November 2018 Watchlist

It’s time again to have a look at the market and try to find some potential targets for my portfolio. October was a busy month for a lot of dividend investors, as the market slipped and presented quite a few opportunities. Unfortunately, I didn’t take advantage of that but hopefully I will still be able to find some openings.

I came up with a list of 3 companies that caught my attention. Let’s get to them!

Illinois Tool Works (ITW)

First up is a company which was also in my September’s watchlist.

The Company is a global manufacturer of a diversified range of industrial products and equipment with 85 divisions in 56 countries.

As I mentioned in September, the company’s share price decreased significantly throughout the year. It turns out that the price is still hovering in low $130s at the moment (was actually $120 at one point in October). So not much changed since the last time I looked at this company and I still find it attractive. Some key numbers (with current price of $132.56):

  • P/E ratio – 23.88 (Forward P/E – 17.61);
  • Dividend yield – 2.99%;
  • Payout ratio – 60% (a little bit on the higher end but still attractive);
  • Raising dividends for – 54 years.

I especially love the fact that they increased their dividend for 54 years in a row. Perhaps I could find a company with better ratios on paper but this could be a nice time to add this dividend aristocrat to my portfolio.

Toronto Dominion (TD)

The Toronto-Dominion Bank, together with its subsidiaries, provides various personal and commercial banking products and services in Canada and the United States.

Banks usually do pretty well when interest rates are rising which is currently happening. I actually don’t own any companies from Financials sector in my portfolio. This is something I would like to change, so I started looking if any of the companies in this sector could be a good addition to my portfolio. Toronto Dominion caught my attention. The company is down by 10.55% off its 52-week high, even though the performance is looking pretty good. Revenues and net profit is rising steadily for the last four years. Some key numbers for the company (with current price of $55.46):

  • P/E ratio (TTM) – 12.06;
  • Dividend yield – 3.71%;
  • Payout ratio – 42%;
  • Raising dividends for – 1 year.

The one thing I don’t particularly like about this company is their inconsistent payout of dividend. Even though they tend to raise their dividends quite significantly in the long run, the payouts look sporadic. But I guess this is due to the moving exchange of Canadian dollar/US dollar. I don’t have experience owning a company which is operating in one country but is bought from another exchange (in this case – TD is listed in both Toronto exchange and NYSE and I would probably buy it form NYSE).

Aqua America, Inc. (WTR)

I wanted to complete the list with a company from another sector I don’t have any holdings of yet. It’s the Utility sector and I recently made a small overview of Utility stocks in the Baltics market. Since none of the companies in the Baltics convinced me to be a good buy, I started looking at what the US market has to offer. And today I came up with a nice analysis of WTR from Dividend Diplomats (link here). Shortly about the company:

Aqua America, Inc., through its subsidiaries, operates regulated utilities that provide water or wastewater services in the United States. It offers water and wastewater services through operating and maintenance contracts with municipal authorities and other parties. The company also provides non-utility raw water supply services for firms in the natural gas drilling industry. It serves approximately three million residential water, commercial water, fire protection, industrial water, wastewater, and other water and utility customers in Pennsylvania, Ohio, Texas, Illinois, North Carolina, New Jersey, Indiana, and Virginia. 

I won’t bother you with a lot of details, as you may read the analysis from the link above but these are the main ratios/numbers of the company (with current price of $33.13):

  • P/E ratio (TTM) – 23.66;
  • Dividend yield – 2.64%;
  • Payout ratio – 62%;
  • Raising dividends for – 19 years.

P/E and Payout ratio are quite high to my liking. But I guess this is the price you pay for the stability of the company. This type of company should not be hit hard during recession, as people will always need to use water. The only worry is that their recent acquisition of People’s (a natural gas utility) will raise their debt level once the acquisition is finalized. Still, this could be a company which could fill in the Utility sector gap in my portfolio.


There you have it – three companies from three different sectors. One problem is that none of those companies are available at my current broker. I got tired of this and am finally in the process of switching brokers. If my application is approved, I should enjoy the wider variety of stocks available, 15% tax on dividend instead of 30% and lower commission fees.

Which company looks most attractive to you? Do you own any of the companies in your portfolio? What are you watching at the moment? I would be happy to hear your thoughts!

Photo by Jon Tyson on Unsplash

8 thoughts on “November 2018 Watchlist

  1. WRE and ITW looks overvalued with PE >20. TD as you said dividends looks a bit unstable. If to chose from thouse ITW whould be the best choice. Taking into acount some oneoffa in q4 their rarios does not looks so bad. Long dividens growth record + growth of sales and income in pas few years. ITW looks more ore less good 🙂

    1. Hi P2035,
      Thanks for the opinion! PE>20 is also something I don’t like. Not sure yet if I will buy anything from this list.

  2. I think all three are solid companies, but ITW is the best valued of the three in my opinion. I’d personally like to see it a little lower before I bought, but the current price isn’t bad.

    Look forward to seeing what you end up buying!

  3. Hi DivvyDad,
    I am mainly leaning towards ITW or TD, actually. I am hoping that one of them will decline in price and present a nicer opportunity 🙂

    1. Hey Tryberich,
      I chose Interactive Brokers via their Lithuanian partner. There is not much choice in Lithuania and they seemed to suit my needs best.

  4. Those are some great names to consider. I’m also looking at ITW this month. It’s been with me since going the DGI route almost 10 years ago. I like my TD as well. All good names for the long haul.

    1. Hi DivHut,
      Thanks for the comment! Wow, I guess ITW more than doubled in value over those 10 years in your portfolio. Great example of buy and hold strategy in action! Let’s see if any of the companies end up in our portfolios again this month.

Leave a Reply

Your email address will not be published. Required fields are marked *