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
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:
|Compass Group plc||2.34|
Still only 6 stocks, but at least it’s better.
FTSE 350 Dividend Stock Watch List
|PZ Cussons plc||2.19|
|Spectris Group plc||2.17|
|James Fisher and Sons plc||3.07|
|RPS Group plc||3.98|
|ITE Group plc||3.94|
|Atkins (WS) plc||2.55|
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.