The S&P 500 continues to amaze and swing wildly. With the news about inflation and interest rate hikes contstantly changing, the stock market is prone to large positive and negative swings.  Of course, when the market goes down, we get excited because it gives us an opporunity to buy some undervalued dividend growth stocks! Today’s article will feature two dividend stocks that I’m going to be watching over the next few weeks. We will discuss the companies and run them through the Dividend Diplomats Dividend Stock Screener!

I mentioned in the introduction that the S&P 500 that the stock market continues to slide. How much? Well, let’s take a look. This last week, February 7 – February 11, the S&P 500 decreased 2.05% and finished at 4,418.64.  The stock market was actually positive halfway through the week; however, on Friday, the train fell off the track. Particularly towards the end of the day  when potential interest rate increases once again spooked the market.

Year to Date, the S&P 500 is down 7.88%!  Compared to 2021, this year has been a lot of fun. Buying opportunities continue to present themselves. My wife and I continue to buy strong undervalued dividend stocks that have long histories of increasing its dividend while prices are down. Some of the major names we have purchased in 2022 include Lockheed Martin (LMT), Citibank (C), T.Rowe Price (TROW) and Unilever (UL).

Watch: Our Latest Dividend Stock Purchases: We continue to Add A TON of Dividend Income in 2022

The name of the game is buying these undervalued stocks, setting….AND FORGETTING. Buy now, hold forever. Watch your dividend income grow over time. That’s what it is all about.  We save a high percentage of our income. That allows us to invest as much cash as we can into the market to grow our dividend income! While we are waiting to invest our money in the market, it is earning a high interest rate in accounts such as Yotta (1% – 2% APY, on average) and BlockFi (Currently earning up to 9% APY). If you are looking to earn more on your cash, it is definitely worth checking those products out!

Dividend Diplomats Dividend Stock Screener

After a deep dive into earnings, it is time to see if Intel is an undervalued dividend stock. After all, the company plummeted after its earnings release. So lets run Intel through the Dividend Diplomats Dividend Stock Screener after the slide. 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.

Watch: Our Simple, 3 Step Stock Screener

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 25.2X.  Historically, forward earnings are between 20X and 25X. The S&P 500 continues to have high valuations given the sliding market.

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!

Read: Dividend Aristocrats with a PERFECT Dividend Payout Ratio

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.

Dividend Stock #1: Intel Corporation (INTC)

Here we go. We are off to the races discussing our first undervalued dividend stock on my watch list. This one really shouldn’t be a surprise to too many in the community. Why? My wife and I have already been adding Intel (INTC) lately. We purchased 10 shares after the stock slid after Intel recently reported earnings.

Read: Why I Bought 10 share of Intel After Earnings

Intel has been crushed due to supply chain issues and chip shortages. The short term outlook for Intel isn’t looking that great; however, the company is taking steps to address this in the long run. Intel recently announced a $20 billion new chip manufacturing facility in Ohio and plans to invest significant dollars in their Arizona facility. The moves will take time to bear fruit; however, in the long run, this will help Intel avoid future shortages by reducing its exposure to the global supply chain.

Intel’s performance in 2022 continues to lag. After another down week, Intel’s stock price is well below $48 per share. Year to Date, Intel is officially down over 10%. With prices like these, its hard to ignore the tech giant that is a cash cow and earns a ton of money.

For this analysis, we will use Intel’s stock price $47.63 (February 11, 2022 close). Analysts are projecting forward EPS of $3.54 per share. The company’s annual dividend is $1.46 per share. Now that we have the inputs for our analysis, let’s dive into the results.

1.) Price to Earnings Ratio: 13.45x. The stock is trading at less than half the valuation of the S&P 500. Check!

2.) Dividend Payout Ratio: 41.24%. A very strong payout, PERFECT ratio. There is still plenty of room to continue increasing its dividend going forward. 

3.) History of Increasing Dividends:  Intel just announced a 5% increase to its dividend. Despite the negative news, Intel still said “hey look at us, this isn’t gong to stop us from increasing our dividend.” After this last dividend increase, the company has increased its dividend for 8 consecutive years. The company’s 5 year average dividend growth rate is just under 6%.

4.) Dividend Yield: 3.07%. I still can’t believe Intel’s dividend yield is over 3%.

Dividend Stock 2: T.Rowe Price (TROW)

Guess what? This stock also shouldn’t be a surprise. We recently bought 8 shares of T.Rowe Price for my wife’s dividend stock portfolio. We will likely continue adding more in the coming weeks.

If you thought Intel was having a tough 2022, T.Rowe price told Intel to “Hold My Beer.”  After ANOTHER rough week, T.Rowe’s stock price is now below $145 per share.  Year to Date, T.Rowe is down OVER 25%! Think about that for one second.

Just like Intel, T.Rowe Price delivered a strong dividend increase despite the negative news. The company increased its dividend 11% this last week. In fact, this gets me even more excited about T.Rowe.  Management is still confident enough to increase its dividend by double-digits despite the stock slide. Phenominal.

Now, lets see how T.Rowe Price stacks up in our dividend stock screener. For this analysis, we will use T.Rowe’s stock price $144.25 (February 11, 2022 close). Analysts are projecting forward EPS of $12.84 per share. The company’s annual dividend is $4.80 per share. Now that we have the inputs for our analysis, let’s dive into the results.

1.) Price to Earnings Ratio: 11.23x. The stock is trading at less than half the valuation of the S&P 500. Check!

2.) Dividend Payout Ratio: 37.38%. A very strong payout ratio. There is still plenty of room to continue increasing its dividend going forward. 

3.) History of Increasing Dividends:  T.Rowe is a Dividend Aristocrat. The company has now increased its dividend for 36 consecutive years after its last dividend increase. Love it! Further, the company’s dividend growth history is strong. Their 5 year dividend growth rate is 14.87%. This latest increase was in line with their average.

4.) Dividend Yield: 3.3%. Strong dividend yield. Can’t say anything more besides…CAN IT GET TO 3.5%?!

Summary – Dividend Stocks TO BUY

Both dividend stocks performed very well in our stock screener. In fact, the two companies passed with flying colors! The metrics speak for themselves. That is why I’m commiting to buy each stock once the market opens on Monday. Further, I will continue to buy these companies if the stock prices remain at their current levels and if the price continues to fall further. The name of the game is buying undervalued dividend stocks. Today, I’ll not only be watching these two companies, but buying them as well.

What are your thoughts about Intel and T.Rowe Price? Are you buying, watching, or selling over the coming weeks? What other companies are on your dividend stock watch list?

Bert