August 2017 Investment Ideas

We are still in the summer period but we definitely can’t get bored. The S&P500 is around all time high, the EUR seems unstoppable against the USD, while the dear leader of North Korea is threatening the US that they will launch a ballistic missile on Guam. Are there any good investment opportunities out there in such situation? Of course, just read on!

In August I will definitely not add any new position to my stock holdings. This is not because of the lack of opportunities, but due to the closing of our real estate deal.

At the same time I’m keeping a close eye on the market and will continue to share my watch list on a monthly basis.

Most of these stocks are the same as in the previous months, although there is also a new addition.

The list of August is the following. In order to provide some extra info, I also include some important metrics for each stock. In case of dividend yield and P/E ratio I also include the current yield vs the 5 years historical average in order to have a better understanding on the current valuation.

IBM

Dividend Yield: 4.2% vs 2.7%

P/E: 11.8 vs 12.4

Payout Ratio: 47.4%

Since the end of February, IBM has fallen from $182 to the low $140s. The main worry here is that the company still doesn’t manage to increase its revenue.

At the same time from a long term dividend investing perspective we’re still talking about a stable company with a safe, over 4% yield which is well covered by the earnings.

Target

Dividend Yield: 4.45% vs 2.81%

P/E: 12.29 vs 17.26

Payout Ratio: 49.37%

The stock really had a good run in July (after a big fall of course), so initially I wanted to remove it from the list until a pull back. But now that during the last 2 days it fell nearly 6%, I decided to keep it on the list. If you believe that people will still actually go out for shopping in the future, TGT might have a good place in your portfolio.

Brinker International

Dividend Yield: 3.89% vs 2.2%

P/E: 11.6 vs 18.6

Payout Ratio: 44.3%

On Thursday, Brinker International has reported their quarterly earnings. I was really interested in it as the results might have justified the big decrease in the share price.

Well, the results were better than expected. In addition, the company has also increased its dividends by 11%.

Based on the above I even have a stronger feeling that the stock is undervalued at the moment. I simply cannot justify a nearly 40% decrease during the last 52 weeks. Let’s see during the next few months whether the market thinks the same way…

Kinder Morgan

Dividend Yield: 2.5% vs 5.5%

P/E: 63.7 vs 166.1

Payout Ratio: 161.2%

Many investors burned themselves in the past by the dividend cut of KMI. Nevertheless the company is currently doing great efforts in order to strengthen its balance sheet.

Kinder Morgan has recently announced a 3 years dividend increase plan. Based on this, next year the dividend will be increased by 60% and then 25-25% in the following two years.

Don’t buy the share for a short term trade, buy it on the potential $1.25 dividend per share that (hopefully) you will receive in 2020. That’s a 6.3% yield based on current share price. Of course I’m also hoping that in the future the share price will increase together with the dividends.

W.W. Grainger

Dividend Yield: 3.11% vs 1.8%

P/E: 18.9 vs 21.5

Payout Ratio: 56.7%

This is another stock that got totally hammered. In February it was still trading over $260 and now the price is in the mid $160s.

Yes, the GWW has some headwinds, but we are talking about a company that has managed to increase its dividends for 46 consecutive years.

General Mills

Dividend Yield: 3.5% vs 3%

P/E: 20.1 vs 20.6

Payout Ratio: 69.3%

I would like you to have a look at the long term chart of General Mills:

general-mills-chart

Impressive, isn’t it? This is generally a rather boring stock that you can just buy and forget about it. Meanwhile it will continue to pay you the dividends (currently for more than 117 years).

The share price keeps on falling since July 2016 and by now it has arrived to levels where it is very attractive to buy again in my view.

If you believe that people will still need food in the future, General Mills is a great long term investment.

L Brands (new addition)

Dividend Yield: 5.6% vs 2.3%

P/E: 11.3 vs 20.7

Payout Ratio: 63.3%

Wondering where the share price will go…
source: www.victoriassecret.com

You might not heard about L Brands as a company, but I’m sure that Victoria’s Secret rings a bell. It’s a great brand with a loyal customer base. In addition the population of the earth is rising, and according to the forecast half of them will be women 🙂

The share price of L Brands has fallen over 50% during the last 1.5 years. The dividend yield is currently 5.6%! And no, a dividend cut is not likely in the foreseeable future as it is still well covered by earnings. For me it looks like a very-very undervalued stock.

 

So that’s it folks, 7 great dividend stocks for long term investing that historically seem undervalued right now. What do you think about the list? Are your own personal favorites included? Do you have any investing ideas you wish to share? Don’t keep it for yourself, share your thoughts at the comment section!

 

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Disclaimer: This post or any other information on the site is not intended to be and does not constitute financial advice or any other advice. I am solely sharing my idea, plan and progress on financial independence and early retirement.

 

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10 Comments

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