Welcome back to this series on the market and finding undervalued dividend growth stocks to research.
Market Commentary:
Bear Market Rally or The Real Deal?
The market is up again this week, quite significantly at that, and is up over the past month as well. After months of declining share prices, this month has seen a substantial rally. The broad indexes are up, 4.65% for the Dow, 5.37% for the S&P 500, and 7.07% for the Nasdaq for the past month.
So is this a Bear Market Rally, or the beginning of the turnaround that most investors have been hoping for over the past 7-8 months?
Only time will tell but there is data that would support both sides of the coin. The biggest driver for the market in recent months has been the record inflation numbers in the U.S. and the government’s response to bring it down. After reporting an over 9% inflation rate this month, there is general concern that the higher prices, and the governments’ attempt to control it, will cause a recession.
As shown, these are historically high numbers, so why would the market be rallying lately? Shouldn’t the risk of high prices, slowing economic growth, job cuts, and higher interest rates cause the values of companies to decline, therefore affecting their stocks price?
Additionally, the U.S. Federal Reserve is meeting this week on July 26-27 and are generally expected to raise interest rates again, up another .50-1%, even after raising last month as well. This will cause the costs of borrowing to go up across the board, companies and individuals alike. These added costs will put a burden on the financials of companies and will directly affect consumers ability and willingness to make large purchases, which will slow down the economy.
The markets are generally forward looking, most participants saying the market looks 6-12 months ahead. Does this mean that the general consensus is that we feel that the market, and the economy, will be better off by then, and the concerns of today are in the past? Maybe so. For instance, the University of Michigan Consumer Sentiment Survey shows a generally positive trend lately, even though it is still down significantly since a year ago.
Likewise, the CNN Fear and Greed Index continues to go higher, indicating that the market is less fearful than the previous week, month and year.
With all this mixed data around, it will take a few more months to understand if the rally we are currently in will be sustained or if as more companies report their earnings will we see a return to the declines we have had this year, having a better sense of the impact of the high inflation, higher interest rates, and consumer demand.
Market Results:
The market saw quite the rally this week, but not all companies/sectors participated. As shown in the heatmap, Communications, Healthcare and Consumer Staples lagged, while Technology, Financials, Consumer Cyclical, and Industrials rallied.
The Communications sector was hit hard by earnings reports by Verizon (VZ) and AT&T (T), showing that some customers were behind on paying their bills, evidence that the high inflation is hurting many customers and they have to choose what to continue to pay. In non-dividend related news in the Communications sector, Snapchat (SNAP) reported dismal earnings and noted that advertising spend dropped more than expected. While I don’t invest in SNAP, the warning that advertisers are not buying as many ads sent the sector tanking on Friday and raised concerns that the economy is not as strong as expected.
After this mixed bag of reports this week, over the past 5 business days the Dow was up 1.95%, the S&P 500 was up 2.55%, and the Nasdaq was up 3.33%. With this rally, the markets are now down 12.22%, 16.88%, and 24.36% year to date, respectively. Even with this rally, there are still some top quality dividend growth stocks that are undervalued, as shown further below.
Dividend News This Coming Week:
Earnings season really kicks into high gear this week with many dividend growth companies reporting, including:
Monday:
AGNC (AGNC), Bank of Hawaii (BOH), Packaging Corporation of America (PKG), Sun Communities (SUI), and Whirlpool (WHR).
Tuesday:
3M (MMM), Chubb (CB), Coca-Cola (KO), Enphase Energy (ENPH), Kimberly-Clark (KMB), McDonalds (MCD), Texas Instruments (TXN), UPS (UPS), and Visa (V)
Wednesday:
American Water Works (AWK), Automatic Data Processing (ADP), Bristol Myers Squibb (BMY), Ford (F), Genuine Parts (GPC), Kraft Heinz (KHC), Qualcomm (QCOM), Sherwin-Williams (SHW), STAG Industrial (STAG), Vici Properties (VICI), and Waste Management (WM).
Thursday:
Apple (AAPL), A.O. Smith (AOS), Altria Group (MO), Digital Realty Trust (DLR), Hershey (HSY), Intel (INTC), Mastercard (MA), Merck (MRK), Pfizer (PFE), Southern Co (SO), Stanley Black & Decker (SWK) and T. Rowe Price (TROW).
Friday:
Abbvie (ABBV), Chevron (CVX), Church & Dwight (CHD), Colgate-Palmolive (CP), Exxon Mobil (XOM), Procter & Gamble (PG), and Weyerhaeuser WY)
With so many very important companies reporting, this week will give us a lot of insights on the economy and how our companies are dealing with inflation, supply chain concerns, and other economic woes.
