Tuesday, September 1, 2015

Stock Watch List for September 2015

Whichever dividend blogger posted their watch list first, I owe them a debt of gratitude. I freely admit that I use other investors’ picks as a starting point for my own research. There is an additional benefit of posting my own watch list, as a means of concentrating my efforts on a handful of companies. Speaking of a handful, I decided to limit myself to a maximum of five companies in order to limit my research and purchasing activities over the next month.  In order to be precise, I'm including a target price at which I’d likely buy the below mentioned securities (assuming adequate cash resources when the price was reached).  Here are the stocks I will consider buying in September 2015.

TransCanada Corporation (TSX = TRP); Target Price = $42

I established a half position in TRP almost three years ago, and haven’t added to it since. Previously, I was unimpressed with their stodgy dividend growth (4-5% a year) and how expensive their stock was with a P/E well in excess of 25X. Recently,management has committed to accelerating dividend growth (in the 8% range) and with a recent decrease in price, coupled with continued strong earnings, the stock is now priced much more attractively with a P/E of about 18X. My target price (close to the 52-week low of $41.95) would provide a dividend yield on cost of about 5%. Putting ethical questions about the company aside, reality is that Canada will continue to produce oil, and that the oil will need to be physically moved.  Looking at their cashflow statement, TransCanada continues to invest heavily in pipelines that should fuel dividend growth for years to come.

Alaris Royalty Corp. (TSX = AD); Target Price = $25

Despite already having a full position in Alaris in my RRSP, I’m very open to initiating a position on this high yielding (~6% currently) dividend growth royalty company in my unregistered account. There are so many things to love about this company, but a few of my favorites are their diversified royalty revenue stream, the fact it’s a monthly payer, their very affordable P/E of 14.5X, and the fact they are now looking at smaller opportunities through a new business development stream. My target price represents a yield on cost of 6.5% and is only slightly below their 52-week low price of $25.50.

Canadian Utilities Limited (TSX = CU); Target Price = $34

A boring utility company with high exposure to the downtrodden Alberta economy? Sounds like the perfect opportunity to complete my position in this company and wait for a recovery in fortunes and perception in what was for many years Canada’s fastest growing province. Other reasons to look into this company include their long history of dividend growth (more than 10 years), its reasonable price with their P/E of 17X, and their strong financial position reflected in their A/Negative issuer rating.  My target price equates to a 3.4% yield on cost and is higher than their recent $31.00 52-week low that occurred on black Monday.

Omega Healthcare Investors Inc (NYSE = OHI); Target price = $32

With a limited amount of funds currently available in my RRSP, and a Canadian dollar worth only $0.76 of a USD, I have to be extremely sure of any US company prior to taking the plunge.  Therefore, I limited myself to only one US company on my watch list, with a honorable mention going to Kinder Morgan. Although I think Kinder is underpriced, I’m already overweight on the company. I’m simply more tempted to buy enough shares to complete my position in Omega. The company has raised its dividend for 13 quarters in a row and now yields 6.6%. The P/E of 23X is slightly misleading for this REIT that has a price to adjusted funds from operations of below 15X. I hope for more volatility that causes this great healthcare company to fall below its 52-week low of $33.10 to my target price.

There you have the list of companies I’ll be playing close attention to in September. I debated including Royal Bank on the list, due to its recent price weakness, but ultimately don’t see myself going even more overweight on my position in Canada’s biggest bank.

What companies are on your watch list this month? Do you have differing positions on any of the four companies outlined above?

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