Dividend Stock Watch List: Lanny’s October 2020 Edition

dividend stock watch list

As investors, there are always opportunities out there.  The stock market has actually shown red in the previous two weeks, something investors have not seen in quite a few months!  Given the stock market has slightly declined, investment opportunities are out there to help you on your journey to financial freedom.  Let’s buckle up and read Lanny’s Dividend Stock Watch List – October 2020 Edition.

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 an ABSOLUTE tear over the last 30 days and it simply doesn’t make things easy for a dividend investor.

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 0.80% back in August.  Luckily, I can still say that I am earning 0.80% on my savings account.  My lovely message from Ally (ALLY) is below:

ally savings account

It appears that savers and investors are flocking more to the stock market, to capture a dividend yield or even appreciation in the stock market via higher share prices.  The IPO’s have taken headlines over, such as Snowflake (SNOW), Airbnb and Robinhood.  In addition, whether it’s Tesla’s (TSLA) battery day or Apple’s (AAPL)’s media event, the big tech names are covering the headlines.  Further, speaking of Apple, I even asked if Apple’s stock is for dividend investors?

Related: Is Apple stock for Dividend Investors?

In addition, the Federal reserve continues to make headlines, as they’ve been flushing the stock market with cash.  See my last point below, which I also snipped in a picture of an article that sums it up:

  • Up to $700 billion in quantitative easing (a fun tool during the financial crisis, that actually, never really stopped).
  • Reduced rates to at/near 0.00% for the fed funds rate.
  • Purchased ~$4B in FNMA Mortgage Backed Securities.
  • Announced Main Street Lending Program to purchase up to $600 Billion of debt from companies employing up to 10,000 workers.
  • Announced Municipal Liquidity Facility to purchase up to $500 Billion of debt from states and cities.
  • In addition, as you’ll see below, the Fed plans to maintain rates near zero for 3 years.

federal reserve bank

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 $600 extra per week has expired.  Now, Donald Trump has an Executive Order out there, requesting a $400 per week additional – $300 paid by the federal government and $100 paid by the state.  One would think this could quite a bit of turbulence in the stock market, as we close out the month of August.

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

In addition, here is a display of what the market did in the last 30 days:

S&P 500 Index

The stock market is down around 2-3% over the last 30 days.  It’s amazing seeing that roar up towards the end of August/early September, but now the market is coming back down, slightly.  We’ll have to see what the rest of the month has in store, as well as the last quarter of the year!  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.  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

General Dynamics (GD)

General Dynamics

General Dynamics (GD) is a beast int he defense sector.  They typically are in the mix with Lockheed Martin (LMT) and do quite a bit of work for the government.

In addition, they are also a beloved dividend aristocrat!  You know, those wonderful dividend stocks that have increased their dividend for 25+ years in a row! Time to see what General Dynamics looks like through the Dividend Diplomat Stock Screener:

  1. Price to Earnings Ratio: At a share price of $142.99, close of 9/18/20, the analysts are projecting $12.03 in earnings per share for 2021.  Therefore, the P/E ratio, which helps determine under/over valuation, calculates to 11.89.  This compares favorable to the S&P 500, which is trading at 28.5x earnings.  Here is evidence for the projected earnings: General Dynamics Earnings
  2. Payout Ratio: General Dynamics pays $4.40 in dividends per year.  At a projected earnings of $12.03, the dividend payout ratio is 37%.  This is significantly low, lower than our 60% ceiling and GD’s dividend payout ratio almost falls into the perfect sweet spot of 40-60%! The dividend safety is in tact. This shows GD reinvests heavily back into the business, but still pays a decent return out to the shareholders, as well as can allow for room for dividend growth!
  3. Dividend Growth: Having increased the dividend for 25+ years, the 5 year dividend growth rate is 10%. If you pair that with their dividend yield, which is now 3.08%, that is a great dividend combo, 1-2 punch!  The history and growth rate are both stellar!

I currently own almost 30 shares of General Dynamics and wouldn’t mind boosting this position another 5 shares to 35.

Cisco (CSCO)

CSCO, Cisco

Cisco (CSCO) remains on my dividend stock watch list, as they were on there in September.  Cisco is a name that you see quite often and you even here us Dividend Diplomats speak about, such as within our YouTube videos and, of course, in my Stocks to Buy in a Post-Pandemic World.

Why do I speak highly of them?  Well, during COVID-19, their network capabilities form a VPN standpoint are critical to everyday businesses functioning.  In addition, their Cisco Web-ex platform is used across the globe and I know with remote work, I have been apart of many web-ex calls in the last 6+ months.

