Dividend Stock Watch List: Lanny’s April 2024 Edition (2024)

The stock market continues to edge up, setting new all-time highs for what feels like - every other day, at this point.

Therefore, it's difficult to find undervalued dividend stocks right now, due to the market surging over 24% in 2023 and over 10% so far in 2024. However, you know the Dividend Diplomats never back down from finding undervalued dividend growth stocks!

Let's dive into THREE dividend stocks on my watch list right now!

Dividend stock watch list

Dividend investing happens whether the stock market is up or down, whether the Fed raises interest rates or lowers. Inflation or deflation. Banks are failing or being bailed out. Recession, no recession. 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, is up over 10% this year and is now gearing up for 5,300, after surpassing the illustrious 5,000 mark. Can you believe the S&P 500 is still on fire? I guess we thank the AI Boom?

The Fed maintained interest rates at the March FOMC meeting, with 3 planned rate cuts in 2024 and 3 more in 2025. Mr. Stock Market reacted favorably to this, but who knows where interest rates will be.

Here is the S&P 500 chart below - Up, down, up down, and now up:

Interest rates have held steady for 6 months now, and the high-yield savings rates "could" be at their peak.

Given the possibility of inflation cooling, bank's current stability, the Fed may top out at the current 5.25-5.50% in their fight against inflation and will hold for a few more months. However, all of the interest rate increases have increased those savings rate. Ally currently has a savings rate of 4.35%. However, there is a Fintech that I HEAVILY use.

I keep MORE savings in my SoFi savings account - as it earns me - now - 4.60% on my savings account.

In addition, I've been buying stocks on SoFi's investing application.

In addition, given the uncertainty, I continue to make 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 approximately $900 per week into Vanguard (pending the VYM stock price), to stay invested in the market, during the uncertain times. In addition, I am also investing $60 per day into Vanguard S&P 500 ETF (VOO) and $40 into Vanguard's Dividend Appreciation ETF (VIG)!

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 between of less than 60%.
3. 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 April 2024. I typically like to keep it at 2-3 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.

Johnson & Johnson (JNJ)

It was time to bring this iconic dividend king back to the table, especially that the stock price is still below $160 and now close to $155. Now.. do we consider them a full-on pharmaceutical stock, competing with the likes of Pfizer (PFE), Eli Lilly (LLY), Bristol (BMY), and AbbVie (ABBV)? What a ride!

Now, they are a TOP 5 Foundation Dividend Stock for YOUR portfolio. Why? Simple. They consistently grow earnings and raise their dividend, every year, and at or around the same rate. Plus, they usually support a nice dividend yield to boot.

Therefore, I want to show the stats and why I do like the stock, even at current prices.

Therefore, let's run JNJ officially through the Dividend Diplomats Stock Screener, which is focused on these 3 metrics.

1. Price to Earnings Ratio: Earnings is approximately $9.81 in earnings per share for 2024. Therefore, JNJ is trading at ~16x forward earnings right now, still low, especially when compared to the 28x the S&P 500 sits at.
2. Payout Ratio: JNJ's current dividend payout ratio, using that metric is actually at 49%. Perfect, a perfect payout ratio. Room for reinvestment and room for dividend growth.
3. Dividend Growth: See the 10-year chart below. This is JNJ's little engine just humming along, growing between 5.5%-7.50% every year!

The dividend yield is currently at 3.062.98%. I would like JNJ stock at or below $155 per share.

Chevron (CVX)

Another Dividend aristocrat here on the list, as JNJ was one, mentioned above. Chevron is a beast in the oil and gas industry, typically and historically, having the better balance sheet than Exxon Mobil (XOM). Chevron was actually a dog of the Dow from 2023 and they haven't popped as much to start 2024.

Up 3.47% this year, growing dividends, growing earnings, increasing the dividend during the pandemic, too. High quality? Let's find out.

Time to look at the dividend metrics.

1.) P/E Ratio: CVX analysts are expecting over $12.62 in earnings per share. The P/E ratio is then approximately 12x earnings.

2.) Dividend Payout Ratio: Chevron pays $1.63 per share, per quarter. This represents a dividend payout ratio of 52%. Solid, safe, and room to keep growing.

3.) Dividend Growth Rate: The last dividend increase was around 8%. I anticipate 5-10d% for the next dividend increase.

Lastly, Chevron's dividend yield. They yield 4.22%, which is well above the S&P 500. Most oil companies yield higher.

Starbucks (SBUX)

One of the iconic logos, brands, and yes - insanely long lines. The Starbucks Coffee company and experience is real.

I know there is a recent Starbucks Union and there are battles going on with China right now. Therefore, things appear to be momentarily rocky for this iconic company. However, where there is red, I see opportunity.

Alright, time for the dividend metrics, right?

1.) P/E Ratio: Starbucks analysts see earnings around $4.06. That is a P/E ratio of 22x, which is actually low for Starbucks, believe it or not.

2.) Dividend Payout Ratio: SBUX pays a $0.57 per share, per quarter dividend, or $2.28 annually. This is another perfect payout ratio, at 56%. We'll take it and I would anticipate lower dividend growth rate going forward.

3.) Dividend Growth Rate: Starbucks' 5-year average dividend growth rate stands at 9.79%. However, I would anticipate lower going into 2025 through possibly 2026. Time will tell. Chart below.

Lastly, we'll take a look at the dividend yield. The yield for SBUX is now at 2.51%, above their 5-year average dividend yield of 2.18%.

I like them under $91 per share.

Other Dividend Stocks to buy

No other stocks are catching my eye really at this point. The market is just TOO HOT!

I own each stock and am constantly evaluating the stock market, to see if there are undervalued dividend stocks to buy in this wild market.

Dividend Stock Watch List Conclusion

Of course, prior to making any purchase, I definitely will make sure to run them through the Dividend Diplomat Stock Screener once more.

As always, I highly encourage you do your own research as this is not financial advice (quick disclaimer!).

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!

-Lanny

Original Post

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

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