Dividend Stock Watch List: Lanny’s April 2022 Edition

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Dividend investing is back. Talk about undervaluation finally coming out of the woodwork. So pumped up to add to my dividend stock portfolio, as the stock market is down over 200 in the S&P 500 to start off 2022.

In addition, dividend increases have been plenty. I have a strong feeling and indication that 2022 will be another fantastic year for dividend investors.

Therefore, as I do every month, here is the Dividend Stock Watch List for April 2022.

Dividend stock watch list

Another dividend stock watch list. The stock market has been more volatile than ever since the pandemic of 2020. What does that mean? New undervalued dividend stocks are coming to light. It’s all about buying dividend income-producing stocks – the best source of passive income source on your journey to financial freedom.

The stock market, specifically the S&P 500, shad touched 4,200 briefly, but has since sprouted back up to over 4,500, almost sitting steady at 4,600. Still, not quite at the highs of 4,800 (for now). Chart is below:

Dividend Stock

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 and 0.50% in mid-December of 2020. Luckily, I can still say that I am earning 0.50% on my savings account as of March 2022. Will that stay, though? I am taking matters in my own hands… How you ask?

I keep more savings in my Yotta Savings Account, that has earned consistently over 1.50% APY and earned over 2% in February 2022 and well over 1% in March 2022. The account is FDIC-insured, of course.

Dividend Stock

What else has been going on? I have been investing more and more into Fundrise, as of late – finally crossing over $10,000+ invested there. In addition, I have been loving the SoFi financial app and platform.

As a dividend stock investor, it’s been harder and harder to find an undervalued dividend stock.

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 into Vanguard (pending the VYM stock price), to stay invested in the market, during 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:

  1. Price to Earnings Ratio – We look for a price to earnings ratio < than the overall Stock Market.
  2. Payout Ratio – We aim for a payout ratio of less than 60%.
  3. Dividend Growth – We like to see history of dividend growth in a company.

Dividend stock watch list

Here is the list of dividend stocks that are on my radar going into the month of April 2022. 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. This is a fairly defensive, consumer-goods intensive, dividend stock watch list.

Cummins

Dividend stocks still show signs of undervaluation out there. I am bringing back Cummins (CMI) to my dividend stock watch list, as they’ve been in/out of my list over the last few months.

See their stock price chart (below) as they are down almost $17+ year-to-date.

Dividend Stock

First, however, we must run them through the Dividend Diplomats Stock Screener, which is focused on these 3 metrics.

  1. Price to Earnings Ratio: Cummins has analysts expecting $17.51 in forward earnings from them on a go-forward basis. With the share price at $202.29, this equates to a price to earnings below 12x earnings. Talk about undervaluation here. Dividend stock
  2. Payout Ratio: Is Cummins dividend safe? You betcha. The dividend payout ratio is only 33.12%, based on a total annual dividend of $5.80. I love it. This also leaves an immense room for dividend growth for CMI stock.
  3. Dividend Growth: CMI is on a rampage of 16+ years of dividend growth. In addition, the 5-year dividend growth rate, on average, is 7.11%. Perfect, keeping up with inflation is what I like to see.

The yield is at 2.87%. If the yield crosses the 3% threshold, I may buy a few more shares. I have invested almost $5,000 into Cummins, but I am sure you could see why this is a great stock to buy now.

Scotts Miracle-Gro

We have been talking about Scotts Miracle-Gro (SMG) all year long, so far.

Why? They are down over $35+ in share price this year or over 21% year-to-date. It’s usually hard to find this stock down, but now the dividend yield is over 2% – would love to see if the dividend stock metrics make sense.

Dividend Stock

Let’s run them through the Dividend Diplomats Stock Screener to find out why this could be a dividend stock to buy…now.

  1. Price to Earnings Ratio: Scotts is down, no doubt. Analysts are anticipating $8.07 in earnings per share. Taking that with the stock price of under $129, the P/E ratio is below 16x actually. Decent value here. Dividend Stock
  2. Payout Ratio: Now that we know forward earnings, time to look at the dividend payout ratio. SMG has a similar payout ratio as CMI. SMG’s dividend payout ratio is only 32.71%, based on the quarterly dividend of $0.66 or $2.64 per year. So much room to pay, raise and also send out special dividends to their shareholders.
  3. Dividend Growth: Scotts’ dividend growth is over 8 straight years. In addition, every 5 years or so, they send out a massive special dividend. Therefore, due to the inclusion of the special dividends, SMG’s dividend growth rate is 35%, on average.

Now the dividend is just a tad over 2%, and I have a very significant position here. However, if they cross below $125 and especially below $120, you know I am buying this stock.

MDU Resources

Based in North Dakota, MDU supplies products & services in the energy distribution arena, including utilities. They have their hands in many of the construction products in the energy industry.

Why are they on my stock watch list? Well, almost a year and a half ago, I acquired shares of MDU. I haven’t touched it since, as the stock was getting into the $30s. However, the stock price has now fallen 14% this year, so naturally, the stock has caught my eye.

Dividend Stock

Therefore, time to see how MDU Resources looks through the fundamental stock metrics. Here we go.

  1. Price to Earnings Ratio: Analysts watching MDU Resources (MDU) anticipated $2.05 in earnings per share. This equates to a P/E ratio of 12.92, another sign of undervaluation on this dividend stock watch list.
  2. Payout Ratio: In addition, MDU Resources has a perfect dividend payout ratio of 42%. Definitely a safe dividend, as well as room to keep growing that dividend.
  3. Dividend Growth: It looks like MDU has increased their dividend at least 8 years. The average dividend growth rate is low, at only 2.50%; but this is just a steady stock and you know what you’re going to get.

I wouldn’t mind just having a nice, rounded position of MDU Resources so that the dividend at least reinvests to another share.

Dividend stock watch list conclusion

Dividend investing is real and is happening.

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, everyday dividend growth stocks. My order, right now, would be the order you see above, Cummins, Scotts and then MDU Resources.

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.

Original Post

Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.

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