Dividend Stock Watch List – May 2015

Dividend Stocks Watch List

Welcome to the May 2015 edition of the dividend stock watch list.

Every month, I go through a list of FTSE 350 value stocks and dividend-paying stocks. I start off with all 350 stocks, and I rank them in different ways in order to whittle down the numbers towards a lower amount by following a set of criteria. This helps me review what is going on in the UK stock market, as I see the ups and downs of every stock’s data. I can then choose stocks that I would like to research more, in order to invest, but first I have to get rid of those that I probably wouldn’t like to invest in. To see how I do this, check out the stock selection criteria we use.

Dividends are one of my strategies for wealth through passive income. I’ve only recently started investing more seriously, after several years as a student. In the intervening years, I mostly used p2p lending as an investing strategy. Now, I’m returning to slowly building up our shares in value and dividend growth stocks as a way of diversifying our income streams, because I believe that certain stocks and markets are cheap right now. Our pensions (M’s SIPP, T’s pensions) do not include individual stocks, and neither does our emergency fund, nor the investment accounts we have opened for our son.

We have recently committed to putting more money into dividend paying value stocks, as part of our regular cashflow management. This will hopefully grow as and when our income increases. Another recent change is the information source for our monthly watch lists. We used to receive a monthly spreadsheet of dividend stocks, but we have changed to retrieving the information ourselves and setting up filters on our own spreadsheet to screen the FTSE 350. Therefore, this month’s constituents might look a bit different to the last few months’ due to different websites reporting slightly different numbers. I have also decided to simplify the table, as it was too wide. Since you already know my screening criteria, I have just taken to producing the tables as simply as possible with the stock’s name and its yield. I hope you like this change. Here goes!

FTSE 100 Dividend Stock Watch List

StockYield
WPP plc2.50
Next plc2.04
Sky plc3.00
Prudential PLC2.27

As you can see, it’s slim pickings this month. I have been wondering whether to alter my PE criteria from 7-20 to 7-25. A PE of 25 would be at the high end of my choices, and I do prefer to buy cheaper stocks as measured by the PE, but the lower number may be too restrictive. Let me know what you think. Here’s what the list looks like if I include stocks with a PE of up to 25:

StockYield
Diageo plc2.95
WPP plc2.50
Next plc2.04
Compass Group plc2.34
Sky plc3.00
Prudential PLC2.27

Still only 6 stocks, but at least it’s better.

FTSE 350 Dividend Stock Watch List

StockYield
PZ Cussons plc2.19
Rotork plc2.12
Spectris Group plc2.17
James Fisher and Sons plc3.07
RPS Group plc3.98
ITE Group plc3.94
Amlin plc5.88
Atkins (WS) plc2.55
Cranswick PLC2.29
Hunting PLC5.29
Computacenter PLC2.73

Now, that’s more like it. As in all our previous watch lists, there are always more value stocks that pay dividends available from the FTSE 350 list. I left the original PE criteria in there (a PE of between 7 and 20) as there are several stocks from which to choose.

We can now look into these stocks further and research them using sites like interactive investor, or blogs like those of John Kingham, who recently wrote a great piece about Prudential and whether it may be still too expensive. At the time, it was trading at around £17.50, but it has since fallen to below £16. However, according to his article, it would have to fall to somewhere around the £11 mark for him to consider investing, as it otherwise just does not meet all his criteria.

I am personally looking for companies with a higher yield at the moment, so several of these do not even meet my desire for a 4% or higher dividend yield. This is purely because we have started to use dividend stocks in a small way as part of our monthly cashflow and cash management. If I were investing purely for the long-term dividend growth prospects, I would probably pick Diageo, along with several of the lower dividend yielding FTSE 250 stocks. But there are also plenty of small-cap stocks that I am also interested in, and which excite me more.

We do not currently include small-caps (anything outside the FTSE 350) in these monthly watch lists, purely because it’s easier to do research on the FTSE 350. However, I am always attracted to small-caps and given my propensity to support smaller businesses, I may start doing a monthly small-cap watch list too.

Which stocks are on your list for May 2015? Are there any stocks which you are surprised by? Do you think we are too harsh with our PE ratio criteria? Would you be interested in a monthly small-cap watch list? Let me know, leave a comment below.

15 Comments

  1. Three comapnies, which You have mentioned, I have included into my folio recently; WS Atkins, Cranswick and Compass Group. I really like dividend level especially for ATK and CPG. All three are great companies, but I wonder, what do you think about the value of CPG? Isn’t it overvalued at the current price level?

  2. Hello TV
    and first many thanks for this impressions. The GB share market is very interessting for german shareholders because of zero withholding taxes.

    I would ask why you have not following shares on your watchlist or depot?

    GVC Holding PLC
    BP PLC
    Centrica PLC
    Ladbrokers PLC
    Brgds
    Sky

    1. Hallo und Willkommen!

      The UK is indeed great to invest in for foreign investors, if only I could say the same about Germany and the USA, but I am being taxed 15% instead, which is sad.

      As regards to the shares you mentioned:

      GVC – I am not familiar with this stock
      BP – I own Royal Dutch Shell instead, as I thought they were stronger than BP (they have a better dividend history too)
      Centrica – they recently cut their dividend, although I am considering buying into Centrica as I have no gas utility as yet
      Ladbrokes – I do not invest in gambling (or tobacco) companies
      Brgds – I do not know what you mean by this
      Sky – I do already own Sky, but I got it so cheap last year, that I am loathe to pay the current prices. I am up 28% on this investment. However, it does tick all the right boxes!

