Welcome back to this series on the market and finding undervalued dividend growth stocks to research.
Market Commentary:
The battle has begun!
The Federal Reserve raised the target Fed Funds rate 0.75% on Wednesday, bringing the short term rate to a target of 1.50-1.75%. This was the biggest increase in 40 years as they began their fight to combat inflation. The Fed has two mandates – keep unemployment low and tame inflation. The first is currently under control, but the second is slipping away from their control. The actions this week, and the expected rate increases for the rest of the year, is the Fed’s primary weapon in this economic battle. The concern is that the Fed will either not be able to win this fight, or that the collateral damage to the economy will be dire and cause a recession. Many economists are saying we are already in a recession, which is defined as two consecutive quarters of negative GDP growth. Their ability to win the battle quickly will determine how long and how severe any potential recession will be.
The market was down all week but really sold off strong on Thursday and Friday as the market processed the rate increase and the news release/statements from the Fed. The Dow, S&P 500, and Nasdaq were down -4.79%, -5.79%, and -4.78%, respectively for the week. This heavy drop came on the heels of a down week last week and continued weakness for the year. The markets are now down 17.75%, 22.90%, and 30.98% year to date, respectively. This is the first time during this downturn that the S&P 500 passed the -20% decline, officially entering a bear market.
The markets are closed on Monday, June 20th, for Juneteenth.
Dividend News This Coming Week:
Two of the major homebuilders are releasing earnings this week: Lennar (LEN) and KB Homes (KB), which hopefully will give some insights on the new housing starts and if there are any slowdowns happening. A few consumer discretionary stocks are reporting as well, Winnebago (WGO), Darden (DRI), Carmax (KMX) and La-Z-Boy (LZB), which should give insights on supply chain and consumer confidence. Lastly, FedEx (FDX), fresh off their 53% dividend increase last week, reports later this week.
Upcoming Ex-Dividend Dates. Note: you must own the stock before the ex-dividend date to receive the payment
Undervalued Dividend Stocks:
With the continued downturn, the list of undervalued stocks continues to increase. This week’s results of the valuation screening shows 45 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)
Here are the quality dividend growth stocks that are appearing undervalued based on all 5 of my valuation methods:
Stocks Listed: ABT, ADP, AOS, APD, AVGO, AXP, BAC, BLK, BMO, BR, CAT, DLR, ECL, HBI, HD, IIPR, INTC, IP, ITW, JPM, LEG, LOW, MDT, MMM, MS, MSM, NKE, RY, SBUX, SMG, SPG, STOR, SWK, TD, TGT, TROW, TSCO, TU, TXN, UGI, UL, UNP, V, WBA
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!
Thanks so much, Jeremy! The information and analysis you provide is really helpful. I appreciate you making it available to those of us not quite as smart as you!
Rich
Good post. I learn something new and challenging on sites I stumbleupon everyday. Its always interesting to read articles from other authors and practice something from other sites.