July 2018 Watchlist

Once again, I am almost ready to do my next purchase, so it’s time to look around and see what market has to offer. It’s always a pleasure to look for another “brick” to go into my small dividend house πŸ™‚ This is the third time when I am creating such a watchlist and I found it useful when considering which stock to buy next.

Let’s see what caught my attention this time:

  • Starbucks (SBUX).Β Let’s start with the stock which I saw very frequently in recent watchlists or purchases of fellow dividend growth investors. These are just a few examples – Lanny’s from Dividend Diplomats recent purchase, DivHut’s stock considerations, Engineering Dividends’ recent portfolio thoughts. Starbucks was in my mind for a few years already due to several reasons. I am lover of takeaway coffee and used to have one almost every working day. I am now trying to limit this to 1-2 times a week, since it’s not the best use of my money if I am planning to retire early πŸ™‚ I would love if dividends from SBUX would cover my takeaway coffees one day! Another reason why I find it attractive is a simple fact that I don’t think that people will start drinking less coffee in the future. The world is spinning so fast now and coffee keeps it going. Of course, there is question if Starbucks will stay as people’s go-to place for a coffee but I think they are smart enough to stay in this position. SBUX stock price took a beating recently due to several reasons: skepticism about company’s aggressive expansion plans in China, slowing growth in the U.S., health concerns about its sugary “frappuccino” etc. Price of the stock declined by ~15% compared to last year and I would like to use this opportunity. The price at the time of writing stands at $51.17 and I would love to add it to my portfolio if the price stays at this level.
  • Discover Financial Services (DFS).Β This is a stock that I found on the watchlist of “MrTakoEscapes”. I love his ideas and am waiting each month for this post. He tends to find out some hidden gems that are usually not that popular among dividend growth investors but his insights are really thoughtful. DFS is a direct banking and payment services company. It’s basically a credit card stock. It is similar to Visa but much smaller and cheaper (in terms of P/E Ratio – 12.61 for DFS and 35.54 for V). Company has a moderate yield of 1.94% but has a low payout ratio of 24% which is good. It has been increasing its dividend steadily as well. One of the drawbacks is that it’s current Earnings per Share (EPS) is negative and stands at -6%. Another drawback is that it would likely suffer a lot if the next “recession” hits and consumer borrowing tumbles. But I would like to have some exposure to financial sector as I don’t have any stocks from this field in my portfolio yet. I will keep it as a consideration.
  • Broadcom (AVGO).Β The third company in my checklist is from technology sector. As company’s website says, Broadcom Inc. is a leading designer, developer and global supplier of a broad range of digital and analog semiconductor connectivity solutions that serve the wired infrastructure, wireless communications, enterprise storage and industrial markets. Its price has recently plunged and is down by ~24% since its 52 week high and currently stands at $218.24. It was down to less than $200 a couple of weeks ago but recovered a bit since then. This happened mainly due to the recent deal where Broadcom agreed to acquire CA Technologies for ~$19 billion and many investors think that it’s not a good deal. We will see how it will work out for them in the future but this recent price drop may be an opportunity to add this solid company to my portfolio. Current dividend yield stands at 3.33%, P/E Ratio stands at 8.53 (mainly due to tax reform so it should be higher next year). What I like about this company is that its products (semiconductor connectivity solutions) are more and more used in multiple industries (“Internet of Things”, cloud computing, driverless cars, industrial automation etc.). I think there is still potential for growth in this field and Broadcom is situated well to benefit from it.

This is a short summary of the main ratios that I am usually looking at when evaluating companies that have potential to be added to my portfolio:

Looking at the above table, AVGO is looking as the best option. However, we shouldn’t compare apples to oranges, as all 3 companies are very different and it would make more sense to compare each of them with their competitors. Also, Broadcom’s recent acquisition of CA Technologies is not included into the numbers and I think that Debt to Equity ratio is going to be much bigger next year. It still gives me some information that I will use to make the final decision.

I will be going through the financial statements of the above companies next and will try to decide which one will be added to my portfolio, if any. Maybe I will find something else that will look more appealing.


What do you think about above companies? Would you consider adding any of them to your portfolio? Are you looking at some other companies at the moment? What was your last purchase? I would love to hear your comments!


Photo byΒ Brendan ChurchΒ onΒ Unsplash

9 thoughts on “July 2018 Watchlist

  1. Hi. SBUX looks interesting buy wity P/E 15. Div yield almost 3% . Low leveraged and nornal capitalized.

    Other two no go for me. 2nd yield is bellow 2% which makes sense for me to repay my mortgage with 1.65% interest and 3rd I would go for T better with PE <10 and yield ~6%

    1. Hi P2035,
      Thanks for your thoughts! I am leaning towards SBUX as well. I don’t think that we should compare T and AVGO, though – the companies are very different, in my opinion. Also, I have some T already, would like to diversify my portfolio instead πŸ™‚

  2. Well well well good to see you back on track πŸ™‚
    Unfortunately none of the above is in my screen at the moment. We are taking a little different paths as I am leaning to Europe business: Siemens, Sodexo, Munich RE, Danone and Total.

    1. Hi GoNorthBalance,
      Thanks for the ideas! For me, the commissions to invest in Europe (excluding Baltics) were bigger than to invest in US companies ($9.95 minimum for US compared to ~€30-50 minimum for companies in Europe). Since I’m investing in chunks of ~$1000, I don’t like to pay more than ~1% for the fees.
      However, I just double-checked the fees and it looks like it changed for one of the German indexes and minimum commission is now €9.95). I will need to look at what they have to offer, thanks for suggestions! πŸ™‚

      1. I am also looking forward for new broker company or even Revolut that will shape the market with reduced or none taxes for share purchases.
        I face the same issue as you but I usually accumulate money till I gather 2.000 – 3.000 euros for my new buy.
        Let us know in case you find gems in Germany.

  3. Intersting pick Broadcam and it tickles my fancy πŸ™‚

    I can understand P2035s remark about T but these are different companies. In essence T is a user of Broadcoms products.

    Thanks for sharing BI!

    1. Hi Mr Robot,
      Thanks for the comment! I agree regarding T. I think T is definitely worth attention at the moment but it’s very different and your observation is on-point! Broadcom is making semiconductors that are used in the industry buy other companies πŸ™‚

  4. Gotta love Starbucks. I also added some shares too and have built a pretty solid position in the coffee giant. I love coffee, so it just makes sense, right? I’m going to pass on DFS at the moment. They are trading at a discount compared to V and MA as you point out. But I’m looking elsewhere at the moment. AVGO is a company I’m not that familiar with, so thanks for giving me another company to research here.

    Happy shopping!


    1. Hi Bert,
      The same here – SBUX is especially attractive for coffee lovers. It would be great to have this position in my portfolio as well but we’ll see – I haven’t made the purchase yet. Shopping is something we love and I mean our way of shopping πŸ˜€
      Thanks for the comment!

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