Recession. Inflation. Increase in interest rates. You name it and it happened in 2022. However, dividend investing is STRONGER than ever.
There is significant value in the stock market to add to your dividend stock portfolio. There are plenty of dividend stocks to buy right now, as the stock market is down more than 700 points in the S&P 500 through August 2022.
In addition, there were many dividend increases. Dividend investors can argue that 2022 has been another fantastic year for dividend investors despite inflation, rising interest rates, big retirements and recession fears.
So, like every month, here’s the Dividend Stock Watchlist for August 2022!
Dividend Stock Watch List
Another Watchlist for Dividend Stocks! Since the 2020 pandemic, the stock market has been more volatile than ever. What does that mean? New Undervalued Dividend Stocks Are Coming, Baby! It’s all about buying dividend-paying stocks – the best source of passive income on your way to financial freedom!
The stock market, specifically the S&P 500, is BACK above 4000. I didn’t think we’d be here yet. From the all-time highs of 4800, dropping below 4000 and holding above 4000 for the last week. We were in bearish territory recently but bounced back after falling over 20% to the current 15% drop. What a volatile time we live in! Diagram below:
Interest rates on your savings, including high-yield savings, checking, and money market accounts and funds, are still low. However, now that the Fed has raised the Fed rate by 75 basis points AGAIN, rates are on the rise. Ally, where I keep a significant amount of money, yields 1.40%, but I use two accounts to increase my APY, one SoFi, which offers a 1.80% checking and savings account.as well as Yotta.
I have MORE savings Yotta Savings Account, which has consistently earned over 1.75% APY and earned 2.80% in June 2022. The account is, of course, FDIC insured. Be sure to sign up if you want to have fun and earn more in your savings account!
On the subject: Sign up for Yotta Savings
What else was going on? I’ve been putting more and more into Fundrise lately – finally surpassing over $10,000 invested there. See my review for Q3 2021. Also, I really like SoFi’s financial app and platform. In fact, check out this article as I’ll show you how SoFi helped me get rich. You can earn bonus money for opening an account, as well as free promotions! Be sure to check it out.
Also, given the uncertainty, I continue to make smaller weekly investments in Vanguard exchange-traded funds (ETFs). The specific ETF my wife and I have been dealing with is Vanguard High Dividend Yield (VYM). We invest about $400-$500 a week in Vanguard (waiting for the VYM stock price) to stay in the market during uncertain times. Plus, I also invest $60 a day in the Vanguard S&P 500 ETF (VOO)! I was doing $50 but recently increased it to $60 on July 25th.
On the subject: Why I invest $500 weekly in the Vanguard ETF
On the subject: Added dividend investing strategy – BUY $50 a day VOO
So, on the road to financial freedom, the goal is to acquire assets that generate cash flow or income! As I always say, there is always a diamond in the rough. How to find an undervalued dividend stock? Time to introduce our favorite Dividend Diplomat Stock Screener!
Diplomat Dividend Stock Screening
If you don’t already know, we keep stock screener metrics for THREE SIMPLE items. They are:
- Price-to-earnings ratio – We look for a price-to-earnings ratio that is lower than the stock market as a whole.
- Payout Ratio – We aim for a payout ratio of less than 60%.
- Dividend Growth – We like to see a company’s history of dividend growth.
Watch the video below for more details and explanations. If you don’t like watching videos – watch ours Diplomat Dividend Stock Screening page!
Time to find out…how did the dividend stocks on my stock screener watch list fare?
Dividend Stock Watch List
Here is a list of dividend stocks that are on my radar for July 2022. I usually like to keep it around 2-3 dividend stocks to focus on. Finding dividend stocks isn’t easy, but there are other factors as well, such as the composition of my portfolio by industry (like whether I’m overweight/underweight in the industry) and exposure to and concentration in one stock.
There, the dividend stocks on my list serve these other aspects when building a dividend stock portfolio. This is a fairly defensive, consumer goods intensive, dividend stock watch list!
Ah… Diageo (DEO). It’s been FOREVER since I laid eyes on DEO. They are present in 180 countries, over 200 brands of alcoholic beverages with over 27,000 employees based in England.
