The investing world is in complete disarray. All markets are rising – cryptocurrency, the stock market and the like. Bitcoin, Ethereum, Tesla – all hitting all-time highs. The S&P 500 has also set a new record, the S&P 500 crossed 4,600! Staying invested is the name of the game to hold assets that produce passive income. That’s where dividend investing comes heavy into play and you know that I’m still finding undervalued dividend stocks to buy in this market!
Therefore, as I do every month, here is the Dividend Stock Watch List for November 2021!
Dividend stock watch list
Welcome back to another dividend stock watch list and I’ll share with you the stocks hot on my radar, potentially stocks I will be buying THIS MONTH. The turbulence in the market is still high, with recent events, such as: Delta-Variant, inflation, the hot cryptocurrency market and the like. In addition, inflation is so high that I know gas by me is nearing $3.50 per gallon. Lastly, they are calling this the great resignation time period. What a world we are in.
The stock market, specifically the S&P 500, still is high, is back firing on all cylinders, up over 200 points since the end of September. In fact, a new record was set on the last day of October – the 29th, settling at $4,605.38. A nice 6.91% increase over the last 30 days is not too shabby for the stock market. Chart is below:
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 of 2020. Luckily, I can still say that I am earning 0.50% on my savings account as of early November 2021. Will that stay, though? I am taking matters in my own hands… HOW you ask?
I keep MORE savings in my Yotta Savings Account, that has earned 1.82% in August and over 1.4% in September 2021. The account is FDIC-insured, of course. Definitely sign up if you want to have fun and earn more yield on your savings account!
Related: Sign Up For Yotta Savings
What else has been going on? I have been investing more and more into Fundrise, as of late – finally crossing over $10,000+ invested there. See my Q3-2021 review. In addition, I have been LOVING the SoFi financial app and platform. In fact, check this article out, as I showcase how SoFi has helped me build wealth this year. You can earn bonus money for opening an account, as well as free stock! Definitely check it out.
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 we will see comparable earnings in upcoming releases 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 $725 per week into Vanguard (pending the VYM stock price), 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 November 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. This is a fairly defensive, consumer-goods intensive, dividend stock watch list!
Store Capital (STOR)
Store Capital (STOR) is a single tenant operating real estate company. Hence, their acronym and ticker is STOR. STOR was formed in 2011, went public in 2014 and even Warren Buffett invested over $375 million into the company in 2017, holding (at the time) almost 10% of all shares outstanding.
STOR almost has $10 billion in market capitalization, steadily growing over their 7 year period of being public.
Now they are a Real Estate Investment Trust (REIT) and, as such, payout in dividends ~90% of their earnings and you are taxed at the ordinary income rate for dividends received from a REIT, if held in the taxable brokerage account.
Therefore, when looking at REITs you do want a little bit higher on the yield, to make up for any increase in tax burden you may have. However, owning a REIT or combination of REITS, offers you the potential for exposure to real estate! In addition, we evaluate REITs by using the Adjusted Funds From Operations (AFFO) vs earnings per share.
First, however, we MUST run them through the Dividend Diplomats Stock Screener, which is focused on these 3 metrics (with AFFO replacing EPS)
- Price to AFFO Ratio: AFFO was $0.97 through 6 months/year-to-date for 2021. To keep it simple, we will simply double that and estimate that they will earn $1.94 AFFO for the year. The share price is $34.33 as of 10/29. This equates to a price to AFFO ratio of 17.70. Not expensive, not cheap. However, fairly good value here.
- Payout Ratio: STORE Capital currently pays a quarterly dividend of $0.385 or $1.54 per year. This equates to a dividend payout ratio of “only” 79%, which is lower for a REIT. Therefore, we should see signs of dividend growth for Store Capital going forward.
- Dividend Growth: Increasing their dividend since they’ve been public, Store Capital (STOR) has been fairly consistent in this department. The average dividend growth rate is right at 6%. The best part, the last dividend increase was above this average rate and was ~7%. I like where STOR is heading.
