Dividend Stock Watchlist: Lanny’s February 2022 Edition
Dividend investing is back baby. Talk about the undervaluation finally coming out of the woodwork. So pumped to add to my dividend stock portfolio as the stock market is down nearly 300 points in the S&P 500 to start 2022.
Additionally, dividend increases have been plentiful. I have a strong feeling and indication that 2022 will be another fantastic year for dividend investors.
Therefore, as I do monthly, here is the February 2022 dividend-paying stock watchlist.
Dividend Stock Watch List
Another watchlist of dividend stocks. The stock market is more volatile than ever since the 2020 pandemic. What does this mean? New undervalued dividend stocks are emerging. It’s about buying dividend-paying stocks – the best source of passive income on your path to financial freedom.
The stock market, specifically the S&P 500, had briefly touched 4,300, but has since rallied to over 4,500. Still, far from the highs of 4,800 (yet). The graph is below:
Interest rates are dramatically low on your savings, including high-yield savings, accounts, and money market accounts and funds. In fact, Ally Savings cut my interest rate to 0.60% in September 0.50% in mid-December 2020. Luckily I can still say I’m earning 0.50% on my savings account in February 2022. Will it stay, though? I take matters into my own hands… how do you ask?
I keep more savings in my Yotta savings accountwhich has consistently earned over 1.50% APY and earned over 1.90% in January 2022. The account is FDIC insured, of course.
What else happened? I’ve been investing more and more in Fundrise lately – I finally topped over $10,000 invested there. See my review Q3-2021. Also, I love the SoFi financial app and platform. In fact, check out this article, because I show how SoFi Helped Me Build Wealth This Year. You can earn bonus money for opening an account, as well as free shares.
As a dividend stock investor, it is increasingly difficult to find an undervalued dividend stock.
Additionally, given the uncertainty, I continue to make smaller weekly investments in Vanguard’s exchange-traded funds (ETFs). The specific ETF my wife and I loaded onto is Vanguard High Dividend Yield (VYM). We invest $400-500 a week in Vanguard (pending VYM stock price), to stay invested in the market, in times of uncertainty.
Therefore, on the path to financial freedom, the goal is to acquire assets that produce cash flow or income. As I always say, there is always a diamond in the rough. How to find an undervalued dividend stock? It’s time to introduce our beloved Dividend Diplomat stock screener.
Diplomat Dividend Stock Screener
If you don’t already know, we limit stock selection metrics to three simple things. They are:
- Price/earnings ratio – We are looking for a lower price/earnings ratio than the broader stock market.
- Payout ratio – We are aiming for a payout ratio below 60%.
- Dividend Growth – We like to see a history of dividend growth in a company.
Time to find the answer to…how did the dividend-paying stocks on my watchlist rank when analyzing the stocks?
Dividend Stock Watch List
Here is the list of dividend stocks that are on my radar heading into February 2022. I generally like to keep it at 3 dividend stocks, keeping the focus locked. Finding dividend stocks isn’t easy, but there are also other factors, such as the composition of my portfolio by industry (e.g. am I overweight/underweight in an industry), as well as the exposure to a security and its concentration.
The dividend stocks on my list address these other facets when building a dividend stock portfolio. This is a rather defensive, consumer-heavy, dividend-equity watchlist.
T price. Rowe (TROW)
This dividend aristocrat is back on my dividend stock watchlist. T. Rowe Price is one of the largest asset management companies in the world.
However, we must first run them through the Dividend Diplomats Stock Screener, which focuses on these 3 metrics.
- Price-to-earnings ratio: T. Rowe’s analyst expectations are $12.92 in earnings per share. Based on the last share price on February 1 of $155.75, this equates to a price-to-earnings ratio of 12.05. Decent sign of undervaluation here.
- Payout rate: The Dividend Aristocrat here pays a quarterly dividend of $1.08 or $4.32 per year. The dividend payout rate at the time of this article is 33%.
