July was another crazy month in the stock market. The market just continues to rise! Still, despite the rising market, I was able to find several undervalued dividend stocks to purchase during the month. While I didn’t invest the same amount of capital as Lanny in July (Nearly $4k), I was able to continue to add a decent amount of dividend income! Let’s jump right in and see what dividend stock purchases I made in July.

Dividend Stock Purchases: How We Find Undervalued Dividend Stocks

Investing in income producing assets in 2020 is as important as ever. Building a growing, truly passive, dividend income stream is what we preach and live by on this website. Further, the yield on our savings accounts continues to decrease.  In fact, I just received news that Capital One is decreasing their “high yield” savings account rate from 1.00% to .8%. Therefore, I’ll look to become even more aggressive investing my excess cash (not emergency fund) into dividend stocks to earn a higher return. Trust me, there are plenty of great dividend stocks with a yield above .8%!

Related: Cash is Dead – Why Your Savings Acccount Is Losing Money

How do we identify the dividend stocks to purchase? We use the Dividend Diplomats Dividend Stock Screener to find undervalued dividend growth stocks. Once we identify undervalued stocks, we perform additional research and confirm the stock would be a great addition to our portfolio. After confirming, we simply log into our brokerage, enter the trade, and watch our dividend income increase. It is pretty simple and takes less than a minute on Fidelity!

Related: Dividend Diplomat Stock Screener

Watch: Dividend Diplomat Stock Screener – Video Example

Related:  Our Dividend Stock PortfoliosDividend Stock Screener

(adsbygoogle = window.adsbygoogle || []).push({}); Dividend Stock Purchases – July 2020 Summary

I have always invested in dividend growth stocks. That strategy has never changed (nor will it).  However, the way I purchase stocks has changed. Last year, my brokerage account, Fidelity, succomed to the “trade fee war” and offered its customers free equity trades. Historically, I was changed at least $3.95 per trade. In the past, since I was charged a fee, I would purchase stock in larger dollar amounts. Thank goodness Robinhood helped push the sector to offer free trades.

As you will see, I have began making micro stock purchases. These days, I purchase one, two, or only several shares of a company at a time.  I purchased one stock 8 times in July. In total, I only added 18 shares. Thus, I averaged only 2.25 shares per purchase. With trade fees, I would never have engaged in this kind of purchase strategy!

Second, after receiving numerous dividend cuts since the start of the pandemic, I have focused on purchasing high quality dividend growth stocks. It isn’t as if I wasn’t purchasing high quality stocks before; however, now, I am laser focused on purchasing Dividend Aristocrats, Dividend Kings, and/or companies with strong balance sheets.

Related: Dividend Aristocrats with Low Debt

Watch: Who & What are Dividend Kings?

Dividend Stock #1: AT&T (T)

AT&T, ATT, T

The first company I purhased in July shouldn’t shock anyone.  AT&T (T) has been one of the top stocks I have purchased over the last few months. AT&T has a very strong dividend yield and a great history of increasing their dividend. They are a Dividend Aristocrat after all (25+ years of increasing their dividend). The company is one of our Top 5 Foundation Dividend Stocks for a reason!

Related: Top 5 Foundation Dividend Stocks for any Portfolio

My strategy for AT&T has been to add shares as long as the company’s share price remains below $30 per share. Since my current position is not considered full, from my perspective, I am happy to continue adding several shares at a time below $30.  I love the company’s position in a major industry (communication and media) and has worked to grow their content library in a shifting media landscape. Sure, their acquisitions have been expensive and required additional debt. However, the company is a cash cow and generating strong operating cash flow.

The chart below details all of my AT&T stock purchases in July. I purchased the company on 4 occassions, down from the 6 separate purchases last month.  adding 16 total shares. My average purchase price was $29.62 per share. Last month, my average purcahse price was $29.68 for AT&T. It is interesting how the price remained approximately the same!

Let’s quickly run AT&T through our stock screener. For this analysis, I will use the average purchase price of $29.62 per share, an annual dividend of $2.08 per share, and the company’s estimated forward earnings of $3.26 per share.

  1. P/E Ratio < S&P 500 – 9.1X – AT&T easily passes this metric.
  2. Payout Ratio < 60% – 64% – AT&T’s dividend payout ratio is just above our 60% threshold. However, I am not concerned about this due to the reasons I mentioned earlier when discussing the company’s debt.
  3. Dividend Growth History – I already mentioned that AT&T is a Dividend Aristocrat, right? The company has increased their dividend for over 35+ consecutive years. Talk about consistency!

(adsbygoogle = window.adsbygoogle || []).push({}); Dividend Stock #2: Walgreens Boots Alliance (WBA)

Walgreens is a company that is new to my wife’s portfolio. I am very excited to add this drug store to our portfolio. Since I own shares of CVS, we will now own the two major companies between us.  The previous decade, Walgreens and CVS have transformed their companies to expand the services to compete on a large scale. That is exactly why Walgreens joined forces with BootsAlliance in the past and part of the reason why we started our position in Walgreens today. Further, both are major players in an industry that is growing, as our population ages and we work to distribute potential solutions to the current, and future, pandemics.

