Hey YouTube.
I'm Jimmy in this video.
I'm going to go through my top five dividend aristocrats that I think could have a solid
2019 a spread out my picks among different sectors to try to help diversify our portfolio
a bit.
Now when I chose these companies I tried to stick with companies that have a few different
features.
Obviously we want a decent yield.
Then I tried to find companies that looked relatively cheap when we looked at their PE
ratio.
Then I looked at their dividend coverage ratio to make sure that it was greater than one.
The higher the dividend coverage ratio the higher in theory the likelihood is that that
kind of company can continue to afford their dividends.
Now to be considered to be considered a dividend aristocrat the company must have grown their
dividends for at least twenty five consecutive years.
So we're likely to end up with larger more high quality companies call it blue chip companies
if they've been around for that long and they've continued to increase the dividend for that
long.
OK.
Now let's jump into the companies.
So our first company comes from the Communication Services sector.
It's AT&T ticker symbol T. Right now AT&T is a current dividend yield of about six point
five percent.
Their PE ratio is about 10x.
When we compare that to the S&P 500 they have about an 18x PE.
So AT&T looks pretty good.
AT&T is a dividend coverage ratio of about two point four which tells us that they earned
their profit was two point four times what they paid out in dividends.
So once again the higher the coverage ratio the better.
So here's a chart of AT&T for 2018.
And as you can see it's been in gradual decline.
Now if we look at some key events that have driven the stock we could see that this drop
here.
This was their most recent earnings and they missed EPS estimates by about 5 percent.
Then this jump here.
Well this is where they came out with the news that AT&T is expecting to roll out three
different streaming video services trying to compete with Netflix and then the final
piece the biggest news overall.
That's sort of been around for a while.
Is their merger with Time Warner and they're expecting in February of 2019 to get some
news from the government as to whether or not the merger will be able to go through.
Ultimately AT&T's goal is to try to create content buy content if they need to.
And their goal is to ultimately be a content provider which should give them much better
multiples of what they're currently trading at.
Okay.
Our next company is Leggett and Platt ticker symbol LEG.
Now this company isn't as popular as AT&T but they have a dividend yield of almost 4
percent a PE ratio that's less than 17x and a dividend coverage ratio of about one point
five.
So the numbers look pretty good.
But who are they.
Well they fall in the consumer discretionary sector.
They create and manufacture products that are used in mattresses furniture car seats
retail store fixtures things like that.
They're the company that first created they first come up with the idea of putting springs
in a mattress.
And they've held that patent for a long time.
Now here's what their chart looks like.
And this dip and recovery came from earnings.
Now earnings actually came in in-line with estimates but management issued guidance and
guidance was a bit lower than expected.
So the market didn't like but it wasn't too big of a deal since the market almost immediately
recovered.
Then this pop here well this right before that there was an announcement that the company
would be buying elite comfort solutions there one of the global leaders in phone technology.
Basically they're used in beds furniture cars boats airplanes shipping products pretty much
anything that uses foam.
The company says they expect this acquisition to be accretive within the next two years.
It creative means that it will increase earnings per share.
The next company comes from the consumer staples sector.
It's Kimberly-Clark ticker symbol KMB KMB has a yield of almost three point five percent
a coverage ratio of about one point six and a PE ratio at about seventeen point five.
Now here's what their chart looks like.
We can see that they've done OK for the year they're about flat for the year but they're
a lot better than the first two companies that we like.
Now this makes sense if you think about it because you're a consumer staple and in theory
if the market or the economy were to head lower we've been fear that heading lower consumer
staples should do better than the rest.
Now in this recent drop can be announced earnings and they actually beat estimates and they
came out with the forecast that was about in line with what analysts were expecting.
But some divisions globally missed earnings and they reduced the forecast for those divisions.
So the market didn't seem sure how to react since they drove the price low lower and almost
immediately kicked it higher.
Oh yeah.
Kimberly Clark is a health and hygiene company.
They make diapers tissues paper towels things like that stuff you wouldn't stop.
Buying if the country went into a recession.
That's why they're a consumer staple.
OK.
Only two companies left.
So our next companies from the health care sector and it's called AbbVie.
Ticker symbol a BBVA AbbVie has a dividend yield of a bit over 4 percent.
They have a coverage ratio of a bit over one point two and their PE ratio is just short
of thirteen X..
Now add these biggest product is Humira accounts for about 60 percent of revenue and that's
a pretty big number.
Now the patent protection for Humira already ran out in 2016.
So the company has been digging around trying to find their next big product.
Now there's been talk that they may make a big acquisition.
They've a bunch of products in the pipeline that could be big for them.
Over the past twelve months they've spent about five billion dollars in research and
development so that could shape up to add to the next big product at the thereafter.
This is a chart of AbbVie and the first big drop here.
This came when an analyst from SunTrust released his report saying that Humira, the sales of
Humira could be down more than expected in Europe.
Now when he when he's released a report he lowered his price target to about 135 given
that the current prices is about ninety dollars per share it looks like with his lowered expectations
there could still be some decent upside for us.
Our final companies from the industrial sector Emerson Electric ticker symbol EMR their dividend
yield is a bit over 3 percent.
They have a coverage ratio of almost one point eight.
Their PE is a bit higher than the other companies at 19x.
It's also a hair over what the S&P is now.
Emerson makes a whole bunch of different items including electrical products valves regulators
and a bunch of other products that are used in the industrial space commercial space and
in the consumer markets.
This is Emerson's chart and as we could see recently the stock has really dipped lower.
This is at least partially due to management lowering their guidance for 2019.
Then there were also some analyst downgrades in there.
Now this dropped back here.
We can see that this drop came shortly after Emerson announced the acquisition of HTE engineering
services.
I haven't seen a price tag for what they're gonna be paying for HTE but they announced
it right before the stock start to fall.
Now Emersons actually fairly good at integrating acquisitions into their business since 2016.
They've completed five acquisitions of more than 240 million dollars and it served their
business well it's really helped add to growth.
So to my way of thinking this recent pullback could be an opportunity if nothing else it's
an opportunity to get in when the dividend is a bit over 3 percent.
So if we were to buy all five of these companies going to put the same amount same dollar amount
in each of the companies well then the yield for our entire portfolio would be almost 4.5
percent.
That's not too bad when we consider that the average yield to the S&P 500 is about 2 percent.
Now we switch out of the coverage ratio.
We can see that the average coverage ratio is a bit over one point seven which when it
comes to keeping up with their dividends.
For me that's plenty good when we look at the average PE ratio.
Well the average PE ratio for our dividend portfolio is about 15x.
Once again the S&P 500 is trading at about 18x.
So our portfolio could be a bit undervalued relative to the S&P 500.
What do you think.
Do you like these companies.
Are there any companies that you would added that I wouldn't touch.
I did have a few runner ups that didn't quite make the cut.
Personally I like Target but frankly Leggett and Platt which is in the same sector had
a slightly higher yield and a better current ratio.
The current ratio is it looks at the cash and cash equivalents compared to short term
debt.
I tried to look at each of these to make sure that they had at least a decent amount of
cash.
I also consider Pepsi which look good.
Dover looks pretty interesting and there are a few others that didn't quite make the cut
but what do you think of our dividend portfolio.
Let me know what you think of the comments below.
And if you haven't done so already hit the subscribe button and I'll see in the next
video.
Thanks for sticking with me all the way to the end.
Thank you.