- Dividend Growth: T. Rowe Price has been increasing the dividend for over 35 years. Additionally, they occasionally pay a special dividend to shareholders every few years. The average dividend growth rate over 5 years is 15%.
The yield is close to 3% and I already have over $13,000 in my dividend stock portfolio. Since I own so many T. Rowe awards, I will wait until the stock price eventually hits $140 before buying more shares. I bought 1 share at $160 and $150. Would love to see another drop in stock prices!
Staying on my dividend stock watch list is Anthem. Who is Anthem? Anthem is a Fortune 500 company and one of the largest health insurance companies in the United States.
This could be a great stock to buy, as we go through the metrics, as they could add a steady stream of passive income with a high growth rate to this passive income stream. Anthem stock crushed 2021, beating the S&P 500 return by a whopping 28% by a wide margin. However, this dividend beast is now down $26 per share year-to-date and down nearly $30 since last month’s article.
How could this nearly $500 stock make it onto my dividend stock watchlist? Let’s take them through the Dividend Diplomats stock picker to find out.
- Price to earnings ratio: Anthem is currently trading at $438.90. Now that analysts are forecasting $32.27, that equates to a very good price-earnings ratio of just 13.60. Now do you see why they are on the list?
- Payout Ratio: Earnings are expected to be $32.27 and the dividend is now $1.28 per share, quarterly, or $5.12 for the year. The payout ratio is incredibly low based on company expectations. The payout ratio is 16%. Bottom line, extreme security in the dividend with this payout ratio. Also – I expect high dividend growth from Anthem, see next metric.
- Dividend growth: Anthem has been increasing its dividend for about 11 years. In addition, the dividend growth rate over 5 years is 12%. The most recent increase was more than 13% a week ago. Therefore, Anthem gracefully passes this dividend-paying stock metric.
I was able to grab and buy 1 share of Anthem a week ago at $430 per share. It’s coming back down and I wouldn’t mind grabbing another share, to build a 4-5 share position soon.
Whoa… Starbucks is back on the dividend stock watch list. Why? They finally went back under $100 a share, that’s why. This icon, the green goddess or “twin-tailed” mermaid, is finally back on my radar.
Starbucks is a culture. They bring happiness, joy and people together. I sincerely believe that they are a “good” soul-based company. Very happy that their stock price has fallen nearly $18 since the start of the year, or 15%.
Therefore, it’s time to see how Starbucks looks at fundamental stock metrics. Here we are.
- Price/earnings ratio: Analysts currently expect $3.99 on a share price of $98.76 for Starbucks. This corresponds to a price/earnings ratio of 24.75. A little higher from a P/E ratio perspective, but slightly lower than the S&P 500, as well as other food competitors right now.
- Payout ratio: Starbucks pays $0.49 per share, per quarter. The total dividend paid is $1.96. This equates to a current dividend payout ratio of 49%.
- Dividend Growth: After 11 years of increasing dividends, Starbucks isn’t shy about rewarding shareholders. The dividend growth rate over 5 years is nearly 17%. The latest dividends are between 8% and 9%. Curious to know if this trend of dividend growth continues. Still at 8%+, I’m still totally ok with that.
I only have 26 stocks in my dividend stock portfolio. I wouldn’t mind continuing to add 4-5 stocks, but I would like the stock price to be slightly lower. Is $90 too much to ask for Starbucks?
Conclusion of the watchlist of dividend stocks
Dividend investing is real and happens.
Of course, before making a purchase, I will definitely make sure to get them through the Diplomat Dividend Stock Screener one more time.
Talk about great everyday dividend growth stocks. My order right now would be Starbucks, Anthem and T. Rowe. And you?
As you have noticed, I have published many articles on this page. The goal is to educate new dividend investors or refine terminology for current dividend investors. As always, stick to your investment strategy and the dividend stocks will be there. What do you think of these actions above? Thank you, good luck and good investment to all.
Editor’s note: The summary bullet points for this article were chosen by the Seeking Alpha editors.