Here’s a pictorial summary of some of their brands:
Diageo, because they sell and distribute alcoholic beverages, tend to fare better in times of recession and inflation. Most people continue to drink and consume, and Diageo passes the cost increase on to the consumer. Also, they are recent published their latest earnings – net sales increased by a staggering 21.4%!
However, first we MUST run Diageo through the Dividend Diplomats Stock Screener which focuses on these 3 metrics.
- Price-to-earnings ratio: Earnings are approximately $8.15 per share. Therefore, the stock is trading at approximately 23 times current earnings. Analysts estimate next year’s earnings per share to be around $8.75. However, the stock is still trading a bit on the high side.
- Payout ratio: Diageo’s dividend is paid twice a year – once in April and a second dividend in October. This is an American Depositary Receipt (ADR) as they are based in the UK. So they declare their dividend in pence, but the conversion is roughly $4.077 in forward total dividends. They follow a 50% dividend payout ratio policy (ie 1.8 to 2.2 earnings). So they’re always in that sweet spot, in that perfect payout ratio range.
- Dividend Growth: Being an international company, it is hard to say about Diageo’s dividend growth. So I thought it would be a good idea to demonstrate the graph below. Needless to say, this trend has been increasing over the past 10 years. The drinks keep flowing and the dividends keep growing!
The dividend yield is 2.15%, well above the S&P 500 and better than most high-quality stocks on average. I’ve owned them for years and it’s definitely a recession and inflation-proof stock – always in use and can pass costs on to the consumer.
On July 28/29, Intel (INTC) posted brutal earnings. Revenue fell more than 20% for the quarter, to just over $15 billion. In addition, gross margins have been depleted, falling to the low 30% range, having previously been in the 50% range.
Intel’s net loss was $0.11 per share. The forecast doesn’t look great, but the CEO said they should be bottoming out and that profitability will continue to rise from here. Is this a buying opportunity? Check out what happened to stocks on July 29th – talk about a sharp drop!
Let’s check out Intel’s dividend stock performance to see if this dividend stock is a buy.
1.) P/E ratio: Intel expects to earn approximately $2.57 in earnings per share in 2022. That’s a P/E ratio of 14 times, which is hopefully a conservative figure. In fact, analysts expect it to reach $3.40 in 2023. So, could this be a sign that the company is aging, will continue to grow, and is a steep discount?
2.) Dividend payout ratio: Intel pays $0.365 per share per quarter or $1.46 per share per year. So based on what Intel thinks they’ll be doing in 2022, the current dividend payout ratio is 57%, still safe and in the ideal payout ratio range.
3.) Rate of Dividend Growth: Intel has increased its dividend for over 7 years in a row. The average growth rate of dividends is more than 6%. I do not expect that in 2023, but I believe that the growth rate could be more than 3%.
Finally, we look at the dividend yield. As an investor, you want to know how much owning these dividend stocks is making you right now! INTC yields over 4% NOW!. I’m not sure I’ve ever seen Intel deliver this level before. Almost 3 times the S&P 500.
Again, they got hit hard after earnings – time to buy or time to stay away?
Other dividend stocks to buy
I’m also looking at Pepsi ( PEP ) and Aflac ( AFL ) as quick approaches. Two dividend stocks with decent dividend yields above 2.6/2.7%. Also, they are both dividend aristocrats and Pepsi is the dividend king.
Both stocks have survived recessions, financial crises, whatever. They continue to grow their earnings and increase their dividends with above-average dividend growth rates.
I own both stocks and keep an eye on both of these dividend stocks.
Conclusion of the dividend stock watch list
Investing in dividends is real and happening! Here’s our latest video covering three undervalued dividend growth stocks owned by banks:
I definitely check them out before I shop Diplomat Dividend Stock Screening one more time.
Two different industries and two completely different price ranges. One stock is rising with Diageo and the other with Intel. Looking forward to seeing what I get in August! However, keep your eyes peeled for dividend aristocrats like Pepsi or Aflac!
As you have noticed, I have put 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 dividend stocks will follow. What do you think of these stocks above? Thanks, good luck and happy investing everyone!