March Watchlist [5 DGI stocks]

We are entering March already so it’s time to prepare my monthly watchlist again. You would think that it get’s harder by the month as the stock market keeps rising to new all-time-highs. But nothing is further from the truth, because there are literally always opportunities out there.

Having said that, it is actually interesting to see how people responded last week on just a few down days. It felt like fear is kicking in while there’s really nothing to worry about. I think the below chart shows it nicely.

S&P500 around all time high’s

And if you’re already 100% up in a year by investing in certain growth stocks like $NIO then why don’t you just trim it a bit?

Nobody ever lost money from taking a profit.

But let’s get back to dividend investing, because that’s all what this blog is about. The good news is: I just got my salary paid again πŸ’ͺ

This means I have fresh capital to deploy and I want to spend it wisely. Last month I used it to expand my positions in Unilever and Ahold Delhaize, because they both dropped ~10% after reporting their annual earnings. This was a surprise to me, because I was actually aiming to initiate a position in Castellum AB.

Anyway, that was last month πŸ˜‰

So let’s have a look at my watchlist for March. The good thing is that most of the companies have reported their 2020 numbers already so there’s a lot of clarity about their dividends.

It was a horrible year for many people out there and it has impacted a large amount of companies. We now know which companies have proven to provide dividend safety during these unprecedented times.

Last but not least, fresh earnings results means that my dividend stock screener is also using the most reliable numbers possible.


Ahold Delhaize

Ahold Delhaize ($AD | NL0011794037) is one of the world’s largest food retail groups with it’s headquarter in the Netherlands. It is a leader in supermarkets and e-commerce (e.g. bol.com) in both Belgium and the Netherlands. It also earns slightly more than half of its revenue in the United States via brands like Food Lion and Giant.

I had it also on my December 2020 watchlist, so I will leave it here regarding it’s introduction. Things have changed though since last December. The company dipped quite a bit in share price after reporting their full year 2020 earnings.

The reason for that was simple: analysts didn’t like their 2021 forecast, because the company used the 1.6 Billion Cash Flow from 2019 as a baseline. I find this very conservative and I like that the company is not extrapolating their future earnings potential based on 2020 numbers. Those numbers were extra-ordinary due to covid-19, because there was a lot of stock piling and home dining.

It’s clear to me that I find this company undervalued. That’s why I bought additional shares when it hit the price of €22.50.

Why do I find Ahold Delhaize currently very attractive? It’s simple, the company currently trades at a P/E of 16.8 and a P/FCF of 10.7. At the same time it keeps buying back shares which helped the company reducing their share count quite significantly without loading up massively on debt. This is what I call shareholder wealth creation!

To prevent catching a falling knife, I intend to buy an additional tranche of shares once the stock declines another 10% since my last purchase price. Hence, when the company trades at a price of 20.25.

Consolidated Edison

The next company on my watchlist is Consolidated Edison. It is the first time that I’m discussing this company and the reason for that is the recent dividend cut from Red Electrica. I am considering now to sell my shares in $REE and use that money to initiate a position in this company ($ED).

Consolidated Edison is one of the largest utilities in the United States with the majority of its operations in New York via the distribution of electricity and gas. The company was founded in 1823 and it has a track record of increasing its dividends for a consecutive 47 years. That’s what I call a true US Dividend Aristocrat.

The company currently yields 4.72% with a 5 year compounded annualized growth rate (CAGR) of 3.3%. The payout ratio stands at 76% and it has a P/E of 16.8. The stock currently trades around its 5 year lows.

I consider this one of those “boring” and slow but stable growing companies.

Unilever Plc

It should come as no surprise, but Unilever is on my watchlist again this month. The company is still trading below my intrinsic valuation which I shared in my most recent post after reflecting on their earnings.

read more: Unilever share price drop – Is this a buying opportunity?

It is also a Tier-1 company as part of dividend portfolio allocation strategy so I’m generally using every opportunity to buy more of it. Having said that, at the same time I don’t want to go all in on this stock in a single week or month. Hence, I would probably be a buyer again if the stock dips this month into the low 40’s, i.e. < €41.50.

Unilever spots 55 years without a dividend cut and it currently yields 3.86% with a 5 year dividend CAGR of 7.07%. The FCF payout ratio is 56.3% and this gives enough room for future dividend hikes (EPS payout ratio is 77.3%). It currently has a P/E of ~19 which is below my typical P/E threshold of 20 for a company like Unilever.

Kimberly Clark

Kimberly-Clark is the 3rd consumer staples in this list. The company is widely known for it’s paper-based consumer brands like Kleenex, Cottonelle and Huggies. The company sells those products in 175 countries and that’s given you nice international diversification. This is especially helpful if you are afraid of the impact of a rising interest rate. Companies like Kimberly Clark can usually pass that on to the consumers in the form of price hikes.

The company was founded in 1872 and it has a track record of 49 years consecutive dividend growth. The company currently yields 3.53% with a 5 year compounded annualized growth rate (CAGR) of 5.31%. The payout ratio stands at 66% with a P/E of 18.8.

