Dividend Stock Watch List: Lanny’s April 2023 Edition

Here are the two dividend stocks on my radar this month! Banks are failing, creating the current banking crisis. The Fed continues to raise interest rates to tame inflation and the stock market is more volatile than ever – making this a great time to buy stocks!

Dividend stock watch list

Dividend investing happens whether the stock market is up or down, whether the Fed raises interest rates or lowers. Inflation or deflation. Banks are failing or being bailed out. Luckily, it has only been 3 banks in the US that has failed thus far, with Credit Suisse (CS) internationally. Deutsche Bank (DB) could be next overseas and First Republic Bank (FRC) is still making noise in the US. It’s all about buying dividend income producing stocks – the best source of passive income source on your journey to financial freedom!

The stock market, specifically the S&P 500, is back below 4,000, yet again. As stated earlier, your stomach needs to be iron clad to go through this volatility and stay the course. The S&P 500 is up over 4% this year, giving back quite a bit of gains over the last month.

Inflation is still high. Jerome Powell has a lot of stress and work to do. Do we see a flat rate decision in May or another modest 25 basis point increase? Only 2 months away, and things are always exciting in 2023!

Here is the S&P 500 chart below – rising as high as 4,050, dropping below 3,900 and is now flat month-to-date. What a month in the stock market!

Interest rates are steadily rising on High Yield Savings Accounts, with many over 3.75-4.00%!

Given the bank failures and instability within banking, the Fed may top out at 5.00-5.25% in their fight against inflation. We may have one more rate increase coming up. However, all of the interest rate increases have increased those savings rates. Ally (ALLY), where I hold a significant amount of cash, is yielding 3.75%, with an 11-month no penalty 4.75% CD. However, there is one specific Bank / Fintech application that I use so much more now…

I keep more savings in my SoFi (SOFI) savings account – as it earns me – now – 4.00% on my savings account.

In addition, I’ve been buying stocks on SoFi’s investing application.

In addition, given the uncertainty, I continue to make weekly investments into Vanguard Exchange Traded Funds (ETFs). The specific ETF my wife and I have been loading up on is Vanguard High Dividend Yield (VYM). We are investing approximately $400 to $600 per week into Vanguard (pending the VYM stock price), to stay invested in the market, during the uncertain times. In addition, I am also investing $60 per day into Vanguard S&P 500 ETF (VOO)!

Therefore, on the road to financial freedom, acquiring assets that produce cash flow or income is the goal! Like I always say, there is always a diamond in the rough. How do I find an undervalued dividend stock? Time to introduce our beloved Dividend Diplomat Stock Screener!

Dividend Diplomat Stock Screener

If you don’t know already, we keep the stock screener metrics to three simple items. They are:

1. Price to Earnings Ratio – We look for a price to earnings ratio < than the overall Stock Market.
2. Payout Ratio – We aim for a payout ratio of less than 60%.
3. Dividend Growth – We like to see history of dividend growth in a company.

Time to find the answer to… how did the dividend stocks on my watch list grade on the stock screener?

Dividend stock watch list

Here is the list of dividend stocks that are on my radar going into the month of April 2023. I typically like to keep it at 2-3 dividend stocks, keeping the focus locked in. Finding dividend stocks isn’t easy, but there are also other factors, such as composition of my portfolio by industry (such as – am I overweight/underweight in an industry), as well as exposure to one stock and the concentration there.

There, the dividend stocks on my list cater to those other facets when building a dividend stock portfolio.

Eastman Chemical (EMN)

Eastman Chemical (EMN), a dividend stock you don’t normally hear me talk about. I own a lot of LyondellBasell (LYB) but my wife owns EMN and it’s a similar player in the chemical space, of course.

Eastman earns over $10 billion in revenue and once was formally part of the Kodak (KODK) company, yes the photography company. One of the largest producers of chemicals and materials in the world, this stock is down 27% in the last 52 weeks!

Therefore, my wife owns ~70 shares of EMN and I am curious if the stock is down enough to be considered a potential stock to buy!

First, however, we must run EMN officially through the Dividend Diplomats Stock Screener, which is focused on these 3 metrics.

1. Price to Earnings Ratio: Earnings is approximately $7.80 in earnings per share for 2023. Therefore, EMN is trading at 10.33x forward earnings right now, very low at the moment.
2. Payout Ratio: EMN’s current dividend payout ratio, using that metric, is actually at 40%. Therefore, there is plenty of room to pay and increase their dividend. In fact, Eastman has a perfect payout ratio.
3. Dividend Growth: See the 10-year chart below. Eastman has been only trending upwards, I love it! EMN’s 5-year dividend growth rate, on average, is 7.71%. The most recent increase was only 4%, however, and that is something to keep in mind.

The dividend yield is closing in on 4%, which is higher than the 5-year dividend yield average of 3.66%. Not a talked about stock or one that you hear in the news, but what’s not to like? If they crack below $78, I may be adding.

Medtronic (MDT)

The dividend aristocrat themselves, Medtronic (MDT). I don’t feature them too often, but this is another stock we’ve been scooping up for my wife’s dividend stock portfolio account.

Generating between $30 and $40 billion in revenue, Medtronic is one of the largest healthcare equipment and technology produced in the world.

Another stock that is down 27% this year, and they are still sitting under $80 per share as of March 27th. To top it off, as stated earlier, over 45 years of increasing dividends!

My wife also owns over 50 shares of MDT and how wild would it be to cross 100 shares of that passive income producing stock?

Let’s run MDT through the dividend stock metrics to see if this could be a dividend stock to buy now.

1.) P/E Ratio: MDT analysts, per Yahoo, are expecting $5.28 earnings per share. That’s a Price to Earnings / P/E ratio is 15. For comparison purposes, the stock market has a p/e ratio of approximately 21x earnings at the moment. This could mean the stock is undervalued at first glance.

2.) Dividend Payout Ratio: MDT pays a quarterly dividend of $0.68 per share or $2.72 per year. This equates to a dividend payout ratio of 52%. This dividend aristocrat is steady as can be, a perfect payout ratio.

3.) Dividend Growth Rate: MDT has an incredible 45+ years of growing dividends, 5 years until the glorious title of Dividend King! The average rate is just over 8%, almost each and every time. The last few increases have ranged between 7 and 9%. Very consistent.

Lastly, we’ll take a look at the dividend yield. As an investor, you want to know how much owning this dividend stock pays you now! The yield for MDT is now yielding 3.41%!

Other dividend stocks to buy

I am also considering, as a quick hitter approach here, my eyes are on a few other stocks. Those stocks are CVS Pharmacy (CVS), LyondellBasell and Johnson & Johnson (JNJ). Stocks that are just beat up, no doubt.

I own each stock and am constantly evaluating the stock market to see if there are undervalued dividend stocks to buy in this wild market.

Dividend stock watch list conclusion

Dividend investing is real and is happening!

Of course, prior to making any purchase, I definitely will make sure to run them through the Dividend Diplomat Stock Screener once more.

I may have to add routinely to all 3 dividend stocks mentioned above. I think these are dividend stocks to buy in March 2023, but again – I highly encourage you to do your own research as this is not financial advice (quick disclaimer!).

As always, stick to your investment strategy and dividend stocks will be there. What do you think of these stocks above? Thank you, good luck and happy investing everyone!

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Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.