Big Banks are increasing dividends. The stock market still is near record-highs. What a year 2021 has been. It’s all about dividend stocks baby!
As I do every month, here is the Dividend Stock Watch List for July 2021!
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. Q2 earnings releases are going to come out very soon, within the next few weeks. The pent up demand to spend, experience and the like is at an all-time high. In fact, demand is so high that there isn’t even enough supply out there to support the demand. Think – housing, cars, hotels, rentals, you name it. What a world we are in.
In addition, around 50% of the country is fully vaccinated and we are now cruising towards that herd immunity.
The Stock Market, specifically the S&P 500, continues to set record highs and we have hung around the 4,200+ mark for some time now. As you see in the chart below, so close to 4,300!
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 early July 2021. Will that stay, though? Not certain, but I am estimating another decline in Ally’s high yield online savings rate by September 2021. Here is my last lovely message from Ally (ALLY), below:
What else has been going on? Child tax credit payments are to begin in July, which is $300 per child for 6 months. In addition, Mortgage rates are still hovering between the 3.00%-3.20% for the 30 year loan. Also, there is absolute no supply for homes, new cars and gas has also gone up to over $3 per gallon. Inflation has been insanely real.
On top of that, the Fed has announced tapering at some point in the future, with two increases to the fed funds rate by the end of 2023. In addition, Joe Biden has been discussing tax rate increases. I am just hoping no change to the dividend tax rates. Call me bias!
As a dividend stock investor, it’s been harder and harder to find an undervalued dividend stock. In addition, estimates on earnings are still difficult to determine. I do believe starting Q3/Q4 of 2021, earnings will be more comparable and will be able to set better expectations. 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
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 July 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. We are talking home improvement, consumer goods and technology!
Pfizer Inc (PFE)
Pfizer (PFE) hasn’t had their price move really this year. First, they had the large spin-off last year with their UpJohn business with Mylan, to form Viatris (VTRS). Excited for that dividend stock. Pfizer also has been crushing earnings so bad that management and the board chose to maintain their dividend, versus previously stating the reduced dividend due to the spin-off.
Here is what the stock price has done year to date. Pfizer (PFE) is surprisingly up 6% year-to-date! This compares favorably versus the S&P 500, which has returned 16% year-to-date.
I own a lot of Pfizer (PFE), but as the other stocks have surged, the concentration in pharmaceutical has actually decreased. That’s partly why they are on my dividend stock watch list.
Therefore, and without further-ado, it’s time to crank Pfizer through our beloved dividend diplomats stock screener!
- Price to Earnings Ratio: Pfizer is projecting to earn $3.76 this year. Given their stock price is at $39.10, their price to earnings ratio is approximately 10.39. The S&P 500 is currently at over 40x earnings and is around the mid-20x earnings for the forward price to earnings ratio. :
- Payout Ratio: Pfizer’s total dividend is $0.39 per quarter or $1.56 per year. Therefore, the payout ratio is 41.5% and is going to be similar to a stock that is also on the watch list. This payout ratio is PERFECT as the dividend payout ratio is between 40% and 60%.
- Dividend Growth: Pfizer is going on 12 years of dividend increases at an average rate of approximately 6%. Technically and I mean technically, this year’s/recent dividend increase is more in the lines of ~10%, as I had built in my expectation of a 3-4 cent decrease due to the spinoff.
Passing all 3 dividend stock metrics! PLUS their dividend yield is at 4%. Do you have Pfizer on your dividend stocks to buy list?
Verizon Communications (VZ)
Verizon (VZ) is back on the dividend stock watch list! They weren’t on the June dividend stock list, but here we are in July and they are still staying steady at the share price range of $55-$57. Why do I like Verizon? They are a great compliment to AT&T (T), which we all know AT&T’s news regarding their spin-off of TimeWarnerMedia. Verizon also is a beast in the 5G department, getting ready for the vast upgrade to the communication lines across the world.
Verizon stock has truly not changed year-to-date. They were in the $58 range to start the year and are down around 5% so far.
Time to see Verizon’s dividend stock metrics through our DD screener:
- Price to Earnings Ratio: Verizon is trading at $55.84. Therefore, with an earning expectation of $5.09, that equates to a price to earnings (P/E) ratio of 10.97. Another, below 11 price to earnings ratio. Can we say undervalued dividend stocks?!
- Payout Ratio: Earnings are projected to be $5.09 and the dividend is $2.51. The payout ratio is approximately 49% as well. Verizon (VZ), showcasing their perfect dividend payout ratio. Nothing wrong with that!
- Dividend Growth: Verizon is heading towards 16 years of dividend increases. The average dividend growth rate is similar to AT&T stock and that dividend growth rate is around 2%. Hopefully 5G shakes up the financial statements in a positive way.
I own 65 shares of Verizon stock, but would be cool to climb my way to 75 shares!
Provident Financial Services (PFS)
You know I love dividend-paying, community bank stocks! For those that may not know, I sold my Peoples United (PBCT) stock and moved the funds into Provident Financial (PFS). I wanted to have a similar bank to replace PBCT, once their merger with M&T finalizes.
Provident is a nice $13.1B bank and steadily grows each quarter. They serve primarily the New Jersey, parts of New York and Pennsylvania. Right up my community banking alley!
How I also evaluate banks is from the price to book value. A bank is typically undervalued if the stock trades close or below the book value of a bank. The book value is $21.17 as of the end of Q1, with the share price of $22.90, this equates to a price to book of only 1.08. This is a fairly good sign of undervaluation.
- Price to Earnings (P/E) Ratio: Now, the stock price is $22.90 (as of 6/29). However, for PFS, due to being a smaller bank stock, only had 4 analysts following them. They are estimated earnings to be $1.90. Therefore, the P/E ratio is only 12x forward or expected earnings.
- Payout Ratio: Provident pays a dividend of $0.92 over the course of a year. Given that earnings are expected to be $1.90, the payout ratio is a perfect 48%. The third dividend stock on the list that has a perfect dividend payout ratio.
- Dividend Growth: The 5 year dividend growth rate, on average, is just a tad over 7%. A fairly good combination when the dividend yield is 4%!
I own approximately 100 shares and wouldn’t mind owning 150 shares by year’s end.
Dividend Stock Watch List Conclusion
Dividend investing is real and is happening! Dividend growth is also back. Two dividend aristocrats and a technology company that has increased their dividend consistently is hard to come by in today’s market. Three dividend growth stocks, all that increase their dividend year after year. The music just rings nicely!
Of course, prior to making any purchase, I definitely will make sure to run them through the Dividend Diplomat Stock Screener once more.
Talk about great, every day dividend growth stocks. My order, right now, would be Provident Financial, then Verizon, followed by Pfizer. It’s funny, as this ends up being the same order of where my concentrations are, from smallest to largest.
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