This is another attractive Dividend Aristocrat like Consolidated Edison and Unilever and I would consider it after a 10% dip from current its current price. Let’s see if we get a nice stock market dip in the upcoming weeks.

BASF

BASF is one of the largest chemical producers in the world and it’s currently domiciled in Ludwigshafen, Germany. The company has a very rich history and 70 years ago it was once part of IG Farben, an infamous company. Other companies that were spun-off from that entity are Bayer, Agfa and Hoechst (which is currently part of Sanofi).

This is again another widely diversified conglomerate which sells their products in 190 countries. The company did not reach Dividend Aristocrat status yet, because it cut its dividend back in 2008 with about 12%. This is typically a red flag for me, but we have another recession right now behind us to judge how well management is committed to their dividend.

And the good news is that it is committed. BASF remained its dividend flat at €3.30 and it mentioned that a reliable dividend is a priority for them, even in difficult times. Kudo’s to management, because we don’t hear this often from European companies.

BASF committed to dividend
Source: BASF Q4 earnings report

Having said that, the company currently still yields 4.7%, while it recovered already nicely in share price from its lows last year. The 5 year compounded annualized growth rate (CAGR) is 1.92%. This is not a high growth rate, but I would argue that this is typical when looking at their dividend growth history. It usually comes with few years of high growth followed by few years of low growth.

The current EPS payout ratio stands at 104% which is not a healthy number, but this is pretty normal for a cyclical company like BASF. Their outlook for 2021 is expected to be ~25% better than in 2020 which would mean that it covers their dividend again. Therefore I do expect a flat or marginally increased dividend by this time next here.

I find BASF still attractive and I would consider adding some additional shares if it drops to the 5% yield level. It fits in my portfolio as a small position and mainly for the yield, not the growth.


That’s it. These are the 5 companies which I have currently on my watchlist. Usually I have a chance to buy 1 or 2 of these during the given month, so let’s see.

Out of curiosity, what are the companies that you are currently looking at?

Yours Truly,

European Dividend Growth Investor


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Disclaimer

I’m not a certified financial planner/advisor nor a certified financial analyst nor an economist nor a CPA nor an accountant nor a lawyer. I’m not a finance professional through formal education. I’m a person who believes and takes pride in a sense of freedom, satisfaction, fulfillment and empowerment that I get from being financially competent and being conscious managing my personal money. The contents on this blog are for informational and entertainment purposes only and does not constitute financial, accounting, or legal advice. I can’t promise that the information shared on my blog is appropriate for you or anyone else. By reading this blog, you agree to hold me harmless from any ramifications, financial or otherwise, that occur to you as a result of acting on information provided on this blog.

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European DGI

It's my desire to retire early via Dividend Growth Investing as a passive income stream. This is not easy and especially when living in Europe. That's why I started this blog and share my journey: to give you a European perspective.
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Dividend Athlete
7 months ago

Bough shares in Ahold Delhaize in 2 tranches recently.
Exactly the type of “boring/steady” business with stable cash flows that I like to own.
Dividends & Buybacks amount to close to 8% returns already and adding mid-single digit EPS/FCF growth to it we are looking at the potential for market-beating returns.

Best regards,
Dividend Athlete

Libor
Libor
7 months ago

I got all of these (some of them thanks to you :)), I’d love Ahold to follow a bit of Unilever dive and to dip below 20.

Mark
Mark
7 months ago

Great suggestions. I own Ahold and Unilever and like them as well. ED also looks good, I’ve chosen PNW over them (less dividend history, but I like the fundamentals a bit better).

Billy
Billy
7 months ago

Actually bought ED before reading this. Feeling even better about my decision after reading your analysis. Similar to my thoughts on the company. Glad to see I wasn’t crazy or missing something.

P2035
7 months ago

Thanks for the list. ED and UL looks to be reasonably valued. Noticed a dip in PG as well. Wonder whats up with these two. High brands are out of flavor πŸ€”

ALVARO CARO ZEZZA
ALVARO CARO ZEZZA
7 months ago

Hi.
I have no news about a dividend cut form Red Electrica. (REE)
What’s more, it has pledge very goods dividends at least until 2025.
Where did you get that info?

Diogo
Diogo
7 months ago

I was hesitant on buying an european stock this month given the low funds and higher transaction fees and considering increasing my US exposure.

But all my stocks are green and higher than my average πŸ˜€ (funny how sometimes we investors don’t like that)…

In adition, I had extra funds this month and entered a very small position on AD.AS at an avg of 20 euros a share. I needed a consumer defensive and another euro stock in my portfolio to balance it a bit more.

Thanks! πŸ˜‰

Last edited 7 months ago by Diogo
Rubik
Rubik
7 months ago

Instead of ED you may want to check Allete (ALE), dividend yields 4% and the 5y CAGR of about 5%. Why I prefer Allete is that they are well positioned for green energy. I am not sure about Consolidated Edison. Given the trend and Biden administration my bet would be on “green” rather than on coal. On top of that I like strong adherence to their values but…. everybody has his own preferences πŸ™‚