HAPPY NEW YEAR EVERYONE! December’s year-end rally is almost behind us!  Now – it’s time to RING IN the new year and really look at dividend stocks to buy, right now and into 2021.  The economic stimulus payments are out, COVID-19 Vaccines are being deployed to masses, yet COVID-19 still haunts our world.  Time to dive into the January 2021 Dividend Stock Watch List!

Dividend stock watch list

Welcome back to another dividend stock watch list and you can have a sneak pick of the dividend stocks that are on my radar.  The stock market has been on, and yes I’m starting to sound like a broken record, another tear over the last 30 days and it simply doesn’t make things easy for a dividend investor.  The economic impact payments round 2 are starting to fly out the door and the stimulus money will surely propel the stock market further.  In addition, the COVID-19 vaccines are out in full force from Pfizer and Moderna.

Below is a chart of the S&P 500 and you can see the market cruse to almost 3,800!

Interest rates are significantly low on your savings, including high yield savings, accounts, as well as money market accounts & funds.  In fact, Ally Savings reduced my interest rate to 0.60% back in September 0.50% in mid-December.  Luckily, I can still say that I am earning 0.50% on my savings account as of the end of 2020.  Will that stay, though?  Not certain, but I am estimating another decline in Ally’s high yield online savings rate by March 2021.  Here is my last lovely message from Ally (ALLY), below:

Since the last dividend stock watch list release, Joe Biden will (more than likely) be our President, the second economic stimulus passed at $600 for everyone under $75,000 in earned income AND the COVID-19 vaccines are showing up by the week, AstraZeneca (AZN) being the recent deployment to the UK, I believe.

In addition, the Federal reserve continues to make headlines, as they’ve been flushing the stock market with cash.  The Fed has been steadily pumping, essentially, using Quantitative Easing (QE) throughout the pandemic period.  Here is the latest from the Fed:

Therefore, it’s hard imagining an economy without the interjection from the Fed and how much the economy here is relying on them.  In addition, the unemployment benefits of $300 extra per week will start up again in 2021.  In addition, due to the bill passing, the rent, mortgage and loan forbearances are still kicked out for due dates.  Very interesting world we are in.

I know the Federal Reserve, the country and the world are waiting (anxiously, nervously, patiently) for the next economic decision that our upcoming President will embark on once in office.  Will we receive a third round stimulus?  Will pandemic unemployment benefit assistance occur ago?  Time will tell and all appears VERY uncertain here in the short-term and moderate-term.

As a dividend stock investor, for the first time, I feel a little uncertain of what the future may hold.  We continue to save and invest in very conservative dividend stock investments, in smaller purchases.  I have written two articles related to the topic of – the Coronavirus Dividend Stock Watch List and Industries that truly thrive during a pandemic.

See – Lanny’s Coronavirus Dividend Stock Watch List

See – Industries Built for the Coronavirus and Dividend Investors

See – Why I Don’t Time or Predict The Market

In addition, given the uncertainty, I continue to make smaller, 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 $500 per week, to stay invested in the market, during the uncertain times.

Related: Why I’m Investing $500 Weekly with Vanguard ETFs

I posted the picture of the S&P 500 above, for the last month.  The stock market is up OVER 3% during the last 30 days.  Two months in a row of stock market gains.  We are closing in on the S&P 500 crossing 4,000.  Goodness.  Dividend investing is a little more interesting and you have to dig a little deeper.  Luckily, we are all about dividend income and increasing that cash flow, as the goal is to have the dividend income cross over expenses, not market value.

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:

1. Price to Earnings Ratio – We look for a price to earnings ratio < than the overall Stock Market.
2. Payout Ratio – We aim for a payout ratio between of less than 60%.
3. 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 January 2021.  I typically like to keep it at 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.  The three industries you’ll see below that I am actually underweight in are Pharmaceutical, Technology and Consumer Goods.

Verizon Communications, Inc. (VZ)

Yes!  You have read it here first.  I am picking Verizon (VZ) on my dividend stock watch list for the FIRST time on this blog!  It is not A&T (T), as they have many events going on with Direct TV selling (at some point), the push for streaming, movies going to HBO Max, the whole gambit.  Verizon has been leading the way for 5G and make a BIG statement at the 5G auction, here is an earlier headline, below.  However, the 5G auction I believe is already soaring over $60B, a record no doubt.

Therefore, as a way to look at a new leader in technology and a competitor, to a solid extent, to AT&T (T), it’ll be nice to have them in my dividend stock portfolio.  We will use the recent share price of $58.14, as of the December 30 close of business for the analysis.

