.33%. Not bad at all!

This has been one of the most shareholder-friendly companies I have followed that I know of. Magna has made great use of its capital and reduced the outstanding share count dramatically.

The cyclical nature of the car business has kept this stock price down; lots of people think we are at the top of the automotive cycle. I could see that, but there is the move to self-driving cars and more electric cars in the future. Innovation keeps coming and Magna has positioned itself nicely in these regards.

Industrials

The industrial sector has started to create some nice entry points. I'm specifically looking at Caterpillar (CAT) and 3M (MMM). I'll pass on CAT at the moment as I think it has more room to fall, but 3M continues to tickle my fancy.

3M

A dividend king! With a nice price, mmmmmm… They should call it 6M at these prices, zing! (See what I did there?). I started a tiny position in the company not too long ago at 190. I thought it was at a good price there; here we are around $164, and with a 3.5% starting yield. This one is extremely tempting, especially when my goal for the year was to start/pump up positions in either 3M, Johnson & Johnson (JNJ) or Pepsi (PEP).

From what you read on forums and in the community, people are starting to grab some shares, while some say they will continue to drop. The company has got some legal issues that it is going to need to deal with and fix the issues with the environment, but this may be one of the bluest blue chips out there. It currently sports a P/E ratio of 17.5 times which screams buy for this king.

Recently, Jason Fieber, aka Mr. Free at 33, had a post on the company as his weekly undervalued dividend growth stock showing how undervalued he believes it currently is; I agree!

Healthcare

Last but definitely not least, the healthcare sector. This is a sector that should be way up there in my portfolio. The baby boomers are getting older (as we all are) and this sector should perform very well moving forward.

AbbVie

I currently hold 34 shares of AbbVie (ABBV) and would also love to increase those numbers. As Matthew McConaughey would say in Wolf on Wall Street - "Those Are Rookie Numbers, You Got To Pump Those Numbers Up."

This is a great company with a lot of drugs in the pipeline and close to approval. Currently, it makes a tonne of its income from Humira, which is starting to lose its patent protection and gain some new competition. Management expected this and has a bunch of faith in its new drugs. I got faith as well since its clinical studies have been moving along nicely.

The current P/E ratio is a little high at 21.8 times, but its dividend yield of 5.55% is enticing. Especially since the company pays in the second month of the quarter, which has always been my lowest paying months.

We all know we should never chase yields though. I have been burnt a couple times doing this and have done my best to learn from those mistakes. I think AbbVie's dividend is safe, and if one of its major drugs gets approval, expect those hefty dividend raises to continue to come.

Conclusion

In summary, our dividend stock watch list for June 2019 consists of four great stocks.

• AbbVie
• Magna
• 3M
• Disney

Only one of the four is a Canadian stock, which is unfortunate as I'd love to increase our TFSA accounts and also not lose on the currency conversion.

Ultimately though I think this month's purchase will be south of the border in our RRSP account. Those three stocks are really tempting at current valuations and also to further diversify our portfolio, both from a sector point of view and geographically. The home bias of investing is very real, and we need to do our best to even out that portfolio!

I'm curious as to what your thoughts are this month. What stocks are you watching or picking up lately? Out of these four, which one would you be buying?

Cheers!

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.