Hopefully your stomach has been able to endure the extreme volatility, as of late. April was a fairly positive month on the valuation front, but there are always stock opportunities. Let’s buckle up and read Lanny’s Dividend Stock Watch List – June Edition.
Dividend stock watch list
The stock market is up approximately 2.8% from 3rd week of April through May 19th. What has caused the increase? First, signs of continual vaccines for the coronavirus continue to come up, causing the market to react positively. Next, the stay at home orders and shutdowns are being lifted across industries, almost day by day and week by week. Therefore, the market is trading on the positive future outlook. However, I believe the Q2 earnings results will be completely dismal and that the market increase doesn’t make sense – especially with the expected 20-30% unemployment rates to come.
As a dividend stock investor, for the first time, I have 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.
Therefore, with using the Dividend Diplomat Stock Screener, there is always an undervalued dividend stock up for grabs, that’s where Financial Literacy and Research pays off.
Here is a display of what the market did in the last 30 days:
In addition, capital is necessary to make any dividend stock purchase that is on this watch list. How do I do it?
I save anywhere from 60-85% of my take-home pay and strongly believe Financial Freedom does not happen by hitting a home run on an investment. Nothing matters more than your savings rate on your journey to Financial Freedom, plain and simple.
Therefore, I work my butt off to make sure expenses remain in-check and that my savings rate are meeting our investment and financial independence goals! Then, you rinse and repeat.
The duck that everyone knows and loves. Further, they are in an industry to invest in that is for LIFE. Everyone has some form of insurance – health, life, auto, home owners, renters, etc.. That is why Aflact (AFL) stands to be on my watch list, specially with the dividend history they have.
Further, their stock price has also dropped from the start of the year of $52.90, down to $33.63 as of May 19, 2020. That’s a 36% stock price drop year-to-date.
We have put Aflac (AFL) through the Dividend Diplomat Stock Screener:
Price to Earnings (P/E) Ratio: Analysts of Aflac are projecting $4.34 in earnings per share for 2020. This represents a price to earnings ratio of 12.90, which is insanely low and is far more undervalued than the S&P 500 index or stock market as a whole.
Dividend Yield and Dividend Growth: Aflac is paying $1.12 in dividends per year. At a share price of $33.63, this dividend yield calculates to be 3.33%, well above the S&P 500 dividend yield and is slightly under my overall portfolio yield. Aflac is a beloved dividend aristocrat and increases their dividend approximately 1 cent per share, per quarter. The latest dividend increase was 3.7%, which is definitely appreciated during the pandemic.
Dividend Payout Ratio: In addition, based on projected earnings of $4.34 and a dividend $1.12 per year, the payout ratio is 26%. The dividend payout ratio significantly lower than the market, typically, but is in line with the industry standard. Aflac is leaving plenty of room for future dividend growth.
General Dynamics (GD)
As stated in my April Dividend Stock Watch List, General Dynamics (GD) are one of the largest aerospace and defense corporations, the 6th largest in the world.
GD was trading at $176.35 at the start of the year and have dropped to $136.19, a 23% drop. Further, their yield has remained above 3%.
Price to Earnings (P/E) Ratio: Analysts of GD are projecting $11.47 in earnings per share for 2020. This represents a price to earnings ratio of 11.87, which is low and is more undervalued than the S&P 500 index or stock market as a whole. Somehow, even lower than Aflac!
Dividend Yield and Dividend Growth: GD is paying $4.40 in dividends per year. At a share price of $136.19, this dividend yield calculates to be 3.23%, above the S&P 500 dividend yield and is also below my portfolio yield, currently. They are a beloved dividend aristocrat, with a streak of over 25+ years and the most recent increase being 7.8%. An over 7% dividend growth rate, with a yield above 3%, that’s a great combination to have.
Dividend Payout Ratio: Based on projected earnings of $11.47 with an annual dividend is $4.40 per year, the pay out ratio is 38%. The dividend payout ratio is right at the lower range of the 40% to 60% we like to see. They keep a fairly sound balance between reinvestment back into the business and a return back to shareholders.
People’s United Financial, Inc (pbct)
The last dividend stock on my watch list was one that was on my May Dividend Stock Watch List. Peoples United (PBCT) is a $59 billion financial institution, based in Connecticut and I initiated my position with them back in April, and continued to add a few more shares into May. I had to go 3 for 3, for having dividend aristocrats as part of my watch list.
PBCT has seen their stock drop from $16.90 to start the year, down to $11.02, as of close on 5/19/2020. That’s a 35% drop, down $0.86 from last month or an additional 7%.
Price to Earnings (P/E) Ratio: Analysts of PBCT are projecting $1.05 in earnings per share for 2020. This represents a price to earnings ratio of 10.49, which is low and is more undervalued than the S&P 500 index or stock market as a whole.
Dividend Yield and Dividend Growth: PBCT is paying $0.72 in dividends per year. At a share price of $11.02, this dividend yield calculates to be 6.53%, well above the S&P 500 dividend yield and my portfolio’s overall yield. They’ve increased their dividend for 25+ years, the most recent increase being only 1.4%. Essentially, they are in the low growth, high yield frame, right now. They increase, usually, a quarter of a penny; i.e. $0.1775 to $0.18, per quarter. They increased their dividend towards the end of April.
Dividend Payout Ratio: The payout ratio is 69%, with the dividend at $0.72 and projected EPS of $1.05. A higher dividend payout ratio, but that is fairly typical for PBCT.
Given they’ve weathered everything, over the last 180 years, I am confident they can endure this pandemic, as well.
Dividend Stock Watch List Conclusion
All three are dividend aristocrats, PBCT is definitely the smaller position, with GD coming in afterwards. Prior to making any purchase, I definitely will make sure to run them through the Dividend Diplomat Stock Screener once more.
I could see adding more shares in this order: 5-10 more shares of PBCT (~$100), 2-3 more shares of GD (~$400) and 5 shares of AFL (~$160). It would be a nice deployment of capital and the average yield should be right at/above my current yield on my portfolio.
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!