Dividend investing and dividend growth is BACK baby! Dividend stocks are completely firing on ALL CYLINDERS this year! As I do every month, here is the Dividend Stock Watch List for June 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 and Q1 indicated strong performances from companies across the board. The pent up demand for buying is really starting to heat the financial statements for most companies.
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, the last week or so has been north of 4,200. Amazing everyone.
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 June 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 are investors waiting on? Well, the discussions, arguments and headlines continue to push for a FOURTH Economic Stimulus Check or Economic Impact Payment. Joe Biden hasn’t ruled it completely out, but I doubt this will happen. He wants to pass the infrastructure bill and there is the $300/month per child starting in July through the end of the year. Cash will still flood the economy.
How about the Fed? Well, there are plenty of news and signs about potential tapering coming up. In fact, the Fed will start to sell the Corporate Bonds and ETFs that it was previously buy. The plan is to sell approximately $13 billion, which is really pennies in the grand scheme of the quantitative easing that has been occurring. However, the news marked for the potential of other tapering down the road.
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 June 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!
Lowe’s Companies (LOW)
Lowe’s (LOW) is on the dividend stock watch list! After they continue to CRUSH earnings and expectations. Home owners continue to perform DIY projects at home and families are constantly building/building out rooms in their home, LOwe’s stands to continue to benefit from this era.
Here is what the stock price has done year to date. Lowe’s has crushed it. Going from the mid $120’s all the way to $190 or a 58% return!
Given the surge in stock price – how in the world did they make my dividend stock watch list? This DIVIDEND KING is a beast in the dividend world and after their recent dividend news, you’ll know exactly why and how they make this dividend stock watch list.
Therefore, and without further-ado, it’s time to crank Lowe’s through our beloved dividend diplomats stock screener!
- Price to Earnings Ratio: Lowe’s is projecting to earn $10.96 this year. Given their stock price is at $189.91, their price to earnings ratio is approximately 17.33. 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: Lowe’s total dividend is $0.80 per quarter or $3.20 per year. Therefore, the payout ratio is 29% and is going to be similar to a stock that is also on the watch list. This payout ratio is very low and there is plenty of room for this dividend aristocrat AND dividend king to keep exploding that dividend upward!
- Dividend Growth: Lowe’s has a not 1, not 2, but 60 year dividend streak going! Yes, they are not only a dividend aristocrat, but a dividend king. Very impressive and this list is very illustrious. Further, their five-year dividend growth rate stands at 16% and the last increase was a blistering 33.33%.
My wife and I do not own shares in Lowe’s but it doesn’t sound like too bad of an idea to start a position, especially as we’ve been doing plenty of house projects this summer.
Oracle (ORCL)
Oracle (ORCL) is a technology company that primarily delivers software platforms for companies of all sizes. Think of your Enterprise Management systems – ERM/ERP, etc.. In addition, their primarily revenue stream is also based on cloud services.
Oracle has had a NICE path of growth over the last 12 months, see below:
Oracle has surged $30+ in the last 12 months or almost a 100% return. Time to see Oracle’s dividend stock metrics through our DD screener:
- Price to Earnings Ratio: Unilever is trading at $82.89. Therefore, with an earning expectation of $4.46, that equates to a price to earnings (P/E) ratio of 18.6. This is not insanely low, but less than half of what the S&P p/e ratio is. Have to love that!
- Payout Ratio: If earnings are projected to be $4.46, the dividend is $1.28. The payout ratio is approximately 29% as well. Another low dividend payout ratio. Oracle has PLENTY of room to continue to grow the dividend at an average rate of double digits.
- Dividend Growth: Oracle typically increases their dividend once every 1-2 years, but at a LARGE rate. For instance – their most recent increase was from $0.24 to $0.32 or 33.33%. Due to technical dividends paid per year, Oracle has a streak of 8 years now!
My wife owns Oracle (ORCL) and at these levels, it may not be the worst idea to add a few more shares.
Kimberly Clark (KMB)
Another phenomenal consumer goods company that does EXCEPTIONALLY well during a global pandemic. Further, they also perform well without a pandemic! Kimberly Clark (KMB) has brands such as Cottonelle, Kotex, Scott, Viva and Huggies to name a few.
They are a consumer goods giant. Let’s see KMB’s recent stock price movement in the chart below:
Kimberly Clark (KMB) surprisingly is trading LOWER than they were 12 months ago. One of few stocks doing so. They were down due to lower revenue and earnings, which was primarily driven by the supply chain issues many companies around the world are currently facing.
Given the headwinds and compression on the stock price, could Kimberly Clark be undervalued? Time to put them through the screener:
- Price to Earnings (P/E) Ratio: The stock price for KMB is $130.57, close of 6/4/21, and analysts are projecting $7.38 in earnings per share for 2021. This equates to a P/E ratio of only 17.69 forward earnings. Definitely signs of undervaluation in comparison to the market, as a whole.
- Payout Ratio: KMB’s dividend stands at $1.14 per quarter or $4.56 per year. At a projected earnings of $7.38, the dividend payout ratio is 61.7%. This is just north of the 60% threshold we typically like, but not by a significant margin. Fairly similar to Procter & Gamble (PG), as an example.
- Dividend Growth: This could be the best part. Kimberly Clark (KMB) has increased their dividend for OVER 45 years, straight! In addition, their dividend growth rate stands at approximately 4.43%, which is above inflation.
Neither my wife nor I own them, so we shall see which dividend portfolio may receive shares in KMB!
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, is the same order above. Going for lower dividend yield, but higher dividend growth. Lowe’s makes sense, since we do not have any position in any home improvement store. In addition, Oracle would fall in second, due to the small position my wife has, wouldn’t mind beefing that up. Given my position in Procter & Gamble (PG), that puts KMB at third on this list.
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