Friday, September 18, 2015

3 Great Dividend Stocks Nobody is Buying!

Almost 9 weeks ago, I started posting weekly summaries of purchases made by bloggers in the Dividend Growth Investing community. I see a lot of popular names each week like WMT, JNJ, MMM, and IBM just to name a few. This list is just based on the blogging community recent buy posts that I read. See my blogroll for the collection of bloggers. I found a short list of companies that have great numbers, but nobody is buying.

In case you don't want to read to the end. The 3 stocks that I am referring too and rarely see purchased are TROW, SJM, and PEP.

T. Rowe Price (TRW)

"T. Rowe Price is an American publicly owned investment firm, headquartered in Baltimore, Maryland. It was founded in 1937 by Thomas Rowe Price, Jr.. The company offers mutual funds, subadvisory services, and separate account management for individuals, institutions, retirement plans, and financial intermediaries. Additionally, the organization offers investment planning and guidance tools." - WikiPedia

The F.A.S.T. Graph above shows TROW  and the historical pattern of trading at a premium to the EPS (orange line) and has only traded below the orange line a few times in recent history. Consensus EPS estimates for TROW are $4.76, $5.07, $5.61 and $6.70 for 2015 through 2018 respectively (NasDaq.com). From this, it is easy to conclude that the orange line above continues an upward trend for the next several years.

Dividend Growth: The past 4 years for TROW have seen double digit dividend growth with a 19 year average growth rate of 17.6%! (Fastgraphs.net)

Payout Ratio: Hovered around 40% the past 5 years and does not seem to be going up as EPS increases are keeping up with dividend increases. (Fastgraphs.net)

P/E Ratio: Consistently below 20, currently at 15.75 (FinViz.com)

Years Paying Dividend: 26 (Dividata.com)

Pepsico (PEP) 

"PepsiCo Inc. is an American multinational food and beverage corporation headquartered in Purchase, New York, United States, with interests in the manufacturing, marketing, and distribution of grain-based snack foods, beverages, and other products. PepsiCo was formed in 1965 with the merger of the Pepsi-Cola Company and Frito-Lay, Inc. PepsiCo has since expanded from its namesake product Pepsi to a broader range of food and beverage brands, the largest of which includes an acquisition of Tropicana in 1998 and a merger with Quaker Oats in 2001, which added the Gatorade brand to its portfolio." - Wikipedia

The history of Pepsico stock price is one of continual increase (well almost, except for 2007/2008). We also see that the price has typically stayed within the window of the orange (EPS) and blue (PE) lines. Currently it sits right about in the middle so it appears to be valued correctly or slightly overvalued but long term EPS estimates look promising for a continued rise. EPS consensus shows 4.55, 4.92, 5.42, 5.88 for 2015 to 2018 respectively (NasDaq).

Dividend Growth: The 19 year average dividend growth rate of 10.6% is fantastic and Pepsi has increased the dividend every year since it first started paying! (Fastgraphs.net)

Payout Ratio: Currently around 55%. Growing slowly over the past 20 years, but still plenty of room for growth. (Fastgraphs.net)

P/E Ratio: Currently around 21.56 (comparatively Coca-Cola (KO) is at 23) (FinViz.com)

Years Paying Dividend: 43 (Dividata.com)

J.M. Smucker Company (SJM)

"The J. M. Smucker Company is an American manufacturer of fruit spreads, ice cream toppings, beverages, shortening, natural peanut butter, and other products in North America. Smucker's headquarters are located in Orrville, Ohio" - wikipedia

While I don't love this chart as much as the others, I think the market is starting to recognize SJM as a great company and therefore applying a premium to the PE and EPS for its stock price. I would prefer to see a drop in price of 5-10% but long term, the stock should continue to rise. The EPS forecast consensus looks very promising: 5.80, 6.56, 7.30, 7.65 from 2015 to 2018 respectively (NasDaq).

Dividend Growth: The past 5 years have shown double digit percentage growth in the dividend! The 19 year growth average is only 10%, but more recently the increases have been higher. (Fastgraphs.net)

Payout Ratio: Consistently around 30-40% and does not appear to be going up as EPS increases are keeping up with dividend increases. This is a very positive long term sign for SJM. (Fastgraphs.net)

P/E Ratio: 21.71 (FinViz.com) As mentioned above, the price seems to be taking off a bit fast compared with earnings,

Years Paying Dividend: 14. This is a relatively new company for dividends, but it has consistently shown that dividends are a priority with raises and consistency. (Dividata.com)

What other stocks out there are you surprised that no one is buying more of?

Disclaimer: Long TROW. I am not a licensed investment professional. I am not liable for any losses suffered by any parties. Any information on this site is my opinion only and should not be used for investments of any kind.


  1. Adam,
    I am long TROW. I would be glad to add PEP or SJM. I am curious why we are not buying these great companies.
    For me, I just don't have enough funds.

    1. I am in the same boat D4s. I am keeping an eye on PEP and SJM for sure for when I get some capital. Thanks for the message!

  2. I've just added TROW a couple week ago. JNJ did a ran up from 81$, just waiting for pullback. I'm averaging down WMT. I'm long WMT, I got home from work last night, decided I need some condense milk to make my yogurt, there is a still a line there at walmart in the middle of the night. What the?!! Anyhow, business is great, they are just hurting right now due to wage increase. They'll find a way.

    1. Hi Vivianne, thanks for the comments. WMT really is in a league of its own isn't it. I remember traveling miles and miles just to go to a Walmart and now it feels like every town has one!

  3. Adam - truly appreciate the article. Love that you give both the company stats, and a brief overview of the company profile. Helps readers understand unfamiliar companies "at a glance." Been eye-balling Smucker's for a while, but still working on building up other positions and finding capital to invest with!

    Cheers! Andy

    1. Thanks for the kind words Andy! I just checked out your site and will add you to my blogroll when I get a chance. There is much to learn from the community! Thanks for stopping in!

  4. I like PEP and TROW. It's true that we often overlook many other great dividend paying companies and only focus on our usual names like JNJ, PG, MMM, etc. TROW and TRV are other financial names I would be considering.

    1. Hi DH!

      TRV is another I was considering for this list. The payout ratio and graph looks good. The EPS forecast is a bit flat but their is definitely room to grow. Maybe I'll include it in a part 2 ;)

      Thanks for stopping by!

  5. I like PEP but I believe it is too high to buy now...