After their last earnings release at the beginning of July, Walgreen’s stock price fell below $40 per share. Offering a strong dividend yield at that price, 4.5%+, the company’s metrics were too strong to ignore. The best part of the company’s earnings release was that the increased their dividend as well!

Related: Dividend Aristocrats – Who & What are They?

Now that you have a little background for WHY we are investing in Walgreens, you know what time it is….time to run Walgreens through the Dividend Diplomats Dividend Stock Screener. For this analysis, I will use our average purchase price of $39.32 per share, an annual dividend of $1.87 per share, and the company’s estimated forward earnings of $4.62 per share (per Yahoo! Finance).

  1. P/E Ratio < S&P 500 – 8.5X – Walgreen’s P/E Ratio is well below the borader market. That is an easy pass for this metric.
  2. Payout Ratio < 60% – 40% – Walgreen’s dividend payout ratio is right in our sweet spot. We consider a payout ratio between 40-60% perfect! Another pass for Walgreens.
  3. Dividend Growth History – Walgreens is also a Dividend Aristocrat, like many of the other companies on this list.

Dividend Stock #3: Aflac (AFL)

Like AT&T, I continue to build my position in this Dividend Aristocrat.  I do not consider this position full in my portfolio either, given my lack of exposure in the insurance sector. The only two insurance companies in my portfolio are Aflac and Cincinnati Financial (CINF). It is funny, I mentioned earlier that I will continue buying AT&T as long as the share price is below $30 per share. For Aflac, that target purchase price is $36 per share. As long as the company stays below that threshold, I will be watching and buying them.

Aflac dominates a niche sector of the insurance industry. They are not competing with the auto insurance or property and casuality giants. Rather, they dominate the health sector. The company has an incredible brand presence as well. Their duck is iconic and is easily recognizable in commercials.  Further, if you take a look at the company’s balance sheet, you will notice a very healthy, strong company with a great investment portfolio. These are all recipes for success that should allow the company to grow their dividend going forward.

I purchased Aflac 8 times this month! That is significantly more than the two purchases last month. The chart below shows all of the purchases and the fact that my average purchase price was $35.62. Now, let’s run Aflac through the Dividend Diplomats Dividend Stock Screener. For this analysis, I will use my average purchase price of $36.22 per share, an annual dividend of $1.12 per share, and the company’s estimated forward earnings of $4.46 per share (per Yahoo! Finance).

  1. P/E Ratio < S&P 500 – 8.1X – Aflac has a P/E Ratio that is significantly lower than the market. The insurance sector as a whole typically has a low P/E ratio.
  2. Payout Ratio < 60% – 25.1% – Aflac’s P/E Ratio is WAY below our 60% threshold. This is an easy pass for the duck.
  3. Dividend Growth History – Like the previous two companies, Aflac is a Dividend Aristocrat. AFL has increased their dividend for 37 consecutive years!

(adsbygoogle = window.adsbygoogle || []).push({}); The Best of the Rest

The previous sections discussed the three major stock purchases for the month. This section will quickly summarize the rest of the purchases my wife and I made. Each company was already in our portfolio at the time of the purchase. Thus, we already knew the companies were quality dividend stocks that passed our investing metrics.

Three of the companies are Dividend Aristocrats (ED, GD, and PBCT). One of the companies was formerly an Aristocrat, PFE, that has worked to rebuild their dividend increase streak after the Great Recession.

These purchases, while small, made an impact on my passive income. They added over $20 in dividend income by investing $447. A 4.5% Yield on Cost is not too bad!

Summary

In total, we purchased only $1,655 were able to add $74 in dividend income. That is an average dividend yield of 4.5% on the purchases.  It is funny that the yield on my “Best of the Best” section is exactly the same as my total purchases for the month. With that being said, I am a little aggrevated and frustrated by the lack of purchases during the month.  It pains me that we were only able to add $1,655 in stock. In reality, it is due to the fact that I have not been as aggressive with purchasing stocks as I should be.

That is why, going forward, we have altered our strategy.  We are going to invest at least $500 per week. If I do not find individual stocks to purchase during the week, I will add shares to a Vanguard ETF (VYM or VOO) at the end of the week to hit this minimum threshold. We discussed this strategy on our YouTube channel and I have successfully executed this stratey the first week of August.

Still, at the end of the day, despite my disappointment, my dividend income continues to move forward.  We are one step closer to financial freedom after July and want to continue looking forward to the months ahead. Let’s keep on pushing!

What stocks did you buy in July? Do you agree with my purchases? Are you buying AT&T?

Bert

The post Dividend Stock Purchases: Bert’s July Summary appeared first on Dividend Diplomats.