      Vielen Dank, und Bis Bald!

      Cheers (PROST!!!)

  3. Hello TV
    and first many thanks for this impressions.

    I would ask why you have not following shares on your watchlist or depot?

    GVC Holding PLC
    BP PLC
    Centrica PLC
    Ladbrokers PLC
    Brgds
    Sky

  4. I’ve been buying up European mutual fund lately (my work won’t allow eft, I dread the 1% mutual fund fee). With the euro is at all time low against the dollars, even mr Buffett is buying Europe, Berkshire is up 10% for the year. My 401k up almost 5% compare to my s&p 500 wing of 2.9. I’m glad I made the decision to buy Europe. Even the Greekexit (Greece exit EU ), I’ll continue to average down. It’ll be like 2008-2009 again, it’s better to be in it, then out of it.

  5. Interesting list as usual, thanks M.

    I’m not planning on buying this month, although have put aside funds for next month to invest in either a stock or investment trust. WPP, Next and PZ Cussons are all on my watch list.
    weenie recently posted…All OverMy Profile

    1. In really interested in getting some more trusts. I’ve only got one at the moment, but I’ve been reading up a lot on them. Do you have any favourites?

      Cheers

      1. Bankers IT and Scottish Mortgage IT are ones I will continue to invest in, but I quite like the idea of getting ITs that are invested in the UK too, also in small UK companies, eg City of London for the former and Aberforth Small Companies for the latter.

        More companies to add to my ever growing list to buy.!
        weenie recently posted…All OverMy Profile

        1. I’ve got aberforth in my sipp, I like it a lot. The only issue I have with ITs are that they often have large holdings in the tobacco companies, so that kind of put me off to be honest.

  6. Great list. I think that keeping the sub-20 search criteria makes sense. If you look at the list–although maybe not massive–it certainly is not lacking quality companies to consider. Alternatively, how about shifting to, say, a PE of 22 rather than 20? That brings in a good number of other higher quality companies whilst also edging away from really very high PE values.

    I hold a handful of those in your list–Diageo, PZ Cussons, WPP, Sky, Amlin–and would happily top up on any of them. Obviously, Amlin is a massive outlier yield wise. However, both WPP and PZ Cussons are set to see their dividends continue to grow at a very impressive rate in the near future.

    Personally, I am very tempted to top up either my Amlin or WPP holdings. Diageo also, at current prices, looks good for the long term (as you note).

    Of the insurers, I am not sure about Prudential. I think I largely agree with John. It is maybe a little dear but it is a very high quality operation. Its dividend record is impressive. I’d quite happily open a position at this price if there were not other excellent investments around.

    The insurer that is catching my eye at the moment in Legal and General. Alternatively, a top up on Old Mutual may be on the cards. Both are FTSE 100 giants. L&G has a higher yield but OM has higher dividend coverage. Both are set to grow rapidly both with regards earnings and dividends.

    Great list. looking forward to seeing what you choose this month!
    Dividend Drive recently posted…My Weekly Top 5: On Here, Over There (and Over To You)–9 May 2015My Profile

    1. Hey D2,

      thanks for stopping by. You know what, L&G has also caught my eye too, although it’s more likely I’d be tempted by Amlin’s amazing yield 😉 I’m also interested in PZ Cussons and Diageo, as well as certain investment trusts like F&C Commercial Property, Fair Oaks, and GCP Infrastructure. We’ve already got a decent holding in John Laing, but I love my infrastructure and services companies as you know with one of our faves, Interserve.

      Thanks for the suggestion on altering the PE to 22 – that is quite good, because as the companies do fluctuate by 1-2 quite regularly, the list could include several extra names that otherwise might only occasionally slip into the list e.g. Diageo who have popped in and out only a couple of times when they went slightly under a PE of 20.

      Cheers

      1. Yes, I think that PE22 is not so outrageous for some of the classic defensive companies like Unilever, Diageo etc. So I think it is fair to shift it to that extent. Above that it is a little more “dear” though! Have an experiment!

        L&G looks very good. When it was around 260p per share it looked excellent with a predicted yield of c.5%. Even now it looks like a nice bet in the insurance market. I agree though, Amlin looks far too attractive at the moment to be overlooked. Currently my holding is down quite a bit (about 10%) and I am seriously thinking of topping it up. It is chiefly a competition between those two for my Catlin cash!

        I had not heard of Fair Oaks before. I will look into it. John Laing is interesting but I find the charges a little steep for my tastes! Interserve still looks such good value today even after the post-election jump.
        Dividend Drive recently posted…My Weekly Top 5: On Here, Over There (and Over To You)–9 May 2015My Profile

        1. It’s a shame I missed the amlin ex-div, which was last month. I might just look elsewhere for a while. To be honest, I’m feeling the need to either buy more in my boring staples such as national grid and Unilever, or to buy strong small caps with good dividend histories. L&G would certainly fall into the former category

        2. Just a point of clairification – I mean the John Laing stock that recently IPO’d and is now up 15% since its debut on the LSE, rather than the fund – which is as you say a bit expensive in terms of charges.

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