Welcome back to this weekly series on the market and finding undervalued dividend growth stocks to research.
The conflict in Ukraine was the main focus of the market’s attention this week. The ongoing battle and escalation of the physical war as well as the war of words is increasingly weighing on the global stock market. The market did get a small bit of positive news in the middle of the week when the Federal Reserve Head Jerome Powell mentioned that he supported a 0.25% rate increase at the March Federal Open Market Committee meeting. The market hates uncertainty and this announcement gave the market what it craved, certainty, at least regarding rates, so there was a bit of a rally on Wednesday. That rally was short lived as the market returned its collective focus to the Russia / Ukraine conflict.
This week was red across all the major indices, with the Dow down 1.30%, S&P 500 down 1.27%, and the NASDAQ down 2.78% for the week. With this continued downward trend for the year (Dow down 7.49%, S&P down 9.18%, and NASDAQ down 14.90%), a lot of quality dividend growth stocks are now approaching fair values or well undervalued. This week’s results of the screening shows 21 companies on my tracker are now undervalued based on my 5 criteria. That is up from 16 names last week.
For all you value dividend investors out there, things are starting to look favorable to pick up great companies at good values. The old saying, “price is what you pay, value is what you get”, is definitely relevant here. All else being equal, you want to buy when you can get a good value in the market, this will provide a higher yield and more upside potential when the market turns around.
For all those who are worried about the lower prices, remember, the market goes up around 8 out of 10 years historically and we have had a 10% pullback in 10 of the past 20 years. This is normal fluctuations in the market and if you have extra cash it may make sense to take advantage of the better pricing. Remember, money we invest should not be needed for at least 3 years, which will normally allow you to ride out these swings.
With all that said, here are some 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)
The new companies to make the list this week are:
AVGO, BLK, IP, JPM, PRU, TXN, V
The remaining names – BR, CMI, FNF, HBI, IIPR, LEG, MDT, MMM, MSM, SBUX, SWK, TROW, TSCO, and UGI are a continuation from last week and remain undervalued.
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!