Market Commentary & Dividend Growth Stocks to Research This Week (10/03/2022)

Welcome back to this series on the market and finding undervalued dividend growth stocks to research.

Market Commentary:

“The Most Important Organ is Not Your Brain, It Is Your Stomach” – Peter Lynch

No truer words have been spoken when it comes to the mindset we need to have as investors.  The market is volatile and we need to be able to push through the downs to get the highs.  On average, the market is up 8 out of 10 years, but those 2 years that are down are very tough to mentally deal with.  Even though we should be long term investors, our brain reacts to the loss of principal and wants to run away.  It is our job as investors to not listen to this “flight” mentality and stick with it through the downs.  In fact, the market tends to do extremely well coming out of a bear market.  The chart below shows the S&P 500 returns in the months after a bear market, and most years the market has significant gains after the start of a bear market, on average returning nearly 24% in one year.

We need to train our brain to fight not flight when the market goes down.  This is the time to push harder, not run away.  One of my favorite dividend growth investors and YouTubers, Ian Lopuch (@PPCIAN) always says, the market is like a spring, and all these down days are pushing that spring lower and lower, tighter and tighter, and eventually the pressure will release and the built up energy in the spring will shoot out and the market will come roaring back.  It is when the spring is being compressed that we should buy.

That time is today.  We need to continue to wisely invest our money in quality companies and funds to take advantage of these times so that when the market spring does release, we can ride it back up with even more power.

The current financial and economic picture definitely looks gloomy, with the Federal Reserve continuing their quest to tackle this high inflation.  The projections are that interest rates will continue to rise this year and flatten out next year.  

This will continue to put pressure on company earnings and consumer’s wallets.  There may continue to be downtrends in the market, but if we wait for the “all clear” signal, we will miss out on the gains.  If our timeline is long, this downturn should be seen as a gift, not as a burden.  

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Market Results:

All of the S&P 500 sectors except Energy were down this week. Utilities (-8.71%) was the biggest loser of the week, followed by Technology (-4.19%).  The best performing sector was Energy (+2.19%) and Materials (-0.61%). 

The month of September was overall a very rough month, with all the sectors down, most of them significantly down.  There was no safe place in the market this month.

Likewise, the year-to-date returns are dismal, except for Energy. 

The carnage was rough this week, but not all stocks were red. The large stocks like Apple, Nike, Visa, JP Morgan Chase, and Abbvie were all down a large amount, which brought down the overall market.  See the S&P500 Heat Map below. 

Broadening the view, this week had negative results across the indices as well, with the Dow down 2.92%, the S&P 500 was down 2.91%, and the Nasdaq was down 2.69%.  These results were not as bad as the previous week, but it is causing a lot of pain for market participants.  The broad indices are now down 20.95%, 24.77%, and 32.40% year to date, respectively, which is a significant bear market across the board.  2022 has definitely been a tough year for investors when looking at the portfolio balances, but this prolonged decline gives dividend growth investors a chance to buy great companies at better valuations, and lock in higher dividend yields while we wait for the market to bounce back.

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Dividend News This Coming Week:

There are not a lot of earnings left for this quarter, but there are still a few big names reporting this week, including: 

Wednesday:

RPM International (RPM)

Thursday:

Conagra (CAG), Constellation Brands (STZ), Levi Strauss (LEVI), McCormick (MKC)

