Weekly Watchlist - Week of July 6, 2020

Fresh off a long holiday weekend, I'm back and at it again screening for undervalued dividend growth stocks.

Stocks were up big yesterday, Monday, July 6, but futures this morning tell a different story. Hopefully the latter trend continues and more stocks fall onto my watchlist, as this week's list already contains a few familiar names if you've followed my prior weekly posts. 

If you have not yet begun to give my weekly watchlist posts a read, you can familiarize yourself with them here and here, and please continue to read going forward! As always, feel free to drop a comment if you have any thoughts or suggestions. 

Further, if you're just getting into dividend investing, and are in need of a brokerage account with no commissions or fees, free dividend reinvestment (DRIP), and fractional shares trading, then check out this link and you'll get a FREE share of stock when you sign up for Robinhood using my referral link. 

With little time to spare before the market opens, here is my watchlist for the week of July 6, 2020. 

The Criteria

To arrive at my watchlist, I first gathered a listing of the dividend aristocrats and dividend kings. For anyone who does not know what that means, a dividend aristocrat is a stock in the S&P 500 that has increased their dividend each year, for at least 25 consecutive years. A dividend king has done the same over a 50+ year period, though dividend kings do not have to be included in the S&P 500. 

After combining these two lists, I exported data from yahoo finance, and began performing filters in excel for the following criteria:

• P/E Ratio below 25
• Dividend Yield above 3%
• Current Ratio above 1
• Payout Ratio below 50%

After identifying all the stocks that met this criteria, I then began examining the 5 year average dividend yield, looking for stocks that currently have a higher yield than this metric. I also examined the 3 and 5 year dividend increase history, and looked for stocks that had average increases above inflation (estimated at 3%). 

The Stocks

As I mentioned above, there were some familiar names on my watchlist this week. In fact, the three stocks that met all the above criteria have been on my past two weeks' watchlists. These stocks are AbbVie Inc. ($ABBV), Archer Daniels Midland ($ADM), and Cardinal Health Inc. ($CAH).

The metrics of these three stocks as of close on Monday, July 6, are as follows:

AbbVie Inc. ($ABBV):

• P/E Ratio of 8.43
• Dividend Yield of 4.43%
• Current Ratio of 3.14
• Payout Ratio of 37%
• 3 and 5 Year Average Dividend Growth of 23% and 20%

Archer Daniels Midland ($ADM):

• P/E Ratio of 12.02
• Dividend Yield of 3.55%
• Current Ratio of 1.51
• Payout Ratio of 43%
• 3 and 5 Year Average Dividend Growth of 5% and 6%

Cardinal Health Inc. ($CAH):

• P/E Ratio of 9.36
• Dividend Yield of 3.71%
• Current Ratio of 1.05
• Payout Ratio of 35%
• 3 and 5 Year Average Dividend Growth of 2% and 7%

Given that these three stocks have been on the list for the past two weeks, I wanted to add a couple 'fringe' watchlist stocks that I'm keeping my eye on. These meet all the same criteria as the three above, but I've relaxed the 50% payout ratio metric to 60%, as this still leaves plenty of safety for future dividend growth. 

Loosening the payout ratio just slightly added two more stocks to the list - Caterpillar Inc. ($CAT) and Genuine Parts Company ($GPC). See their metrics below. 

Caterpillar Inc. ($CAT):

• P/E Ratio of 18.10
• Dividend Yield of 3.05%
• Current Ratio of 1.42
• Payout Ratio of 55%
• 3 and 5 Year Average Dividend Growth of 10% and 8%

Genuine Parts Company ($GPC):

• P/E Ratio of 16.91
• Dividend Yield of 3.52%
• Current Ratio of 1.22
• Payout Ratio of 60%
• 3 and 5 Year Average Dividend Growth of 5% (both)

Summary

Now to put some money to work! Here's a quick recap of the five dividend growth stocks I've got my eye on this week - AbbVie Inc. ($ABBV), Archer Daniels Midland ($ADM), Cardinal Health Inc. ($CAH), Caterpillar Inc. ($CAT), and Genuine Parts Company ($GPC). 

That's my watchlist - what's on yours? Drop a comment and let me know below!