Welcome back to this series on the market and finding undervalued dividend growth stocks to research.
Market Commentary:
“What’s a dividend growth investor to do?“
The market appears to be in free fall, interest rates are rising, inflation is not subsiding, reports of recession are appearing, fear is gripping investors, so what is a dividend growth investor to do?
With the market continuing its decline, many investors are trying to figure out what is the best next move to make. Do we continue to invest each week, do we hold on to our cash waiting for more certainty, do we buy U.S. Treasuries and other government bonds to hold us through?
Lately, it appears that investors are selling equities in mass, walking away. The volume of the declines and the breadth of the red, this selloff is not sector or company specific. Investors as a whole are throwing out the baby with the bathwater, and nowhere appears safe. As shown below in some of my favorite gauges of investor fear, the Fear & Greed Index is now in Extreme Fear and the AAII Investor Sentiment Survey is showing extreme bearishness, twice as high as the historical average.
The U.S. Federal Reserve’s decision to raise interest rates 0.75% was anticipated, but the language in the statement and speech seems to have reinforced fear in investors that the issues that we are having, and the length of these issues, will persist longer than anticipated. The Fed stated that they will continue to fight the high inflation, their only focus now, even if that causes “pain” in the stock market, housing, and the economy as a whole.
They will continue to raise rates and tighten their monetary policy until inflation gets back to their target of 2%. This they anticipate could take until 2025. This additional timeframe and the results expected from this fight have caused the markets to sell off. After all, if the rates you can get on guaranteed government bonds is 4% or more, that is going to increase the risk premium investors are going to demand on risk assets in order to take the risk. This higher required rate of return will lower the demand on stocks, causing pricing to go down, and this is exactly what we are seeing now. Add on the possibility of a prolonged recession, and there is no easy path for stocks to go anywhere but down.
The market’s emotion is constantly swinging from bull to bear, positive to negative. The chart below shows the cycle of market emotions and it appears that we are solidly in the Fear, Desperation, or Panic stage of the cycle. When all stocks, no matter their quality, are knocked down in price, you know that the emotions are bad out there.
So what is a dividend growth investor to do? To quote Warren Buffett, “be fearful when others are greedy, and greedy when others are fearful”. For long term investors, this is the time where you want to buy or start considering buying. When fear is this prevalent is when the most opportunity exists. Yes the prices could continue to go down, but your risk/reward and potential upside is much better now than when prices were at all time highs.
Lower prices create higher dividend yields, which is a bonus for dividend growth investors.
Great wealth is made in bear markets, we just don’t realize it yet.
Have a plan in place, do your research to know which companies are the highest quality, and be ready to buy once a company stock reaches an acceptable valuation for you. Prices and valuations have come down, as shown below from the chart from Yardeni Research. Yields are higher, and we can get more income for our money.
If your timeline is long, which is the majority of dividend investors, we should be excited to get to buy at such discounts. The money you invest now will be some of the strongest workers you have in your army of dollar bills over time. I continue to buy on a weekly basis, allowing my money to continue to buy great companies and funds and reduced prices, effectively locking in better yields for the rest of my life. Since I am not planning on selling my shares, down markets like this should only be considered a positive and not a situation to fear.
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Market Results:
All of the S&P 500 sectors were down this week, with all 11 sectors in the red. Real Estate (-5.97%) was the biggest loser of the week, followed by Consumer Discretionary (-5.87%). The best performing sectors, if you want to call it that, were Consumer Staples (-0.82%) and Utilities (-2.88%). There was truly no safe sector to hide in this week.
Broadening the view, this week had negative results across the indices as well, with the Dow down 4.00%, the S&P 500 was down 4.65%, and the Nasdaq was down 5.07%. These results were similar percentages down compared to last week, causing a lot of pain for market participants. The broad indices are now down 18.57%, 22.51%, and 30.53% year to date, respectively, which is a significant bear market and quite the difference from the past few years, and really the past decade plus.
