3 Undervalued Dividend Stocks for Christmas: Lanny’s Christmas List

Christmas list

Alright, welcome back to the blog dividend investing community!  It’s the most wonderful time of the year and the holidays are slowly coming upon us.  Therefore, I wanted to gather my list and check it twice, to find out which dividend stocks are undervalued and nice, for the portfolio that is!

We aren’t going to waste any time here.  Christmas is JUST around the corner, 6 days away and I wanted to bring YOU my dividend stocks to buy Christmas stock watch list.  Now that the economic stimulus is vastly approaching, as the government will be working the next 48 hours to come to a deal AND Pfizer (PFE) and Moderna’s Vaccines are being distributed and used across the world, it is time to show YOU what dividend stocks I am watching, RIGHT NOW!  Time to DIVE in!

Intel (INTC)

intel

Why did I pick Intel (INTC) after the announcement that Microsoft (MSFT) made about them bringing chip making in-house for their servers and Microsoft Surface business?  Well, it was actually a little easier than difficult.

Microsoft to make their own chips

Microsoft does not own/produce many overall devices, let’s keep that in mind.  That’s why you see Acer, Asus, Dell, HP, the list goes on and some use Intel (INTC) others use ADM chips and some use both!  In fact, SO DOES Microsoft.

In addition, Intel is going to be the dominant player in the industry, regardless, as MANY other industries and companies in and outside of technology rely on Intel.  Think AT&T (T), Verizon (VZ) and their deployment of 5G and the chips that will be used to run this?  See excerpt from the venture with AT&T (T) and Intel (INTC):

AT&T and Intel 5G

This led to a steep drop in Intel’s share price on Friday, December 18, 2020.  Here is the chart:

intel stock price

Therefore, going from almost $51 to mid- $47 stock price range had caught my eye.  Why?  That’s back to the same stock price as my December Dividend Stock Watch List, where Intel was trading at $47.45!

Therefore, taking a quick-look at the Dividend Diplomat Stock Screener Metrics for Intel:

  1. Price to Earnings Ratio: 10.43, based on analyst forward expectations of $4.55.  This is significant signs of undervaluation, versus the stock market S&P 500, which is trading over 35x earnings.
  2. Dividend Payout Ratio: Intel pays out $1.32 per year, per share.  At a forward earnings of $4.55, this equates to a dividend payout ratio of 29%.  This is below the 60% I like to see and shows sheer signs of safety, as well as room for dividend growth in the future.
  3. Dividend Growth: Truthfully, their dividend growth is a bit skewed.  See the chart below.  Essentially they’ve increased their dividend, each and every year starting in 2014, except that one year in the 2013-2014 era, where it was the same dividend payout.   The average dividend growth rate for Intel is between 6.5%-7%!Therefore, I am still interested in acquiring more shares.  In fact, I picked up 5 more shares of Intel after the Microsoft news broke out on Friday afternoon!

Pfizer (PFE)

pfizer stock

This dividend stock list would not be the same without the wonders of Pfizer (PFE).  Nearly 3 million doses of Pfizer’s coronavirus (COVID-19) vaccine was delivered over this past week.  We watched high profile individuals in our country receive the vaccine and I know hospitals were receiving & vaccinating thousands across each facility.

Pfizer vaccine

On top of that, Pfizer ALSO increased their dividend in early December by $0.01 or 2.6%.  Not only is Pfizer producing and distributing a vaccine to save millions of lives across the world, they still are giving back to their shareholders!  As a dividend investor, what a dividend stock to own and buy right now.  Proud of you Pfizer!