Now, it is time to see what Verizon looks like through the Dividend Diplomat Stock Screener:

1. Price to Earnings Ratio: At a share price of $58.14, close of 12/30/20, the analysts are projecting $5.01 in earnings per share for 2021.  Therefore, the P/E ratio, which helps determine under/over valuation, calculates to 11.60.  This compares favorable to the S&P 500, which is trading at 35x+ earnings.  35x earnings is insanely high rate now, hence why investing into dividend stocks is tougher and tougher.  Here is evidence for the projected earnings:
2. Payout Ratio: Verizon’s total dividend is $2.51 in dividends per year.  At a projected earnings of $5.01, the dividend payout ratio is 50%.  This is right in the range I like to see.  In fact, Verizon’s payout ratio is in the perfect sweet spot of 40-60%!  The dividend safety is in tact.  Being a Telecommunications & Technology based company, you want to make sure you have earnings to reinvest and grow the business, which a payout ratio right at the 50% mark does just that.
3. Dividend Growth: Verizon has a dividend growth streak of 15+ years going.  They want that Dividend Aristocrat status, I can feel it!  However, the average dividend growth rate is low, at 2% on their 5 year average.

I am excited to show the community my dividend stock purchases for December… did I buy Verizon or am I waiting?  You’ll have to find out!  I am interested in Verizon, as a compliment to my portfolio and other telecom/tech stocks.

General Dynamics (GD)

General Dynamics (GD) the beloved dividend aristocrat is BACK baby!  Yes, if you are new to this website/blog – General Dynmics has been on my watch list off and on throughout 2020.  Their stock price has fluctuated BUT they are still down from their 52-week high of $190.  In fact, they are still $40+ below that high or 22% lower.

How are GD’s dividend stock metrics?  Like you didn’t think we’d go over them!  Let’s check GD through our DD screener:

1. Price to Earnings Ratio: GD’s stock price is $148.30, as of 12/30/20.  21 analysts are projecting $11.46 in earnings per share for 2021.  Therefore, dividing the stock price over the earnings per share, equates to a price to earnings ratio of only 12.94.  Definitely below the S&P 500 and other competitors in the industry, including Lockheed Martin.
2. Payout Ratio: At $4.40 in dividends per year and dividing that over $11.46, you come to a favorable answer.  The dividend payout ratio for General Dynamics is 38%!  GD’s dividend lets you sleep at night and it’s no wonder they are a dividend aristocrat.  They need to keep reinvesting back in the business to continuing winning the BIG defensive, government contracts.
3. Dividend Growth: GD has consistently paid and increased dividends for over 25+ years.  Their 5 year average dividend growth rate stands at 10%, with the most recent dividend increase at 7.84%.  Very nice and definitely has the ability to increase your purchasing power with that growth rate.

I own over 34 shares of GD.  However, with a yield at/around 3%, I would not mind chipping in another 6 shares to get to 40 shares of General Dynamics!

J.M. Smucker co (SJM)

Smucker’s remains on my dividend stock watch list!  As stated earlier, the proof is in the jelly here.  Smuckers, doesn’t that just sound delicious?  The Smucker CO (SJM) is a strong dividend growth stock who has performed exceptionally well during the global pandemic.  Think about it – Jams, Jelly, peanutbutter (JIF), Coffee with Folgers & Cafe Bustello, they are in many households, no doubt.  Given we are in the global pandemic, Smuckers has been a staple in many pantries and refrigerators.  Their price is actually slightly down from last month’s watch list posting.

Now, if they are in your fridge and/or cupboard – how about a spot in your dividend stock portfolio?  Let’s see how J.M. Smucker performs through our Dividend Diplomats Dividend Stock Screener!

1. Price to Earnings Ratio: Analysts are projecting $8.38 in earnings per share, on a go forward basis.  At a stock price of $114.72, this equates to a significantly low 13.69 price to earnings ratio. Another low price to earnings ratio for a dividend stock on my watch list baby!
2. Payout Ratio: Remember, the perfect ratio is between 40% and 60%.  Smuckers dividend is currently $3.60 per year, per share.  Therefore, $3.60 dividend over $8.47, equates to a dividend payout ratio of 43%.  Right in that perfect dividend payout ratio sweet spot.  Plenty of room for future dividend increases and that’s what dividend investing is all about.
3. Dividend Growth: Truly, though special dividends may cause a different story, Smucker’s has increased their dividend for 17+ years.  Dividendinvestor.com only shows 10+ years, but I go back to 2002-2003, where it all began.  They are right on track to being a dividend investor.  Smucker’s 5 year dividend growth rate average is 6.34%!  Pair that with a 3.09% dividend yield, and you have yourself an incredible dividend stock.

Currently, my wife holds Smucker’s (SJM) in her dividend stock portfolio.  She currently has 25 shares and we’d like to boost that to 30 total shares at these prices.

Dividend Stock Watch List Conclusion

We definitely have General Dynamics (GD) in my portfolio and Smucker’s (SJM) in my wife’s portfolio.  Verizon is going to be the, “hot take” for the month!  I am very eager to add Verizon (VZ) to the dividend stock portfolio and would love to see them break below $58, if possible.  In addition, grabbing GD above a 3% dividend yield is not too shabby!

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

I could see myself adding all three, but would arguably love to see lower stock prices!  The road to financial freedom seems far away, but I know I need to make investment decisions and continue to step along the path.  Not one specifically sticks out in my mind as a clear stock winner here, as all three show great metrics.  I would argue Verizon, General Dynamics and Smucker’s if I were to order them.  Only based on positioning!

Related: 5 Reasons Dividend Income is the Easiest Passive Income Source

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