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Dividend News This Coming Week:
Earnings season is wrapping up but there are still some notable dividend growth companies reporting, including:
Tuesday:
Jabil Inc. (JBL), Cal-Maine Foods Inc (CALM)
Wednesday:
Cintas (CTAS), Paychex inc (PAYX), Thor Industries (THOR), Vail Resorts (MTN)
Thursday:
Nike Inc (NKE)
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Upcoming Ex-Dividend Dates:
There are a lot of great companies going Ex-Dividend this week. Note: you must own the stock before the ex-dividend date to receive the payment.
| Upcoming Ex-Dividend Dates | |||||
| Company | Amount | Yield | Ex-Dividend Date | Record Date | Payable Date |
| BRT BRT Apartments | $0.25 | 4.50% | 9/26/2022 | 9/27/2022 | 10/7/2022 |
| GE General Electric | $0.08 | 0.43% | 9/26/2022 | 9/27/2022 | 10/25/2022 |
| HTLD Heartland Express | $0.02 | 0.57% | 9/26/2022 | 9/27/2022 | 10/7/2022 |
| LOGI Logitech International | $0.98 | 2.00% | 9/26/2022 | 9/28/2022 | 9/27/2022 |
| CM Canadian Imperial Bank of Commerce | $0.65 | 5.13% | 9/27/2022 | 9/28/2022 | 10/28/2022 |
| PM Philip Morris International | $1.27 | 5.40% | 9/27/2022 | 9/28/2022 | 10/12/2022 |
| PSEC Prospect Capital | $0.06 | 9.93% | 9/27/2022 | 9/28/2022 | 10/20/2022 |
| AQN Algonquin Power & Utilities | $0.18 | 4.70% | 9/28/2022 | 9/29/2022 | 10/14/2022 |
| NOG Northern Oil and Gas | $0.25 | 3.42% | 9/28/2022 | 9/29/2022 | 10/31/2022 |
| AKR Acadia Realty Trust | $0.18 | 4.16% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| AFCG AFC Gamma | $0.56 | 12.90% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| AGNC AGNC Investment | $0.12 | 12.80% | 9/29/2022 | 9/30/2022 | 10/12/2022 |
| ADC Agree Realty | $0.23 | 3.82% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| ARE Alexandria Real Estate Equities | $1.18 | 3.14% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| ALCO Alico | $0.50 | 6.20% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| COLD Americold Realty Trust | $0.22 | 3.00% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| NLY Annaly Capital Management | $0.88 | 52.85% | 9/29/2022 | 9/30/2022 | 10/31/2022 |
| ACRE Ares Commercial Real Estate | $0.33 | 9.60% | 9/29/2022 | 9/30/2022 | 10/17/2022 |
| AVB AvalonBay Communities | $1.59 | 3.16% | 9/29/2022 | 9/30/2022 | 10/17/2022 |
| BGS B&G Foods | $0.48 | 7.41% | 9/29/2022 | 9/30/2022 | 10/31/2022 |
| BXMT Blackstone Mortgage Trust | $0.62 | 8.63% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| BXP Boston Properties | $0.98 | 4.74% | 9/29/2022 | 9/30/2022 | 10/31/2022 |
| BHR Braemar Hotels & Resorts | $0.01 | 0.78% | 9/29/2022 | 9/30/2022 | 10/17/2022 |
| BRSP BrightSpire Capital | $0.20 | 9.96% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| BTI British American Tobacco | $0.74 | 6.20% | 9/29/2022 | 9/30/2022 | 11/15/2022 |
| BRMK Broadmark Realty Capital | $0.07 | 13.15% | 9/29/2022 | 9/30/2022 | 10/17/2022 |
| BNL Broadstone Net Lease | $0.27 | 4.95% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| CPT Camden Property Trust | $0.94 | 2.91% | 9/29/2022 | 9/30/2022 | 10/17/2022 |
| CP Canadian Pacific Railway | $0.15 | 0.76% | 9/29/2022 | 9/30/2022 | 10/31/2022 |
| CTRE CareTrust REIT | $0.28 | 5.50% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| CHMI Cherry Hill Mortgage Investment | $0.27 | 17.06% | 9/29/2022 | 9/30/2022 | 10/25/2022 |
| REFI Chicago Atlantic Real Estate Finance | $0.47 | 12.80% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| CIM Chimera Investment | $0.23 | 12.17% | 9/29/2022 | 9/30/2022 | 10/31/2022 |
