Dividend Stock Watch List: Lanny’s August 2023 Edition

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Here are the TWO dividend stocks on my radar this month! Always buying stocks, no matter what is happening in the stock market. The stock market can go up and can go down, but the Dividend Diplomats are buying dividend stocks and adding to the passive income stream.

Let’s review two dividend stocks hot on my radar right now!

dividend stock watch list

Dividend investing happens, whether the stock market is up or down, whether the fed raises interest rates or lowers. Inflation or deflation. Banks are failing or being bailed out. Luckily, it has only been 4 banks in the US that has failed thus far, with Credit Suisse internationally. It’s all about buying dividend income producing stocks – the best source of passive income source on your journey to financial freedom!

The stock market, specifically the S&P 500, is BACK ABOVE 4,500, insane. The S&P 500 has ying-yanged all year long, as a few months ago, they were below $4,000. Now they are up 19% year to date. Just wow.

Inflation is cooling from the all time highs, but still rising year over year. Jerome Powell has a lot of stress and work to do. We just received another 25 basis point increase and we may even see another in the fall. Bring the pain baby!

Here is the S&P 500 chart below – just sky rocketing over the last 30 days, touching almost 4,600 multiple times but hanging right above 4,500 at the moment!

Interest rates are steadily rising on High Yield Savings Accounts, with many over 4.40%! In fact, I wrote about many in a recent article (see below).

Given the possibility of inflation cooling, bank failures and instability within banking, the Fed may top out at 5.25-5.50% or even 5.50%-5.75% (come the fall of 2023) in their fight against inflation. We may have one more rate increase coming up. However, all of the interest rate increases have increased those savings rate. Ally, where I hold a significant amount of cash, is yielding 4.30%, with an 11 month no penalty 4.55% CD. However, there is one specific Bank / Fintech application that I use so much more now…

I keep MORE savings in my SoFi savings account – as it earns me – now – 4.40% on my savings account.

In addition, I’ve been buying stocks on SoFi’s investing application (hint, if you sign up YOU get free stock! You can automatically buy partial shares as frequent as you want. Absolutely love investing with SoFi and cannot stop recommending their platform.

In addition, given the uncertainty, I continue to make weekly investments into Vanguard Exchange Traded Funds (ETFs). The specific ETF my wife and I have been loading up on is Vanguard High Dividend Yield (VYM). We are investing approximately $400 to $600 per week into Vanguard (pending the VYM stock price), to stay invested in the market, during the uncertain times. In addition, I am also investing $60 per day into Vanguard S&P 500 ETF (VOO) and $40 into Vanguard’s Dividend Appreciation ETF (VIG)!

Therefore, on the road to financial freedom, acquiring assets that produce cash flow or income is the goal! Like I always say, there is always a diamond in the rough. How do I find an undervalued dividend stock? Time to introduce our beloved Dividend Diplomat Stock Screener!

Dividend Diplomat Stock Screener

If you don’t know already, we keep the stock screener metrics to THREE SIMPLE items. They are:

Price to Earnings Ratio – We look for a price to earnings ratio < than the overall Stock Market.
Payout Ratio – We aim for a payout ratio between of less than 60%.
Dividend Growth – We like to see history of dividend growth in a company.

See the video below, for further details and explanation. If you don’t like to watch videos – see our Dividend Diplomat Stock Screener page!

Time to find the answer to… how did the dividend stocks on my watch list grade on the stock screener?

Dividend stock watch list

Here is the list of dividend stocks that are on my radar going into the month of August 2023. I typically like to keep it at 2-3 dividend stocks, keeping the focus locked in. Finding dividend stocks isn’t easy, but there are also other factors, such as composition of my portfolio by industry (such as – am I overweight/underweight in an industry), as well as exposure to one stock and the concentration there.

There, the dividend stocks on my list cater to those other facets when building a dividend stock portfolio.

