Welcome back to this weekly series on the market and finding undervalued dividend growth stocks to research.
It is amazing what a few weeks will do. The markets have made significant upward movements over the past two weeks. The decision to finally raise interest rates was greeted by general positivity from the market. As I mentioned previously, the market likes certainty. We knew a rate hike was coming since the Fed had discussed it for some time, but now that it is official the market can effectively price that rate in. The big question going forward is how much the Fed will need to raise rates to slow down inflation without causing a potential slowdown/ recession. It is a tough balancing act but in my opinion the rate increases are needed but I wish they had happened sooner to have avoided some of the large inflation numbers. Time will tell if they get it right.
Regarding the war in Ukraine, it appears that there has been little progress on advancement from Russia, with some news channels mentioning that Russia is changing its mission from one of replacing the government to one of taking control of certain parts of Ukraine only. It feels like now the war is one of attrition as opposed to a full on invasion. The sanctions that the world has placed on Russia is severely affecting their economy so it will be hard for the Russian military to continue getting the supplies and support it needs.
Whether the market and the economy stay strong or dip, as a dividend growth investor, we win either way. Up markets mean we are making money, down markets mean we get opportunities to get more yield on our new investments and our dividend DRIP will give us more shares.
The selloff we saw earlier in the year seems to have stalled out and we have made up some of those losses the past two weeks. This past week the Dow was up .31%, S&P 500 was up 1.79%, and the NASDAQ was up 1.98%. This upward trend has helped, with the markets now only down 4.06%, 4.68%, and 9.43% for the year respectively (two weeks ago the Dow was down 9.34%, S&P down 11.79%, and NASDAQ down 17.9% for the year).
With this rally we have seen, this week’s results of the screening shows only 18 companies on my tracker are now undervalued based on my 5 criteria (down from 27 last time).
With that said, here are the quality dividend growth stocks that are appearing undervalued based on all 5 of my valuation methods:
- Discount to Analyst Price Target
- 5% or more off the 52-week high
- Discounted Cash Flow (DCF)
- P/E Mean Reversion
- Dividend Yield Theory (DYT)
There are no new companies to make the list this week, but the following have been removed since the last analysis:
INTC, MCD, SYY, AVGO, BLK, IP, MSM, PRU, TSCO
This list should be used to begin your research to determine if the stock meets all of your investment goals and criteria. Valuation should only be one of many aspects you look at when deciding to make an investment.
Best of luck, happy investing, and check back next week for more undervalued stock ideas!