Dividend Stock Watch List: Lanny's August 2021 Edition
Summary
- Intel is showing signs of value, due to the impact their industry is facing with the supply chain hurdles.
- Verizon stock has truly not changed year-to-date. They were in the $58 range to start the year and are down around 3-5% so far year-to-date.
- Provident is a nice $13.1B bank and steadily grows each quarter.
The S&P 500 continued to set record highs in July, even crossed 4,400 at one point! The stock market is still on a roller coaster, especially dealing with the Q2 earning releases coming in, as well as battling the Delta-Variant to COVID-19.
As I do every month, here is the Dividend Stock Watch List for August 2021!
Dividend stock watch list
Welcome back to another dividend stock watch list and you can have a sneak peek of the dividend stocks that are on my radar. Q2 earnings releases have been fairly strong, as they come in throughout July. The Delta-Variant to COVID-19 is scaring the heck out of the world right now and mask mandates are starting to come back, as well. In addition, (finally) 50% of the country is fully vaccinated and we are now cruising towards that herd immunity.
The Stock Market, specifically the S&P 500, continues to set record highs and we have hung around the 4,300+ mark for some time now (even crossed 4,400 a few times). As you see in the chart below, so close to 4,400!
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.
However, I do keep more savings in my Yotta Savings Account, that has earned 1.57% APY, FDIC-insured, of course.
What else has been going on? Child tax credit payments are out the door (started in July) for $300 per child for 6 months. In addition, Mortgage rates are still low, below 3%, for the 30 year loan. Also, there is absolutely no supply for homes, new cars and gas has also gone up to over $3 per gallon. Inflation has been insanely real.
On top of that, the Fed has announced tapering at some point in the future, with two increases to the Fed funds rate by the end of 2023. In addition, Joe Biden has been discussing tax rate increases. I am just hoping no change to the dividend tax rates. Call me biased!
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 starting Q3/Q4 of 2021, earnings will be more comparable 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.
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.
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 of less than 60%.
- Dividend Growth – We like to see history of dividend growth in a company.
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 August 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 home improvement, consumer goods and technology!
Intel Corp. (INTC)
Now look who made the list! Yes, I am bringing back the beloved chip maker of Intel. Sure, AMD (AMD) is posing stiff competition in the chip market, but Intel still owns the majority of the market, where switching costs can be quite high!
In addition, every manufacturer is going through supply chain issues and shortages due to COVID-19. Thanks Global Pandemic! What has this caused Intel’s share price to do?
You can see Intel was heading towards $70 per share, but has since plummeted around $15 in share price or over 20%! Though the supply chain shortages cannot happen overnight, a dividend investor may be able to take advantage of adding an undervalued tech stock to their portfolio!
First, however, we must run them through the Dividend Diplomats Stock Screener, which is focused on these 3 metrics:
- Price to Earnings Ratio: Intel is trading at $53.82. Therefore, with an earning expectation of $4.62, that equates to a price to earnings (P/E) ratio of 11.63. Below 12x forward earning, which is fairly undervalued when compared to competitors & the S&P 500!
- Payout Ratio: Earnings are projected to be $4.62 and the dividend is $1.39. The payout ratio is approximately 30% as well. Safety in the dividend, first off. Then, Intel can continue to reinvest heavily back into their business, open new production centers for chips, research & develop new technology, etc. I am loving where Intel’s ratio is at.
- Dividend Growth: 6+ years of consistently increasing the dividend for Intel, at an average growth rate of 6.28%. There was one odd year from 2012-2014, where it stayed relatively flat at $0.225 per share per quarter. However, since then, Intel has been steadily raising that dividend payout!
Intel is showing signs of value, due to the impact their industry is facing with the supply chain hurdles. This will pass, and I believe by Q4 2022/Q1 2023 – things will be normal from a production standpoint. That is, so long as COVID-19 doesn’t start trending terribly like in 2020/early 2021.
Verizon Communications (VZ)
Verizon 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. Here’s Verizon’s Highlights section from their earnings:
Verizon stock has truly not changed year-to-date. They were in the $58 range to start the year and are down around 3-5% 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 $55.78. Therefore, with an earning expectation of $5.12, that equates to a price to earnings (P/E) ratio of 10.89. Hard to beat a below 11 price to earnings ratio. Can we say undervalued dividend stock?!
- Payout Ratio: Earnings are projected to be $5.12 and the dividend is $2.51. The payout ratio is approximately 49% as well. Verizon, showcasing their perfect dividend payout ratio. Nothing wrong with that!
- Dividend Growth: Verizon is heading towards 16 years of dividend increases. The average dividend growth rate is similar to AT&T (T) stock and that dividend growth rate is around 2%. Hopefully 5G continues to juice operating cash flow and earnings going forward.
I own 75 shares of Verizon stock, but would be cool to climb my way to 100 shares!
Provident Financial Services (PFS)
Provident Financial was on my dividend stock watch list in July. Provident is a community bank and they also just released earnings. Net income for the 2nd quarter was up over 200%! In fact, on a year-to-date basis, PFS is up the same, well over 200%. Provident Financial is on fire right now and is firing on all cylinders. However.. their stock price hasn’t and has realistically stayed in the $21-$22 range for quite some time:
Provident is a nice $13.1B bank and steadily grows each quarter. They serve primarily the New Jersey, parts of New York and Pennsylvania. Right up my community banking alley!
How I also evaluate banks is from the price to book value. A bank is typically undervalued if the stock trades close to or below the book value of a bank. The book value is $21.55 as of the end of June, with the share price of $21.60, this equates to a price to book of only 1x. This is a fairly good sign of undervaluation.
- Price to Earnings (P/E) Ratio: Now, the stock price is $21.60 (as of 7/30). However, for PFS, due to being a smaller bank stock, only had 4 analysts following them. They are estimated earnings to be $1.96. Therefore, the P/E ratio is only 11x forward or expected earnings.
- Payout Ratio: Provident pays a dividend of $0.92 over the course of a year. Given that earnings are expected to be $1.96, the payout ratio is a perfect 47%. Following in Verizon’s footsteps, have to like their safety and the ability to increase the dividend.
- Dividend Growth: The 5 year dividend growth rate, on average, is just a tad over 7%. A fairly good combination when the dividend yield is 4%!
I own approximately 146 shares and wouldn’t mind owning 200 shares by year’s end.
Dividend Stock Watch List Conclusion
Dividend investing is real and is happening! Dividend growth is also back. Two dividend aristocrats and a technology company that have increased their dividend consistently is hard to come by in today’s market. Three dividend growth stocks, all that increase their dividend year after year. The music just rings nicely!
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, Provident Financial and Intel to Anchor. Verizon really impressed me with their earnings release.
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!
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
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