The Most Undervalued Dividend Stock | Best Stock to Buy October 2020
Welcome back to a fun filled article about dividend investing. After reviewing the current stock market landscape and the insane surge the stock market has done in the first two weeks, have led to dividend investors to struggle to fund undervalued dividend stocks.
However, that journey has brought me to one beloved dividend growth stock. After performing and using our Dividend Diplomats Stock Screener, which uses 3 simple and basic dividend metrics, I couldn’t help but land on one of my longest-term holdings.
Yes, I am talking about Pfizer (PFE). The pharmaceutical giant that has been making headlines on many fronts within the investment community.
Pfizer is making a big push to be first to the COVID-19 Vaccine!
Pfizer (PFE) is rushing hard to knock it out of the park with the COVID-19 vaccine, partnering up with BioNTech. As the pandemic is sweeping the global population, including many countries seeing that second wave start to spike, having a vaccine will make things very interest, especially for the pharmaceutical industry.
Not only is Pfizer (PFE) making headlines there, but they are nearing closure of the major spinoff with Mylan and Pfizer’s UpJohn business to form a new entity, that will essentially keep the generic drugs and legacy brands of Lipitor and Viagra. Looking forward to, hopefully, new shares and a new dividend from a cash cow pharmaceutical.
However, you are here because they are an undervalued dividend stock. In fact, I am considering them to be one of the most undervalued dividend stocks, right now, in this month of October 2020!
Dividend diplomats dividend stock screener
We ran them through the Dividend Diplomats Dividend Stock Screener and Pfizer is showing why they can arguably be the MOST undervalued dividend stock to buy, RIGHT NOW!
1.) Price to Earnings Ratio: First, the P/E ratio is where we like to begin. The S&P 500 is trading at 28-35x earnings. Analysts are projecting approximately $3.25 in forward earnings for Pfizer and Pfizer’s stock price at the conclusion of the video was at $36.82. Therefore, the price to earnings was only 11.33x! That is SIGNIFICANT undervaluation, right there.
2.) Dividend Payout Ratio: Second, it doesn’t end here for Pfizer. Pfizer currently pays $1.52 in dividends per year and dividing that over the expectation of $3.25, this produced a dividend payout ratio of 47%. We consider this a PERFECT DIVIDEND PAYOUT RATIO! Why? They are in the middle of 40% and 60%, the sweet spot. This shows that Pfizer reinvests back into the business, but also returns quite a bit back to their shareholders.
3.) Dividend Growth: Third, we care about dividend growth. Pfizer is going on 10 years of consecutive dividend increases. Further, their average dividend growth rate is just over 6%. This is a solid dividend growth rate, given the BONUS dividend metric.. the Dividend Yield!
4.) Dividend Yield: Yes, we do bring in the dividend yield to make this a full picture on why this could be the most undervalued dividend stock. Given a current dividend paid per year of $1.52 and a stock price of $36.82, this equates to a dividend yield of 4.13%! This is 2x the S&P 500, just another sign of being an undervalued dividend stock.
conclusion
There you have it. Pfizer crushes every dividend stock metric. Pfizer (PFE) is showing undervaluation with a below market price to earnings ratio, above average dividend yield, a solid dividend growth rate and streak and a perfect dividend payout ratio. Do you see why they are arguably one of the most undervalued dividend stocks right now?
Though I already own 145 shares of Pfizer (PFE) in my dividend stock portfolio, at these prices, I may have to add more to bring PFE up to 150 shares.
Do you currently own Pfizer stock? Would you agree they are the most undervalued stock to buy right now? Do you have a different dividend stock to buy this month?
Thank you for reading and watching! Share the comments and feedback below. As always – good luck and happy investing!
-Lanny
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