However, what also is great about Cisco (CSCO) are their dividend stock metrics!  Cisco stacks fairly well in the Dividend Diplomat Stock Screener, see below:

  1. Price to Earnings Ratio: CSCO’s stock price is $39.81, as of September 18, 2020.  22 analysts are projecting $3.33 in earnings per share for 2022.  Therefore, dividend the stock price over the earnings per share, equates to a price to earnings ratio of 11.95.  Definitely below the S&P 500 and other competitors in the industry, including Microsoft (MSFT) and Zoom Media (ZM).
  2. Payout Ratio: At $1.44 in dividends per year and dividing that by $3.33, you come to a favorable answer.  The dividend payout ratio for CSCO is 43%!  Their safety appears sound and they are smack-dab in the middle of the 40%-60% range that I like to see.
  3. Dividend Growth: Not a dividend aristocrat, yet.  However, they are going on 9 consecutive years of dividend growth.  Further, they have already increased their dividend in 2020, therefore – that elephant in the room is out of the way!  Their 3 year dividend growth rate is almost 9% with an over 12% dividend growth rate for 5 years.  I would anticipate 3-5% for the next 1-3 years, again, due to COVID-19.

I own 129 shares of Cisco (CSCO).  However, I could see this position swelling to 150 shares at or under these price levels.  Obviously, I prefer lower!

AT&T (T)

AT&T, ATT, T

This wouldn’t be a dividend stock watch list without a Top 5 Foundation Dividend stock, it just wouldn’t be right.  AT&T (T) has been a dividend stock that has been treated more like a fixed income investment.  Their stock price for AT&T (T) has virtually remained unchanged, between $28 and $31 per share.

AT&T (T) is gaining momentum within the streaming segment, with their new AT&T TV service.  Further, sports are back, so their networks are going to be performing well.  Lastly, 5G is coming and AT&T stands to capitalize with their telecommunications segment.

Related: Top 5 Foundation Dividend Stocks

It only makes sense to also run AT&T through our Dividend Diplomats Stock Screener.  See the dividend stock metric results below:

  1. Price to Earnings Ratio: Analysts are projecting $3.22 in earnings per share, on a go forward basis.  At a stock price of $28.93, this equates to a significantly low 9 price to earnings ratio.  Wow, is all I have to say!  Definitely signs of undervaluation.
  2. Payout Ratio: Given AT&T (T) pays out $2.08 in dividends, you take that over $3.22.  This equates to a dividend payout ratio of 65%.  Slightly higher than the 60% threshold we like to see, but AT&T is typically around this payout mark.
  3. Dividend Growth: They are a dividend aristocrat baby!  They have 36 years of consistent dividend increases, albeit with a dividend growth rate of 2%.  They aren’t here to blow your socks off with dividend increases, that’s for sure.

Dividend Stock Watch List Conclusion

All three dividend stocks my wife and I hold in our portfolio.  In addition, we have a decent position in all 3, but they are showing signs of undervaluation.  We have three completely different industries here with Defense, Technology/IT and Telecommunications.  I would argue that each one is used in our every day lives.  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 Cisco, then General Dynamics and followed by AT&T, if I were to order them.

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

8 thoughts on “Dividend Stock Watch List: Lanny’s October 2020 Edition

  1. I’m also a Cisco holder. My work uses them all the time and it works, but not as seamless as Zoom or Google Meets. One day I asked our IT why we don’t switch and apparently, it’s a massive pain to transition to something else, Cisco is very “sticky”. So when my company would rather deal with Cisco than use something easier, that’s when I buy. =)
    -Andrew

    • Andrew,

      Too funny! That’s a similar Microsoft “problem” companies face. Think: OS, office suites, Teams now…

      Luckily at work we weren’t married to any single provider. However, I find myself in WebEx meetings ~75% of the time. It’s a split between Zoom and Teams after that.

      -Lanny

  2. I like all 3 of them ,I am tempted to average down on T,But thinking its becoming big position in terms of shares,
    CSCO i am adding here and there ,but its increasing my average ,GD i am reinvesting dividends in it.

  3. All three are good choices. I have been adding to my T this month and just recently noticed GD looking attractive once again. CSCO is another name I have been watching too for a long time and would go nicely with my few tech holdings. I usually don’t like all your choices but this month it’s a 3 for 3.

    • DH –

      Glad I caught you in a good mood to like all 3! I may nibble a share or two of T, it’s just bizarre that they haven’t moved and can simply just yield over 7% like it’s no biggie.

      GD and Cisco I feel are deeper value plays that should turn massive corners once the economy is firing away.

      -Lanny

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