The S&P 500 continued to set record highs in August, crossing the 4,500 mark! The Delta-Variant to the Corona-virus is still causing the stock market to be extremely volatile, while Bitcoin and Crypto Currency has been on a significant uptick, as well. However, I am all about investing into dividend stocks, right?!
Therefore, as I do every month, here is the Dividend Stock Watch List for September 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 were fairly strong and most companies are meeting or exceeding expectations. However, similar as we’ve seen in the housing market, Home Depot (HD) and Lowe’s (LOW) may be seeing a slow-down in growth right now.
The Stock Market, specifically the S&P 500, continues to set record highs and we BROKE THROUGH the 4,500 mark! See 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. Luckily, I can still say that I am earning 0.50% on my savings account as of early August 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:
However, I do keep MORE savings in my Yotta Savings Account, that has earned 1.82% in August, 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? Hurricane Ida is causing havoc. Delta-Variant is out of control. COVID-19 cases have spiked again in Ohio and we are back to early 2021 levels and are worse now than this same time in 2020. Stock market is at a record-high. Housing market appears to be cooling slightly. What a whirlwind.
On top of that, the Fed has announced tapering soon. In addition, Joe Biden has been discussing tax rate increases and is still dealing with pulling troops out of Afghanistan. Cannot even keep it all straigh sometimes!
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 $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 September 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 healthcare, telecommunications and… BIG OIL!
Viatris (VTRS)
Viatris (VTRS) is BACK on the list! They were created from the Pfizer (PFE) spin-off with Mylan, to create a cash-flowing, brand empire essentially. Viatris has monstrous brands, such as Lipitor, Xanas, Viagra, just to name a few. Analysts also have high expectations, yet the stock has not performed well or lived up to the hype. That is a GREAT thing for dividend investors, as we want to buy Viatris when the stock is undervalued! See the stock chart below:
The stock has been in the $13-15 range for the better part of 5 months, but Viatris was once at the $18-$19 range. Definitely love an undervalued cash cow in this pharmaceutical company.
First, however, we MUST run them through the Dividend Diplomats Stock Screener, which is focused on these 3 metrics:
- Price to Earnings Ratio: Viatris is trading at $14.37. Therefore, with an earning expectation of $3.64, that equates to a price to earnings (P/E) ratio of under 4x earnings?!?! Just… WOW. The P/E ratio is barely calculable at this rate, due to lack of SEC filings for Viatris to see the true earnings. However, that’s what the calculation shows!
- Payout Ratio: Earnings are projected to be $3.64 and the dividend is $0.11 per quarter or $0.44 for the year. The payout ratio is insanely low based on the expectations the company has. The payout ratio is 12%. This shows that dividend growth will be around the corner and Viatris can also reinvest heavily back into their business.
- Dividend Growth: N/A. This is N/A as the company has not even been in existence for 1 year. More to come here, with a payout ratio like this, it has to.
I have 105 shares of Viatris and the goal is to reach 150 shares. Under $15 per share, should be pretty “easy” to start pooling in shares to hit the 150 share target. At 150 shares, this produces a dividend of $16.50 quarterly, or at least one additional share reinvested using DRIP.
Verizon Communications (VZ)
Verizon (VZ) must remain on my dividend stock watch list. The dividend stock metrics are just too good. They are the 5G premier winner and their earnings release was VERY stellar. Verizon had a solid 2nd Quarter and they also recently rolled out 5G to 5 new cities for business internet, see the snip for Verizon here:
Verizon stock has truly not changed year-to-date. They were in the $58 range to start the year and are down around 7% so far year-to-date.
Time to see Verizon’s dividend stock metrics through our DD screener:
- Price to Earnings Ratio: Verizon is trading at $54.77. Therefore, with an earning expectation of $5.31, that equates to a price to earnings (P/E) ratio of 10.31. Hard to beat a below 11 price to earnings ratio. Can we say undervalued dividend stock?!
- Payout Ratio: Earnings are projected to be $5.31 and the dividend is $2.51. The payout ratio is approximately 47% as well. Verizon (VZ), showcasing their perfect dividend payout ratio. Nothing wrong with that! Payout ticked down 2% from last watch list, as analysts expectations are even higher on Verizon’s stock for their earnings performance.
- Dividend Growth: Verizon is at 16 consecutive 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 continues to juice operating cash flow and earnings going forward.
I own 85 shares of Verizon stock, but would be cool to climb my way to 100 shares! I’ll be buying more Verizon stock this week.
Kinder Morgan (KMI)
Uh Oh! Here we go! Kinder Morgan (KMI) is really on my watch list! Big Oil is making a BIG comeback! The price per barrel of crude oil is over $72 right now but Kinder Morgan’s stock has actually dropped almost $3 over the last few months. You can see KMI almost hit $20 back in June/July, has now slid to the mid-$16 range.
Now, we know Kinder Morgan (KMI) has stung us once before, around 5 years or so ago, when they cut their big dividend from $0.50 to $0.125. However, KMI has now steadily grown their dividend back up to $0.27 per share. Is it time to look back at Kinder Morgan as a stock to buy now? First, as always, let’s go through the Dividend Diplomat Stock Screener!
- Price to Earnings (P/E) Ratio: Now, the stock price is $16.59 as of August 27th. Analysts are expecting $1.32 in forward earnings, which equates to a P/E ratio of 12.6. This is below the S&P 500 current P/E ratio, which is 35x current earnings. See the expectations below:
- Payout Ratio: Kinder Morgan currently pays a $0.27 per share, per quarter dividend. On an annual basis, that is $1.08. The payout ratio, then, is 81.8%. Definitely on the higher side, BUT technically the industry really looks at operating cash flow. However, for this article, we’ll keep it simple with EPS.
- Dividend Growth: Kinder Morgan is currently on a 3 year dividend growth streak. The average rate is 8.5% right now for a 5 year average, which includes 2 years of no dividend growth. I am predicting a 7.5% growth in 2022.
I own approximately 180 shares and wouldn’t mind reaching 200 shares of Kinder Morgan (KMI).
Dividend Stock Watch List Conclusion
Dividend investing is real and is happening! If you haven’t caught our recent dividend increases YouTube Video, we showcased 4 massive increases, 3 which is the SECOND dividend increase in 2021 for those select companies:
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 Verizon, Viatris and Kinder Morgan. Verizon really impressed me with their earnings release and what they are doing out there.
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