As the Stock Market still sets over 4,100+ in the S&P 500, finding an undervalued dividend stock to buy is very difficult.
However, if you are like us, you are dividend investors and you never let the stock market hold you back. We are always on the hunt for undervalued dividend stocks to buy. In this article, I believe I have found a gem of a dividend stock that could be great for the dividend stock portfolio!
The stock market
In order to really show you the difficulty in finding an undervalued dividend stock, right now, look at the S&P 500 chart:
The S&P 500 started the year at 3,748.75 and is now at 4,151.75 or an increase of 403 points (10.75%+). You know it’s hard to find a dividend stock seeing a chart like this.
In addition, there’s been much volatility, as the inflation rate triggered in at 4.2% and the cryptocurrency market is all over the place at the place (i.e. Dogecoin, Bitcoin and Ethereum). AT&T (T) stock announced a massive, upcoming spin-off of WarnerMedia and Discovery (DISCA).
However, over at our YouTube page, we are pumping out videos on dividend investing, the dividend increases (which are BACK by the way) and other dividend stocks to buy. Definitely check out our page to familiarize more of the stocks on the radar recently.
Though I have my Vanguard (VYM) strategy, that has now amassed over $29,500+, it’s still the passion to find an undervalued dividend stock out there in the market place. Therefore, it’s time. What stock did I find?
SpartanNash (SPTN) is the undervalued dividend stock that is on the radar right now! Let’s dive into the details below.
SpartanNash (SPTN) dividend stock analysis
Who is SpartanNash? First, SpartanNash is a dominant player in the infrastructure and supply chain for food and grocery stores. They have been around for over 100+ years and are headquartered in Michigan.
The main source of revenue is food distribution, which accounts for approximately $4 billion in sales. This has been improving due to better adaptation to COVID-19. Their next two largest segments are retail grocery stores and military food distribution.
Now that we know SpartanNash (SPTN) is heavily involved in the food channel, which is fairly pandemic safe, due to the vast array of business segments that are involved with, it’s time for one more thing. That is, to run them through the Dividend Diplomats 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 our Dividend Diplomat Stock Screener page for my details on why this screener identified undervalued dividend stocks!
- Price to Earnings Ratio: At a share price of $20.31, close of 5/21/21, the analysts are projecting $1.76 in earnings per share for 2021. Therefore, the P/E ratio, which helps determine under/over valuation, calculates to 11.53. 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 undervalued dividend stocks is tougher and tougher. The forward p/e ratio for the S&P 500 is around 21-22x+, as well. Here is evidence for the projected earnings:
- Payout Ratio: SpartanNash pays out $0.80 in dividends per year. At a projected earnings of $1.76, the dividend payout ratio is 45%. This is the perfect payout ratio, in the range of 40%-60%. Goes to show that they have plenty of earnings to grow the business and pay shareholders!
- Dividend Growth: SpartanNash has a dividend growth streak of 10+ years going. Not only that, but their average dividend growth rate over the last 5 years is 7%!
- *BONUS* Dividend Yield: At a payout of $0.80 per year with a stock price of $20.31, the dividend yield is 3.94%! Definitely higher than my dividend portfolio yield, on average, as well as more than 2x the S&P 500!
- Price to Earnings Ratio: At a share price of $20.31, close of 5/21/21, the analysts are projecting $1.76 in earnings per share for 2021. Therefore, the P/E ratio, which helps determine under/over valuation, calculates to 11.53. 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 undervalued dividend stocks is tougher and tougher. The forward p/e ratio for the S&P 500 is around 21-22x+, as well. Here is evidence for the projected earnings:
I am sure, based on the dividend metrics above, it leaves no question that SpartanNash (SPTN) is an undervalued dividend stock right now!
Their ex-dividend date will be happening in a few weeks, in June. Therefore, if you buy the stock over the next 2-3 weeks, you’ll also more than likely capture the next dividend payment. Always love the, “accidental”, timed dividend stock purchase.
Now, let’s hope the stock market behaves this week and keeps the price low, for a nice dividend stock purchase that will more than likely happen!
SpartanNash (SPTN) dividend stock conclusion
There we have it! Finally, a nice undervalued dividend stock to buy in this overvalued stock market. SpartanNash passes ALL THREE dividend stock metrics above AND they are crushing it with the dividend yield at 4%.
What is not to like? In fact, that is what I’ll ask YOU, the reader, what don’t you like about SPTN? Do you see any flaws in the business model? They do have $481 million of long-term debt, but that is down substantially from even 2019. Therefore, they are improving in that department. Let me know your thoughts.
If you think this is a great undervalued dividend stock to buy, right now, let me know in the feedback below.
I would love to add 100-150 shares of SPTN at current price levels, so long as they stay under $21.50. However, as a disclaimer – definitely perform your own research and to make your own investment decision; I am simply telling you my plans! Thank you, had to leave the disclaimer.
If you have other questions/comments, please leave them below. Appreciate the stop by, and – as always, good luck and happy investing!
-Lanny