United Parcel Service (UPS)

I am on a pursuit to 100 shares of United Parcel Service (UPS). Once we dig into the metrics, I’ll be curious if you agree. Over $160 billion by market capitalization, they are definitely one of the larger companies in the world.

UPS is projecting to earn between $88 billion to $100 billion in revenue, just large amounts, even during a tough year that we have all been through.

Therefore, I want to show the stats and why I do like the stock, even at current prices. I am around 15-16 shares away from 100 of UPS stock. In addition, they finally have the Union strike behind them, close call for UPS.

Therefore, lets run UPS officially through the Dividend Diplomats Stock Screener, which is focused on these 3 metrics.

Price to Earnings Ratio: Earnings is approximately $10.69 in earnings per share for 2023. Therefore, UPS is trading at ~17x forward earnings right now, very low at the moment, compared to the 26x the S&P 500 is currently priced at.
Payout Ratio: UPS’ current dividend payout ratio, using that metric is actually at 6060.62.34%. Right at the ceiling of the dividend payout ratio metric. Still safe, but dividend growth may be lower in the future.
Dividend Growth: See the 10 year chart below. All up from here. Over 13 years of growing dividends, at an average rate of almost 6.5%, not too bad. Given high inflationary times, high interest rates, tightening of consumer spending, UPS keeping this streak alive is great.

The dividend yield is closing in on 4%, currently at 3.47%. I miss scooping up shares between $166-$168. I’ll keep adding when they drop below $185 possibly. Keeping my eyes on them.

Pfizer (PFE)

I think Pfizer (PFE) has taken an A$$ whooping this year and are oversold and punished for their declining COVID revenue. If everyone recalls, Pfizer was a company before COVID and was spinning off their consumer brands, or in process of doing so, before COVID as well. Therefore, they should be just fine in the long run, but look at that stock chart below.

Down almost 30% this year and heading into $35 territory as of this writing, amazing how the mighty have fallen. Investing into companies for the long term pushes you to go through the highs and lows.

Let’s run Pfizer stock through the dividend stock metrics, to see if this could be a dividend stock to buy now.

1.) P/E Ratio: PFE analysts are actually expecting over $3 in earnings per share. However, I am being conservative and will use $0.60 per share, per quarter, or $2.40 per year. That pegs the price to earnings ratio at 15x current expected earnings right now. Lower than UPS above and the stock market.

2.) Dividend Payout Ratio: PFE pays a quarterly dividend of $0.41 per share or $1.64 per year. This equates to a dividend payout ratio of only 68%. Pfizer’s payout ratio could be creeping up there, for sure. As a reminder, I am using a conservative EPS figure in the first metric.

3.) Dividend Growth Rate: Pfizer has been increasing dividends over a decade. As a dividend growth investor, you want to see the engine continue to get faster and grow. Unfortunately, I expected low dividend growth this year and am hoping for at least a one penny increase from $0.41 to $0.42.

Lastly, we’ll take a look at the dividend yield. As an investor, you want to know how much owning this dividend stock pays you now! The yield for PFE is now yielding 4.53%!

One share away from owning 200!

Other Dividend Stocks to buy

I am also considering, as a quick hitter approach here, my eyes are on a few other stocks. Those stocks are Hormel (HRL), possibly Viatris (VTRS) and always have an eye on Elevance Health (ELV).

I own each stock and am constantly evaluating the stock market, to see if there are undervalued dividend stocks to buy in this wild market.

Dividend Stock Watch List Conclusion

Dividend investing is real and is happening! Here is our latest video covering TWO Dividend Stocks we are buying RIGHT NOW:

Of course, prior to making any purchase, I definitely will make sure to run them through the Dividend Diplomat Stock Screener once more.

As always, I highly encourage you do your own research as this is not financial advice (quick disclaimer!).

As you have noticed, I have trickled many articles on this page. The goal is to educate new dividend investors out there, or to sharpen the terminology for current dividend investors. As always, stick to your investment strategy and dividend stocks will be there. What do you think of these stocks above? Thank you, good luck and happy investing everyone!

-Lanny

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