Dividend Stock Watch List: Lanny’s May 2021 Edition

Alright dividend investing community!  We are already 1/3 down with 2021 and dividend investing is FIRING on ALL CYLINDERS this year!  As I do every month, here is the Dividend Stock Watch List for May 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.  Q1 earning releases are flying in and EVERYONE is almost beating expectations and of course – crushing Q1 2020 performances.

In addition, around 1/4 – 1/3 of the country is fully vaccinated and the hopes for the economic upswing are in “full swing”.

Below is a chart of the S&P 500 and you can see the market climb almost back up from 3,923 on 3/24 through 4,179 on April 23rd.  We are setting record highs in the stock market, folks.

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 June 2021.  Here is my last lovely message from Ally (ALLY), below:

ally savings account

What else are investors waiting on?  Well, for the markets to correct and for President Biden to announce more economic stimulus.

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 are ongoing.  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.

The THIRD economic stimulus checks were sent out and there are even rumors and talks of a FOURTH economic stimulus package.  In addition, there are extensions to many items within the ACT, such as PPP, Pandemic Unemployment Assistance, etc..  In fact, a new child tax credit will begin in the 2nd half of 2021, where there is an estimate of $300 per month, for six months, for each child you have on your tax return for 2020.  Then, you’ll also be able to receive this as a credit (I believe) in 2022, for any children that were born in 2021, if you qualify.  Incredible.

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 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:

  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 March 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 two industries below, that I am actually underweight in, are Telecommunications and Consumer Goods!

Verizon Communications, Inc. (VZ)

Verizon (VZ) stays on my dividend stock watch list for ANOTHER month!  The 5G auction ended with OVER $80 Billion and Verizon, of course, led the charge.  In addition, the Oracle of Omaha himself, Warren Buffett made a nice $8 billion investment into Verizon.

Here is what the stock price has done year to date.  In fact, they are actually still down slightly from where they started the year and are peaking/heading north, ending at $57.30 on April 23rd.

Why did the stock come back down?  After their Q1 earnings release, they did lose subscribers, but yet – revenue and earnings beat prior periods.

Therefore, since it’s still below the price at the start of 2021, and yet – Verizon is delivering positive news on a performance standpoint – it is time to run them through the Dividend Diplomat Stock Screener:

  1. Price to Earnings Ratio: At a share price of $57.30, close of 4/23/21, the analysts are projecting $5.09 in earnings per share for 2021.  Therefore, the P/E ratio, which helps determine under/over valuation, calculates to 11.26.  This compares favorable to the S&P 500, which is trading at 40x+ earnings.  40x earnings is insanely high rate now, hence why investing into dividend stocks is tougher and tougher.  The forward p/e ratio for the S&P 500 is around 22x+, as well.  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 $5.09, the dividend payout ratio is 49%.  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 49-50% 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 currently own 53 shares and met my original goal of wanting 50 shares.  Do I dare push my goal to 100 shares?!

Unilever (UL)

Unilever

Unilever (UL) doesn’t need much of an introduction.  They are an international consumer brand company, with brands that go DEEP.  You know them well, such as Dove, Axe, Lipton, Breyers, Tresemme, Klondike, Suave, the list purely goes on.

What’s been exciting about Unilever is their stock price for dividend growth investors.  Look at Unilever’s performance year-to date:

Unilever has had their stock price drop to $56.88 from $60.53 on January 4th 2021.  In fact, that represents a 6% drop year-to-date.  Sounds like a great time for an undervalued dividend stock opportunity.  Let’s check UL through our DD screener:

  1. Price to Earnings Ratio: Unilever is trading at $56.88.  Therefore, with an earning expectation of $3.06, 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!
  2. Payout Ratio: If earnings are projected to be $3.06, the dividend is estimated to be $2.05 (I am conservative).  The payout ratio is approximately 67% as well.  As you’ll see below, this may be a theme, but is slightly higher than the 60% payout ratio ceiling we like to have.
  3. Dividend Growth: Unilever usually increases their dividend every year, which is sometimes hard to determine due to currency exchange/translation rates.

My wife has a ton of Unilever (UL).  We’ll have to see how much more we could/should add.

Pfizer (PFE)

The COVID-19 vaccine king.  Yes, Pfizer (PFE) is back on the dividend stock watch and for GOOD reasons.  First, the stock price is “only” up 5% year to date.  Pfizer’s stock price movement is in the chart below:

Second, they announced HUGE news for current Pfizer (PFE) and soon to be Pfizer investors.  See, when they completed the spin-off venture – combining the Mylon & Upjohn brands to form Viatris (VTRS), the dividend was supposed to be reduced by the dividend that Viatris is expected to pay, which is anticipated to be $0.11 per share, per quarter.

