Given that the stock market has had roaring days for the most part of June, outside of one very deep red day, it is time to revisit what dividend stocks I am watching. We will call this Lanny’s Mid-June Dividend Stock Quick Picks. These companies are packed full of dividend history, growth and stand to do well during uncertain times!
We are in for a ride! I released my June Dividend stock Watch List a few weeks ago and damn, I had to change this up. The stock market continued to rise, outside of the dark red day last Thursday and it was time to revise and release dividend stock quick picks mid-month. That is how much things can change. It’s no longer a matter of years or months, but weeks and days.
Dividend stocks evaluation
I will be taking into consideration stocks that have continued to be operating/firing on all cylinders, some that even stand to do well in a Post-Pandemic world.
Further, as a dividend investor, I am looking for a company that has grown dividends and stands to grow dividends this year, if they haven’t done so already.
Therefore, in a nutshell, I am looking for pandemic-proof stocks that can continue to pay and increase their dividend. In order to be on my dividend stock quick picks list, one must pass through the Dividend Diplomat Stock Screener, of course!
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.
See the video below, for further details and explanation.
Time to find the answer to… how did the dividend stocks on my quick pick list grade on the stock screener?
Dividend stock quick picks list
General Dynamics (NYSE:GD) is a defense corporation that has been around for over 120 years. Further, they are a Dividend Aristocrat, cranking out dividend increases for over 25 years. GD raised their dividend by 7.8% back in March. Therefore, they are good to go on their increase for the year. Here are the reasons why they are on my dividend quick pick list, since we have run them through the Dividend Diplomat Stock Screener:
- Price to Earnings Ratio: Based on an earnings projection of $12.26 and a share price of $153.09, the price to earnings is 12.49. This is below the S&P 500 on average, and compares favorably in their industry.
- Payout Ratio: GD pays a dividend per year of $4.40. If analysts are projecting $12.26, then the payout ratio is only 36%. This means there is plenty of room for GD to continue to grow that dividend baby!
- Dividend Growth: Even though they are a Dividend Aristocrat, their 3-year and 5-year dividend growth rates are 10%. However, I predict these to be lower going forward, evidenced by this past increase and that we are in a Pandemic.
I have invested approximately $3.5k in total in GD with 22 shares. I can see going to 25 shares and reaching closer to a $4k total investment. At these prices, signs of undervaluation are there, no doubt.
Time to bring back the Blue Pill just when we needed it, right? Kidding… I think. Pfizer (NYSE:PFE) is a massive pharmaceutical and I have owned them for over 10 years. What a 10 years it has been, straight dividend increases my way. Pharmaceuticals stand to persevere during the pandemic and shutdowns. Here is why Pfizer is one of my dividend stock quick picks:
- Price to Earnings Ratio: The earnings projection is $3.02 for 2021 and the share price is $33.36. Therefore, the P/E ratio is only 11.04. Therefore, this P/E ratio is below the stock market as a whole, as well.
- Payout Ratio: Pfizer pays an annual dividend of $1.52. At a projected earnings of $3.02, the payout ratio is 50%, smack dead in the middle. Pfizer stands to increase their dividend going forward. Cheers to hoping they increase their dividend for the 10th year in a row, during the 4th quarter.
- Dividend Growth: Pfizer is not a dividend aristocrat, but they have 9 years of dividend increases. Their dividend growth rates are 6% for 3 and 5 years. I predict another 2 cent per share, per quarter increase this year. This would represent 5.3% and would be reasonable during 2020.
Given I own almost 140 shares, I wouldn’t mind seeing this position grow to 150 shares. Time to make some moves on this dividend quick pick.
Cisco (NASDAQ:CSCO) is a massive technology company, focused on networks, software configuration and telecommunications. Further, they just so happen to be on my Stocks to Buy in a Post-Pandemic World. Time to also find why they are on my dividend stock quick picks list! See below their results through the stock screener:
- Price to Earnings Ratio: The earnings projection is $3.15 for 2021 from 27 analysts and the share price is $45.35. Therefore, the P/E ratio is only 14.40. Therefore, this P/E ratio is below the stock market as a whole, as well.
- Payout Ratio: Cisco pays an annual dividend of $1.44. At a projected earnings of $3.15, the payout ratio is only 46%, perfect placement. This shows Cisco has reinvested back into the business and also rewards shareholders, no doubt.
- Dividend Growth: Dividend growth has been going for 8 years now at Cisco. Their most recent increase was 3%, and 6% the year before that. Their double-digit growth rates may be an item of Cisco’s past, but having an increasing dividend during this time period is a breath of fresh air, from technology, nonetheless.
I own around 110 or so shares of Cisco. I wouldn’t mind bringing that up to 120, for a near $4k investment as well.
Dividend stock quick picks summary
Right, there are 3 dividend stocks that show definite signs of undervaluation, in an overbought market. The stock market has risen over 45% since the March lows, and I still cannot put the pieces to the puzzle to find the reason why (outside of the sheer mass of stimulus).
The three industries the stocks cover above are defense, healthcare and technology. I don’t see any of the three going away and, if anything, should be even more so prevalent now than before. Think – defense from countries/protecting assets, etc.., to vaccines for the current coronavirus, and then technology to make sure we stay connected in a secure world.
If you want to keep it very simple, continue investing and add dividend income to your stock portfolio, here is one suggestion. You can always consider our Top 5 Foundation Dividend Stocks for YOUR Portfolio! Here is the video below:
As always, let me know if you have questions, comments or other thoughts below. Definitely perform your own research, as what may work for my portfolio may not work for yours (fun disclaimer!). Further I’d also be curious what I am missing or what else you are watching in the stock market.
Thank you again for stopping by everyone! Stay hungry and motivated out there. As always, good luck and happy investing!
Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.