Lastly, STOR’s dividend yield isn’t too shabby at 4.50%! I would say that is definitely higher than Realty Income (O) and is far higher than your average yield, which you typically should require for a REIT.
I currently own 57 shares, but would not mind getting towards 100 shares of Store Capital, hence the watch list!
Cummins (CMI)
Cummins (CMI) is as boring of a stock as they get, but that’s what makes them such an exciting stock to own! Boring is good when it comes to investing, trust me. Cummins is a great stock to buy now and to just hold, letting it ride.
Cummins designs, manufactures & distributes engines, filtration, and power generation products. One could simply state, they are in the machine, nuts and bolts business here.
Cummins also is a simple cash machine, earning billions of revenue each year. They are up only 9% year to date and the last year. The past month has been solid for Cummins, up almost 7%. How are they on my dividend stock watch list?
Time to run them through the Dividend Diplomats Stock Screener, like you didn’t know that was what I was going to do to see if they are a dividend stock to buy now!
- Price to Earnings Ratio: Analysts are expecting $15.94 for the year 2021, which we will use to be conservative (versus the higher $18.74 for 2022). Given the stock price is $239.84 as of October 29th, the price to earnings ratio is a sound 15. Significantly undervalued vs. the competition and the S&P 500.
- Payout Ratio: Cummins pays a quarterly dividend of $1.45 or $5.80 for the year. At a forward earnings of $15.94, the dividend payout ratio is a low, 36%. Significant room for growth in the future and Cummins dividend is extremely safe.
- Dividend Growth: 15 years of consistent growth for Cummins. The 5 year dividend growth rate average is 6.87%, definitely a nice raise you receive each year. The last dividend increase was higher, again, at 7.41%.
Cummins is such a complimentary stock – offering appreciation, dividend yield (~2.4-2.5%) and dividend growth (6%-8%). I own 31 shares of Cummins but would like to see the big FIFTY, 5-0, mark!
AEP (AEP)
AEP (AEP), a Columbus, Ohio-based utility provider, is on the dividend growth watch list for the first time in history for me! I typically don’t showcase many utility companies on my dividend stock watch list, BUT the positions that I have with utilities is significantly small. My wife has ConEd (ED) and I have National Grid (NGG).
This powerful, dividend-growing Utility company is up about 4.35% over the last month, slightly trailing the S&P 500. Year-to-date AEP is up only 4%, and is actually down 6% since last year. Quite compelling! In addition, AEP also announced a SOLID dividend increase of 5.4%!
Alright, you know by now that we are going to run them through the fundamental stock metrics from the Dividend Diplomats Stock screener, here we go.
- Price to Earnings Ratio: Analysts are currently expecting $4.68 on a share price of $84.71 for AEP. This calculates out to a price to earnings ratio of 18.10. Fairly valued at the moment compared to the competition (ConEd’s P/E ratio is 17.74), and they are under the S&P 500 at the moment.
- Payout Ratio: AEP pays a quarterly dividend of $0.78 per quarter or $3.12 per year. Therefore, the dividend payout ratio is 67%. Higher than the 60% we like to see, but that is typical for utility players, as they are looked at as a fixed income stock. Utilities are not in a high growth business to say the least.
- Dividend Growth: AEP has now grown their dividend for over 11 years. Their last increase was 5.4% and the 5-year dividend growth rate average is 5.74%, so right on point.
The dividend yield for AEP is 3.68%, which is a solid yield for a utility stock that has an above average dividend growth rate.
I currently don’t own any but will have them on my watch list at this time.
Dividend Stock Watch List Conclusion
Dividend investing is real and is happening! Here is one of our latest videos on a dividend growth stock that had their stock price plunge over $45 this past month!
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 the order that you see them above! Store Capital (STOR) to round out that position, then Cummins (CMI) and followed by AEP (AEP). How about you?
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