This would have then reduced Pfizer’s (PFE) dividend payout, yield and ultimately income that it provides for investors.  Investors would be whole, given the dividend received from Viatris (VTRS) shares.  However, management dropped some AMAZING NEWS!  Here we go:

The board is going to keep the $0.39 per share, per quarter dividend and the dividend will NOT be reduced!  This is HUGE for dividend investors and is essentially an $0.11 increase!!

Therefore, I wanted to run Pfizer (PFE) back through the Dividend Diplomat Stock Screener to see what this dividend growth stock looks like today, April 23, 201:

  1. Price to Earnings (P/E) Ratio: The stock price for Pfizer is $38.66, close of 4/23/21, and analysts are projecting $3.38 in earnings per share for 2021.  This equates to a P/E ratio of only 11.4x forward earnings.  Definitely signs of undervaluation in comparison to the market, as a whole.
  2. Payout Ratio: Pfizer’s total dividend is $1.56 in dividends per year.  At a projected earnings of $3.38, the dividend payout ratio is 46%.  In the sweet spot or the PERFECT dividend payout, which is 40%-60%.  Definitely room to grow the earnings and to continue their research and development for new products.
  3. Dividend Growth: Pfizer has increased it’s dividend for 10+ years and this essentially should count as the 11th.  They typically increase in December, so we’ll see if there’s any bump then.  The average dividend growth is around 6%.  Therefore, with a dividend yield of 4.04% and a DGR of 6%, this is a solid combination!

Dividend Stock Watch List Conclusion

Dividend investing is real and is happening!  Dividend growth is also back.  Verizon, at these prices, is very enticing.  Would love Pepsi slightly lower and Unilever is a solid pick too.  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.  Pfizer (PFE) is just firing away and being the best/most positive COVID-19 vaccine pusher.  In addition, 5G will be key over the next 5 years.  Then, of course, the consumer good giant Unliever (UL) will continue to do it’s thing!

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

15 thoughts on “Dividend Stock Watch List: Lanny’s May 2021 Edition

  1. It’s amazing in general just how much the market is BOOMING just in the 1Q of 2021, alone. That means that dividend investing can only get more lucrative (hopefully) as we start to close out the year, Insane!

    So many millionaires were made this year as compared to last year. Here’s to the good times continuing!

    • David –

      You are right. The market is booming and dividend stocks are also seeing the price increase. A lot of speculation out there for the millionaires – wonder how many got out of their position, once they hit the big 7 figures +.

      -Lanny

      • I’ve never let my personal investment account reach pass $500K, I’ve always cashed out the profit to buy investment property, but this year I’m selling 1 4-plex and will go to stock, I might go into some crypto … maybe at 1% of my asset, but I don’t know yet.

  2. I’m selling my 4-plex, I’m going to have around $400K to invest, I’m looking to invest in dividends growth stock, your screenlist comes in handy. 🙂

  3. I have been buying; CSCO (first quarter dividend), CLX (second quarter dividend) and VDC (third quarter dividend) ensuring I most my divy income every month.

  4. Lanny,

    The value investor in me tends to favor LHX over ABT and MSFT. At roughly 16 times this year’s earnings, a company positioned to grow its earnings at a low-double digit clip the next few years is awfully tempting. Of the 3, LHX offers the best mix of growth and value IMO.

    • LHX has a PE over 40 with net income decreasing 73% year on year. Would be better off adding to VYM which has beaten it by 25% with double the yield. Plus the chart has topped out at $210 and it headed lower.

  5. Take a look at NEP. They have stated a goal of growing their dividend by 12% to 15% per year through 2024, seems like your kind of stock.

  6. All three are long term holds in my portfolio. I notice how about 10-15 of these “must have” stocks kind of rotate in and out of being the great value of a month or two. I am sure we will see GD, T, LMT, JNJ, TGT, TROW, MO, and a few others become the steal of the month again.

    I will soon be posting my monthly dividends and will have a major announcement coming. I will have to temporarily cash out a bunch of shares to get the ball rolling on paying for my mom’s assisted living. Then I will get it back from the sale of her home and buy back what is the good value then. So once I got to a good place portfolio-wise, I have to turn over the apple cart and then restart again.
    Take care you two,
    John

  7. Hey Lanny
    Solid companies on your list. Unilever just initiated a new share repurchase program. I‘ve been shareholder for a few years and it was always a robust holding. Unspectacular and solid. And the dividend keeps climbing up.
    Cheers
    MyFinancialShape

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