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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
APLE Apple Hospitality REIT	$0.07	5.34%	10/3/2022	10/4/2022	10/17/2022
BRX Brixmor Property Group	$0.24	4.30%	10/3/2022	10/4/2022	10/17/2022
DG Dollar General	$0.55	0.89%	10/3/2022	10/4/2022	10/18/2022
HASI Hannon Armstrong Sustainable Infrastructure Capital	$0.38	3.75%	10/3/2022	10/4/2022	10/11/2022
DOC Physicians Realty Trust	$0.23	5.95%	10/3/2022	10/4/2022	10/14/2022
DGX Quest Diagnostics	$0.66	1.87%	10/3/2022	10/4/2022	10/19/2022
RCII Rent-A-Center	$0.34	5.71%	10/3/2022	10/4/2022	10/25/2022
RITM Rithm Capital	$0.25	12.20%	10/3/2022	10/4/2022	10/28/2022
SCVL Shoe Carnival	$0.09	1.73%	10/3/2022	10/4/2022	10/18/2022
BNS Bank of Nova Scotia	$0.79	5.50%	10/3/2022	10/4/2022	10/27/2022
WSR Whitestone REIT	$0.04	4.30%	10/3/2022	10/4/2022	10/12/2022
CSCO Cisco Systems	$0.38	3.21%	10/4/2022	10/5/2022	10/26/2022
CMCSA Comcast	$0.27	2.90%	10/4/2022	10/5/2022	10/26/2022
GPS GAP	$0.15	5.61%	10/4/2022	10/5/2022	10/26/2022
MTN Vail Resorts	$1.91	3.60%	10/4/2022	10/5/2022	10/24/2022
ABM ABM Industries	$0.20	1.80%	10/5/2022	10/6/2022	11/7/2022
CPB Campbell Soup	$0.37	3.05%	10/5/2022	10/6/2022	10/31/2022
IMKTA Ingles Markets	$0.17	0.80%	10/5/2022	10/6/2022	10/13/2022
JPM JPMorgan Chase & Co.	$1.00	3.45%	10/5/2022	10/6/2022	10/31/2022
ROP Roper Technologies	$0.62	0.65%	10/5/2022	10/6/2022	10/21/2022
VLGEA Village Super Market	$0.25	4.71%	10/5/2022	10/6/2022	10/27/2022
BMY Bristol-Myers Squibb	$0.54	3.01%	10/6/2022	10/7/2022	11/1/2022
CIO City Office REIT	$0.20	6.90%	10/6/2022	10/7/2022	10/21/2022
GD General Dynamics	$1.26	2.18%	10/6/2022	10/7/2022	11/10/2022
GIS General Mills	$0.54	2.75%	10/6/2022	10/10/2022	11/1/2022
GNTX Gentex	$0.12	1.76%	10/6/2022	10/7/2022	10/19/2022
GL Globe Life	$0.21	0.83%	10/6/2022	10/7/2022	11/1/2022
INTU Intuit	$0.78	0.67%	10/6/2022	10/10/2022	10/18/2022
LNC Lincoln National	$0.45	3.59%	10/6/2022	10/10/2022	11/1/2022
MAIN Main Street Capital	$0.22	5.90%	10/6/2022	10/7/2022	10/14/2022
MMC Marsh & McLennan Companies	$0.59	1.56%	10/6/2022	10/7/2022	11/15/2022
MRVL Marvell Technology	$0.06	0.55%	10/6/2022	10/7/2022	10/26/2022
MA Mastercard	$0.49	0.63%	10/6/2022	10/7/2022	11/9/2022
NTAP NetApp	$0.50	2.55%	10/6/2022	10/7/2022	10/26/2022
SYY Sysco	$0.49	2.27%	10/6/2022	10/7/2022	10/28/2022
PGR Progressive	$0.10	0.30%	10/6/2022	10/7/2022	10/14/2022
TD Toronto-Dominion Bank	$0.70	4.18%	10/6/2022	10/7/2022	10/31/2022
TOL Toll Brothers	$0.20	1.90%	10/6/2022	10/7/2022	10/21/2022
UVV Universal	$0.79	6.10%	10/6/2022	10/10/2022	11/7/2022
VZ Verizon Communications	$0.65	6.40%	10/6/2022	10/7/2022	11/1/2022
AMT American Tower	$1.47	2.51%	10/7/2022	10/11/2022	10/26/2022
DRI Darden Restaurants	$1.21	3.69%	10/7/2022	10/10/2022	11/1/2022
GBCI Glacier Bancorp	$0.33	2.67%	10/7/2022	10/11/2022	10/20/2022
IVR Invesco Mortgage Capital	$0.65	32.70%	10/7/2022	10/11/2022	10/27/2022
WLYB John Wiley & Sons	$0.35	3.63%	10/7/2022	10/11/2022	10/26/2022
MKC McCormick & Company, Incorporated	$0.37	2.01%	10/7/2022	10/11/2022	10/25/2022
MU Micron Technology	$0.12	0.92%	10/7/2022	10/11/2022	10/26/2022
TR Tootsie Roll Industries	$0.09	1.00%	10/7/2022	10/11/2022	10/20/2022
UDR UDR	$0.38	3.39%	10/7/2022	10/11/2022	10/31/2022

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Undervalued Dividend Stocks:

With the continued downturn in the market, this week’s results of the valuation screening now shows 46 companies on my tracker are now undervalued based on my 5 criteria. 

1. Discount to Analyst Price Target
2. 10% or more off the 52-week high
3. Discounted Cash Flow (DCF)
4. P/E Mean Reversion
5. 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, BNS, BR, CAT, CCI, CCOI, DLR, DOW, ECL, EMR, HBI, 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!