| DHR Danaher | $0.25 | 0.35% | 9/29/2022 | 9/30/2022 | 10/28/2022 |
| DE Deere & Company | $1.13 | 1.23% | 9/29/2022 | 9/30/2022 | 11/8/2022 |
| DRH DiamondRock Hospitality | $0.03 | 1.30% | 9/29/2022 | 9/30/2022 | 10/12/2022 |
| DDS Dillard’s | $0.20 | 0.25% | 9/29/2022 | 9/30/2022 | 10/31/2022 |
| DEI Douglas Emmett | $0.28 | 5.60% | 9/29/2022 | 9/30/2022 | 10/18/2022 |
| EGP EastGroup Properties | $1.25 | 3.00% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| EIX Edison International | $0.70 | 3.99% | 9/29/2022 | 9/30/2022 | 10/31/2022 |
| EPR EPR Properties | $0.28 | 7.95% | 9/29/2022 | 9/30/2022 | 10/17/2022 |
| ELS Equity LifeStyle Properties | $0.41 | 2.30% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| EPRT Essential Properties Realty Trust | $0.27 | 4.87% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| ESS Essex Property Trust | $2.20 | 3.37% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| FPI Farmland Partners | $0.06 | 1.67% | 9/29/2022 | 10/1/2022 | 10/17/2022 |
| FITB Fifth Third Bancorp | $0.33 | 3.61% | 9/29/2022 | 9/30/2022 | 10/17/2022 |
| FBNC First Bancorp | $0.22 | 2.30% | 9/29/2022 | 9/30/2022 | 10/25/2022 |
| FR First Industrial Realty Trust | $0.30 | 2.22% | 9/29/2022 | 9/30/2022 | 10/17/2022 |
| INBK First Internet Bancorp | $0.06 | 0.67% | 9/29/2022 | 9/30/2022 | 10/17/2022 |
| FCPT Four Corners Property Trust | $0.33 | 4.96% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| FRG Franchise Group | $0.63 | 7.14% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| FBRT Franklin BSP Realty Trust | $0.36 | 11.32% | 9/29/2022 | 9/30/2022 | 10/11/2022 |
| BEN Franklin Resources | $0.29 | 4.44% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| GVA Granite Construction | $0.13 | 1.87% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| GNTY Guaranty Bancshares | $0.22 | 2.54% | 9/29/2022 | 10/1/2022 | 10/12/2022 |
| HT Hersha Hospitality Trust | $0.05 | 2.01% | 9/29/2022 | 9/30/2022 | 10/17/2022 |
| HST Host Hotels & Resorts | $0.12 | 2.77% | 9/29/2022 | 9/30/2022 | 10/17/2022 |
| HUM Humana | $0.79 | 0.64% | 9/29/2022 | 9/30/2022 | 10/28/2022 |
| ITW Illinois Tool Works | $1.31 | 2.50% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| IRT Independence Realty Trust | $0.14 | 2.85% | 9/29/2022 | 9/30/2022 | 10/21/2022 |
| IIPR Innovative Industrial Properties | $1.80 | 7.99% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| KDP Keurig Dr Pepper | $0.20 | 2.12% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| LADR Ladder Capital | $0.23 | 8.39% | 9/29/2022 | 9/30/2022 | 10/17/2022 |
| MDLZ Mondelez International | $0.39 | 2.42% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| MPWR Monolithic Power Systems | $0.75 | 0.72% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| NFG National Fuel Gas | $0.48 | 2.76% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| NHI National Health Investors | $0.90 | 5.53% | 9/29/2022 | 9/30/2022 | 11/4/2022 |
| NRC National Research | $0.24 | 2.73% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| NUE Nucor | $0.50 | 1.71% | 9/29/2022 | 9/30/2022 | 11/10/2022 |
| NTR Nutrien | $0.48 | 2.30% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| ORC Orchid Island Capital | $0.16 | 15.40% | 9/29/2022 | 9/30/2022 | 10/27/2022 |
| ONL Orion Office REIT | $0.10 | 3.70% | 9/29/2022 | 9/30/2022 | 10/17/2022 |
| ORCC Owl Rock Capital | $0.31 | 9.66% | 9/29/2022 | 9/30/2022 | 11/15/2022 |
| PK Park Hotels & Resorts | $0.01 | 0.30% | 9/29/2022 | 9/30/2022 | 10/17/2022 |
| PEB Pebblebrook Hotel Trust | $0.01 | 0.23% | 9/29/2022 | 9/30/2022 | 10/17/2022 |
