We are always on the hunt for undervalued dividend stocks to buy. The name of the game is growing your passive income stream by buying, and building, a growing dividend income stream. The S&P 500 continues to present us with PLENTY of buying opportunities and we continue to capitalize. That is why in this article, we will share 3 undervalued dividend stocks that have caught Bert’s. See Bert’s 3 dividend stocks to watch in September 2022.
We continue to save a high percentage of our income to invest as much as capital. Having a high savings rate, and putting the cash to work, is critical for achieving financial freedom. When cash isn’t invested, I typically keep it in my SoFi account (2.00% APY at the time of this article). You might as well have your cash earn more while its parked on the sidelines, right?
Once that cash is ready to earn more and move off the sidelines, we look to our stock watch lists and other lists (such as our Top 5 Foundation Dividend Stocks).
August 2022 was a fascinating month. Companies were releasing earnings and discussing the implications of sky-high inflation, rapidly accelerating interest rates, and continued supply chain issues. The results were mixed and signs continue to point towards a recession. The S&P 500 entered August above 4,100 and left the month below 4,000. A continued sign of the times.
With a declining market, we now have some great buying opportunities. The remainder of the article will focus on 3 stocks that I own that make up my dividend stocks to watch in September 2022. To see our full portfolios, click here! We share our ENTIRE dividend stock portfolios on our website.
Dividend Diplomat Stock Screener
To find and analyze undervalued dividend stocks, we use 3 SIMPLE metrics to evaluate every dividend stock. The goal of our stock screener is to identify if a stock is an undervalued dividend growth stock to buy.
Here is a rundown of the 3 metrics of our stock screener:
1.) Price to Earnings Ratio Less than the S&P 500. Currently, the S&P 500 is trading at a P/E Ratio of 19.83X.
2.) Dividend Payout Ratio Less than 60% (Although we think a perfect payout ratio is 40% – 60%). The payout ratio measures the safety of the dividend. This ensures the company can continue growing its dividend during good times and bad. That’s why it is a critical metric in our stock screener that we must evaluate!
3.) History of Increasing Dividends. We review this metric by reviewing the company’s five-year average dividend growth rate and consecutive annual dividend increases. Since we are long term investors, it is important that a company increases its dividend consistently!
Bonus: Dividend Yield. We like to also throw in a bonus metric to our dividend stock analysis. Yield does not drive our decision; however, we would be lying if we said we completely ignore dividend yield.
See the video below, for further details and explanation. If you don’t like to watch videos – see our Dividend Diplomat Stock Screener page!
Dividend Stock #1: Qualcomm (QCOM)
First on the list, Qualcomm. My wife and I have been adding shares of Qualcomm at various points in 2022. In most instances, the stock price was trading around $130 per share. Lately, QCOM’s stock was on a tear. Therefore, we stopped buying shares and let the position sit for a while. However, over the last month, the company’s stock price has fallen once again and is now in our buy zone.
Our dividend stock portfolio has a pretty low allocation in the technology sector (if you don’t consider mutual fund and ETF holdings). That’s why I’d love to build my position in this powerhouse tech company. What jumps out when reading QCOM’s earnings releases and financial statements is the company is an absolute cash cow and dominates its sector. To me, that is exactly the kind of company you want to have in your portfolio.
Qualcomm’s stock price is $128.48 per share at the time of this article. We currently own just over 8 shares; I’d love to get to 10 by the end of this month and build our position to 20 shares in the long run. That, of course, depends on whether or not the metrics are right!
1.) Price to Earnings Ratio: 9.90x.
2.) Dividend Payout Ratio: 23.1%.
3.) History of Increasing Dividends: Qualcomm has a 5 year average dividend growth rate of 5.40% and has increased its dividend for 11+ consecutive years.
4.) Dividend Yield: 2.33%
Dividend Stock #2: Texas Instruments (TXN)
Texas Instruments (TXN) was just featured on our YouTube Channel. The legendary company in its sector has quickly earned a place on my dividend stock watch list. My tech allocation isn’t the largest, even with investments in Qualcomm, Cisco, Intel, and IBM over the years.
What jumps out to me about TXN is the company’s strong revenue and earnings growth over the last year. Why? Many companies in the sector continue to experience slowdowns and significant margin compression due to supply chain issues (Yes, I’m talking about you Intel). Texas Instrument’s well run company stands out in the crown, even if it isn’t the cheapest stock.
Last week, I purchased 3 shares to start my position in the company. My long term goal is to increase my position to at least 20 shares! Let’s see if we will be adding soon though by looking at the metrics! The company’s current stock price at the time of this article is $163.00 per share.
1.) Price to Earnings Ratio: 17.01x.
2.) Dividend Payout Ratio: 48%.
3.) History of Increasing Dividends: Texas Instruments has a 5 year average dividend growth rate of 18.43% and has increased its dividend for 18+ consecutive years. Plus, the company is expected to increase its dividend in September 2022. Shareholders, buckle up. Hopefully the company can deliver an EPIC dividend increase.
4.) Dividend Yield: 2.82%
Dividend Stock #3: Stanley Black & Decker (SWK)
This Dividend King has taken an absolute beating in 2022. Stanley Black & Decker is down over 50% year to date. The stock is getting crushed due to a cool down in demand due to a slowing DIY project pipeline for households, especially as budgets continue to tighten due to inflation. Further, the company is dealing with a tough management transition and supply chain issues. All in all, after a poor earnings release in July, management slashed earnings guidance and the price has fallen since.
Over the year, my wife and I have amassed a 25 share position in SWK. Our average cost basis is much higher, since we started buying around $130 per share and have been adding ever since. The current stock price of $85.77 is significantly lower than our cost basis and may present a great buying opportunity! Let’s see how the company performs in our dividend stock screener.
1.) Price to Earnings Ratio: 12.13x.
2.) Dividend Payout Ratio: 45.26%.
3.) History of Increasing Dividends: Stanley Black & Decker has a 5 year average dividend growth rate of 6.06% and has increased its dividend for 54+ consecutive years. Although lets be real, that July dividend increase was freaking pathetic!
4.) Dividend Yield: 3.73%
Summary – Dividend Stocks to Watch
All in all, I like the 3 dividend stocks to watch featured on this list. I could easily see myself adding to all three positions by the end of September. In fact, I may just have to do that. One thing that really jumped out to me is just how low Qualcomm’s P/E ratio is. I can’t believe it is currently below 10X. That is INSANELY LOW!
At the end of the day, I just want to continue buying and investing in long term dividend growth stocks to reach financial freedom. That’s the name of the game. Buying additional shares in Qualcomm, Texas Instruments, and Stanley Black & Decker will get me one step closer to achieving this goal!
What dividend stocks are you watching in September? Do you like the 3 stocks on my list? Are you avoiding Stanley Black & Decker all together?