Upcoming Ex-Dividend Dates. Note: you must own the stock before the ex-dividend date to receive the payment.
| Company | Amount | Yield | Ex-Dividend Date | Record Date | Payable Date |
| ACI Albertsons Companies | $0.12 | 1.84% | 7/25/2022 | 7/26/2022 | 8/10/2022 |
| RY Royal Bank of Canada | $1.00 | 3.95% | 7/25/2022 | 7/26/2022 | 8/24/2022 |
| GS The Goldman Sachs Group | $2.50 | 2.47% | 7/25/2022 | 7/26/2022 | 8/10/2022 |
| AM Antero Midstream | $0.23 | 9.72% | 7/26/2022 | 7/27/2022 | 8/10/2022 |
| FAST Fastenal | $0.31 | 2.48% | 7/26/2022 | 7/27/2022 | 8/24/2022 |
| DNUT Krispy Kreme | $0.04 | 0.97% | 7/26/2022 | 7/27/2022 | 8/10/2022 |
| PSEC Prospect Capital | $0.06 | 9.70% | 7/26/2022 | 7/27/2022 | 8/18/2022 |
| CLX Clorox | $1.18 | 3.29% | 7/26/2022 | 7/27/2022 | 8/12/2022 |
| AOS A. O. Smith | $0.28 | 1.98% | 7/28/2022 | 7/29/2022 | 8/15/2022 |
| AGNC AGNC Investment | $0.12 | 12.40% | 7/28/2022 | 7/29/2022 | 8/9/2022 |
| ADC Agree Realty | $0.23 | 3.90% | 7/28/2022 | 7/29/2022 | 8/12/2022 |
| COST Costco Wholesale | $0.09 | 0.07% | 7/28/2022 | 7/29/2022 | 8/12/2022 |
| EPD Enterprise Products Partners | $0.48 | 7.92% | 7/28/2022 | 7/29/2022 | 8/12/2022 |
| EPR EPR Properties | $0.28 | 6.71% | 7/28/2022 | 7/29/2022 | 8/15/2022 |
| MS Morgan Stanley | $0.78 | 4.15% | 7/28/2022 | 7/29/2022 | 8/15/2022 |
| NNN National Retail Properties | $0.55 | 5.02% | 7/28/2022 | 7/29/2022 | 8/15/2022 |
| PFE Pfizer | $0.40 | 3.22% | 7/28/2022 | 6/29/2022 | 9/6/2022 |
| SLG SL Green Realty | $0.31 | 7.64% | 7/28/2022 | 7/29/2022 | 8/15/2022 |
| STAG STAG Industrial | $0.12 | 4.87% | 7/28/2022 | 7/29/2022 | 8/15/2022 |
| SKT Tanger Factory Outlet Centers | $0.20 | 5.41% | 7/28/2022 | 7/29/2022 | 8/15/2022 |
| UNM Unum Group | $0.33 | 4.11% | 7/28/2022 | 7/29/2022 | 8/19/2022 |
| ALLY Ally Financial | $0.30 | 3.50% | 7/29/2022 | 8/1/2022 | 8/15/2022 |
| AON AON | $0.56 | 0.83% | 7/29/2022 | 8/1/2022 | 8/12/2022 |
| BX Blackstone | $1.27 | 4.70% | 7/29/2022 | 8/1/2022 | 8/8/2022 |
| CALM Cal-Maine Foods | $0.75 | 5.62% | 7/29/2022 | 8/1/2022 | 8/16/2022 |
| CASY Casey’s General Stores | $0.38 | 0.77% | 7/29/2022 | 8/1/2022 | 8/15/2022 |
| C Citigroup | $0.51 | 3.88% | 7/29/2022 | 8/1/2022 | 8/26/2022 |
| KMI Kinder Morgan | $0.28 | 6.40% | 7/29/2022 | 8/1/2022 | 8/15/2022 |
| LEVI Levi Strauss & Co. | $0.12 | 2.90% | 7/29/2022 | 8/1/2022 | 8/17/2022 |
| OHI Omega Healthcare Investors | $0.67 | 8.70% | 7/29/2022 | 8/1/2022 | 8/15/2022 |
| OKE ONEOK | $0.94 | 6.40% | 7/29/2022 | 8/1/2022 | 8/15/2022 |
| ORRF Orrstown Financial Services | $0.19 | 2.90% | 7/29/2022 | 8/1/2022 | 8/8/2022 |
| PNW Pinnacle West Capital | $0.85 | 4.98% | 7/29/2022 | 8/1/2022 | 9/1/2022 |
| O Realty Income | $0.25 | 4.16% | 7/29/2022 | 8/1/2022 | 8/15/2022 |
| SYF Synchrony Financial | $0.23 | 2.82% | 7/29/2022 | 8/1/2022 | 8/11/2022 |
| TXN Texas Instruments | $1.15 | 2.76% | 7/29/2022 | 8/1/2022 | 8/16/2022 |
Undervalued Dividend Stocks:
This week’s results of the valuation screening 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, CNI, DLR, DOW, ECL, HBI, HD, IIPR, INTC, IP, ITW, LEG, LOW, MDT, MMM, MSM, NKE, RY, SBUX, SMG, SPG, STOR, SWK, TD, TGT, TSCO, TU, TXN, UGI, UNP, V, WBA, WSO, V, VZ
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!
Thank you Jeramy for the information you provide. Especially the valuation Post and the list of current discounted stocks.
Thanks for the feedback Ray, glad you found it useful. Please let me know if there are any other companies you are interested in and I can see if they are a good value.