In fact, I may have purchased more shares of this pharmaceutical giant.  Here are the stats through the Dividend Diplomat Stock Screener:

  1. Price to Earnings Ratio: At a stock price of $37.68 with analysts projecting $2.48 in earnings going forward (post UpJohn spinoff), this equates to a price to earnings ratio of 15.19.  Showing signs of undervaluation for sure!
  2. Dividend Payout Ratio: At a forward earnings of $2.48 and a new dividend of $1.56, this equates to a dividend payout ratio of 63%.  Slightly above the threshold.  However, this dividend will decrease in Q2 of 2021, as the new entity – Viatris (VTRS) will have a dividend in that time period.  Therefore, PFizer’s dividend payout ratio will be reduced, due to a lower payout.
  3. Dividend Growth: Pfizer (PFE) is now on a streak of 10+ years and they aren’t showing signs of slowing down, that’s for sure!  In addition, the average dividend growth rate is approximately 6%!

Keep your eyes on this COVID-19 vaccine delivering stock!  Definitely have great signs of a dividend growth stock, but can’t knock how Abbott Labs (ABT) and other pharmaceuticals are juicing up their dividend, as we discussed in our video last week.

Smuckers (SJM)

The consumer staple.  Smucker’s in each and everyone’s cupboard and/or refrigerator in some shape or form.  They have JIF peanutbutter, Folgers coffee, Cafe Bustello espresso, Smucker’s Jelly and Jams and that isn’t talking about their other products or pet food.

Given the landscape of lockdowns, fears of getting COVID-19 and the mindset shifting to staying at home more, regardless, Smucker’s (SJM) stands to benefit.

Time to look at their dividend diplomat stock metrics:

  1. Price to Earnings Ratio: Forward expectations are $8.38 and the stock price is $115.88.  This equates to a price to earnings for Smuckers to the tune of 13.83.  Again, significantly below the market and other consumer good staple companies!
  2. Dividend Payout Ratio: Given the expectation is $8.38 and Smucker’s pays out $3.80, this equates to a dividend payout ratio of 45%!  This meets our threshold of below 60% and, in fact, this is what we consider a PERFECT dividend payout ratio!
  3. Dividend Growth Rate: Also going on 10+ years of dividend growth, Smucker’s is crushing the consecutive years of increasing their dividend.  The average dividend growth rate is 6%, as well.

At the current prices, I have been adding to my wife’s taxable dividend portfolio account.

Dividend stock watch list – christmas style conclusion

There you have it!  I hope Santa is good to us heading into the new-year and these stocks continue to show signs of being on sale, i.e. undervalued.  I kept it right to the point with these 3 dividend growth stocks on my watch list.

In fact, I just realized, this may be the SAME watch list from 3 weeks ago that I wrote about.  HOLY smokes?!  It’s truly due to price declines over the last few days, bringing them BACK to the stock watch list.

How about you?  What dividend stocks are on your Christmas list?  Are you waiting for a stock to come down in price?  Looking at energy/oil companies, as their stocks still haven’t rebounded?  What stocks are you buying?  Share this below in our comments.

As always, good luck, happy investing and Happy Holidays to everyone!

17 thoughts on “3 Undervalued Dividend Stocks for Christmas: Lanny’s Christmas List

  1. Hi! Just the other day, I also wrote on my own blog about Intel so I’m happy when others think it can be a good investment at that price! I have a different selection criteria but Intel is a good company. I also bought from Pfitzer in small batches but I see the future uncertain there (hopefully they can keep their ability to pay dividends if the vaccine path doesn’t go well). I wish you a Merry Christmas and a dividend-rich New Year!

  2. We’re on the same page, Lanny. Got some of all three of these babies and was looking at INTC last week when I decided to go for SJM.
    My future plans are to get more SJM to have around a $4K cost basis in them. That’s my goal for a cost basis to keep things semi-balanced.
    Have a great Holidays!
    – John

  3. These are great picks. Very cool to see that there are still good dividend opportunities in a record-breaking stock market. Pfizer looks very intriguing. I am surprised to see the stock staying at around the same price despite all the positive vaccine news.

  4. Intel is looking interesting at current valuation.
    My preferred dividend-paying tech picks are still Broadcom and Texas Instruments but Intel is certainly on my watchlist.

    Wish you successful investing!

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