October 2017 Investment Ideas

The stock market seems unstoppable these days. This is great if you’re in position, but makes it harder and harder to find some good value investment opportunities. As every month, in this article I am trying to find some undervalued stocks that long term dividend investors might consider.

IBM

Dividend Yield: 3.78% vs 2.74%

P/E: 12.78 vs 12.15

Payout Ratio: 47.42%

IBM is on my watch list from the very beginning of this series. That time the share price was around $160 and now it’s still close to that range. In the last couple of month there have been some great entry points, but it’s still a good long term buy in my view.

Target

Dividend Yield: 3.9% vs 2.88%

P/E: 12.55 vs 17.16

Payout Ratio: 48.58%

The company is on my watch list since it was traded around $53. Now the share price is over $60. Target is historically undervalued with a nice dividend yield.

Brinker International

Dividend Yield: 4.5% vs 2.35%

P/E: 10.59 vs 17.86

Payout Ratio: 46.26%

Brinker has made it to my watch list in May. That time the share price was around $40 and I have even purchased at higher levels. The stock just keeps on falling and now it’s 50% lower than its all time high. I personally still don’t see any problem with the numbers and believe that the current price is very cheap.

Kinder Morgan

Dividend Yield: 2.78% vs 4.6%

P/E: 32.14 vs 159.72

Payout Ratio: 89.29%

KMI is a long term play for me. There are definitely more short term opportunities out there and the current dividend yield is not that exciting either comparing to the risk. But meanwhile the company is building down debt and maintaining a strong cash flow position. Adding the future dividend increase plan that they announced, I consider any future share price decline as great buying opportunity.

General Mills

Dividend Yield: 3.75% vs 2.99%

P/E: 18.55 vs 21.27

Payout Ratio: 69.18%

I don’t know when was the last time you could purchase General Mills for such dividend yield. The only thing that worries me is the relatively high payout ratio. This definitely slows down the dividend increases until they manage to increase their earnings. I believe there is limited downside risk around $50, while it can be a stable element of a long term portfolio.

L Brands

Dividend Yield: 5.43% vs 2.64%

P/E: 13.01 vs 19.99

Payout Ratio: 70.59%

L Brands has been added to the watch list in August and since then the share price has increased around 10%. Just like GIS, my main worry is the high payout ratio. The next few quarters will be important, so I will watch the results closely. With such attractive dividend yield, it might worth to open a small position.

 

There is also one stock that has been removed from my watch list. The share price of W.W. Grainger has reached $200, which is a significant increased since I first mentioned it. I don’t find these levels as an attractive entry point anymore.

 

Is any of the above stocks on your watch list? What else are you buying these days?

 

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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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6 Comments

  1. Mr. Robot October 30, 2017
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