| PBT Permian Basin Royalty Trust | $0.22 | 15.69% | 9/29/2022 | 9/30/2022 | 10/17/2022 |
| PVL Permianville Royalty Trust | $0.05 | 17.34% | 9/29/2022 | 9/30/2022 | 10/17/2022 |
| PRT PermRock Royalty Trust | $0.09 | 13.13% | 9/29/2022 | 9/30/2022 | 10/17/2022 |
| PLYM Plymouth Industrial REIT | $0.22 | 4.27% | 9/29/2022 | 9/30/2022 | 10/31/2022 |
| RL Ralph Lauren | $0.75 | 3.22% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| RC Ready Capital | $0.42 | 13.10% | 9/29/2022 | 9/30/2022 | 10/31/2022 |
| REVG REV Group | $0.05 | 1.70% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| RLJ RLJ Lodging Trust | $0.05 | 1.61% | 9/29/2022 | 9/30/2022 | 10/17/2022 |
| SAFE Safehold | $0.18 | 1.95% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| SLG SL Green Realty | $0.31 | 8.10% | 9/29/2022 | 9/30/2022 | 10/17/2022 |
| SRC Spirit Realty Capital | $0.66 | 6.04% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| STAG STAG Industrial | $0.12 | 4.90% | 9/29/2022 | 9/30/2022 | 10/17/2022 |
| STWD Starwood Property Trust | $0.48 | 8.36% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| STLD Steel Dynamics | $0.34 | 1.69% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| STOR STORE Capital | $0.41 | 5.13% | 9/29/2022 | 9/30/2022 | 10/17/2022 |
| SYK Stryker | $0.70 | 1.30% | 9/29/2022 | 9/30/2022 | 10/31/2022 |
| SUI Sun Communities | $0.88 | 2.30% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| TRP TC Energy | $0.70 | 5.16% | 9/29/2022 | 9/30/2022 | 10/31/2022 |
| YORW York Water | $0.19 | 1.80% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| USB U.S. Bancorp | $0.48 | 4.25% | 9/29/2022 | 9/30/2022 | 10/17/2022 |
| UBP Urstadt Biddle Properties | $0.21 | 5.50% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| WPC W. P. Carey | $1.06 | 5.09% | 9/29/2022 | 9/30/2022 | 10/14/2022 |
| XRX Xerox | $0.25 | 6.13% | 9/29/2022 | 9/30/2022 | 10/31/2022 |
| APD Air Products and Chemicals | $1.62 | 2.87% | 9/30/2022 | 10/3/2022 | 11/14/2022 |
| CAH Cardinal Health | $0.50 | 2.90% | 9/30/2022 | 10/3/2022 | 10/15/2022 |
| CUBE CubeSmart | $0.43 | 3.90% | 9/30/2022 | 10/3/2022 | 10/17/2022 |
| PKG Packaging Co. of America | $1.25 | 4.23% | 9/30/2022 | 10/3/2022 | 10/17/2022 |
| RJF Raymond James | $0.34 | 1.25% | 9/30/2022 | 10/3/2022 | 10/17/2022 |
| O Realty Income | $0.25 | 4.76% | 9/30/2022 | 10/3/2022 | 10/14/2022 |
| RSG Republic Services | $0.50 | 1.40% | 9/30/2022 | 10/3/2022 | 10/14/2022 |
| STT State Street | $0.63 | 3.72% | 9/30/2022 | 10/3/2022 | 10/13/2022 |
| TWO Two Harbors Investment | $0.17 | 15.42% | 9/30/2022 | 10/3/2022 | 10/28/2022 |
| VTR Ventas | $0.45 | 3.81% | 9/30/2022 | 10/3/2022 | 10/14/2022 |
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Undervalued Dividend Stocks:
With the continued downturn in the market, this week’s results of the valuation screening now shows 44 companies on my tracker are now undervalued based on my 5 criteria.
- Discount to Analyst Price Target
- 10% or more off the 52-week high
- Discounted Cash Flow (DCF)
- P/E Mean Reversion
- Dividend Yield Theory (DYT)
For information on how these valuation methods are calculated, please check out my valuation post here.
Here are the quality dividend growth stocks that are appearing undervalued based on all 5 of my valuation methods:
Stocks Listed: ABT, AOS, APD, AVGO, AXP, BAC, BLK, BMO, BR, CAT, CCI, CCOI, DLR, DOW, ECL, EMR, HD, IIPR, INTC, IP, KR, LEG, LOW, MDT, MSM, NKE, PFE, RY, SBUX, SPG, SWK, T, TD, TGT, TROW, TSCO, TU, TXN, UGI, UNP, V, VZ, WBA, WSO
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!