﻿Investing in dividend-paying stocks, allows you to share in the profits of some of the
world’s most successful companies. You can reinvest these dividends to buy more shares,
which creates a powerful compounding effect, or you could take them as pure cash. In this video,
I’m going to highlight 3 dividend stocks that I think are a good value going into 2022.
Of the three, one will have a high yield with low growth, one will have an average yield and growth,
and one will have a low yield with very high growth. If you stick around to the end I have
a bonus stock that I think is poised to do well in 2022 and beyond.
My name is Zach and you should leave a like and subscribe to the channel if you enjoy the video.
The research tool I’m going to be using throughout this video is my dividend investing software.
It’s available at dividenddata.com and you can join the free beta test.
Stock number 1 is AT&T. If you’re a fan of the channel, then you know this is one of my
largest positions and a company I cover a lot. T Stock has fallen dramatically over the last year
and now trades a very low valuation. The main catalyst was a deal announced in May 2020 that
they’d be spinning out WarnerMedia and merging it with Discovery. This will occur in mid-2022
and we’re quickly approaching it. The new company will be called Warner Bros Discovery and AT&T
shareholders will receive stock representing 71% of it. The negative news was that AT&T
would be reducing their dividend after the deal completes. Since they’d be losing the cash flow
of WarnerMedia, a dividend adjustment was obvious, but it’s actually a slight reduction beyond that.
AT&T expects an annual dividend payout ratio of 40% to 43% on an anticipated free cash flow of $20
billion. So after the spit, the new AT&T would pay a dividend at around a 4-5% yield on cost.
But in the meantime, you still get high yielding AT&T dividend of around 8%.
So this news caused a huge collapse in AT&T’s shareholder base, since many of
them were dividend-focused. The stock fell over 32% and bottomed out in December around $22 a
share. AT&T has since recovered slightly, but still remains a great value. It’s trading at
7.5 times free cash flow, which is a 13.5% free cash flow yield. AT&T is a cash flow machine and
a reliable one at that. Their core business is vital and all subscription revenue. Recently,
the financial performance has been great. Completely disconnected from the stock price.
AT&T disclosed in a press release that the company saw 1.3 million total postpaid net additions
in the fourth quarter, including about 880,000 postpaid phone net additions. For the full year,
AT&T recorded 3.2 million postpaid phone net additions, which the company said was its
highest total in more than 10 years. The company also added roughly 270,000 fiber
subscribers in the fourth quarter and ended the period with about 73.8 million total HBO Max
and HBO subscribers globally. The HBO figure came in above the outlook for 70 million to
73 million subscribers that AT&T had offered back in September. This is all fantastic news.
As we approach the WarnerMedia spinoff, uncertainty is evaporating around the
stock. We’ll be left with a more focused AT&T that can reinvest more in growth and
is seeing positive business performance. Then we’ll have stock in Warner Bros Discovery,
which I think is dramatically undervalued. This company will be a media powerhouse behind Netflix
and Disney. It will be well-positioned, as we see more consolidation in Media over the next decade.
I think AT&T stock and Warner Bros Discovery will perform very well in 2022 and beyond.
Stock number 2 is Intel. This semiconductor company has been seeing growing financials and
is trading much cheaper than its peers. They’re also in the middle of a dramatic turnaround.
Intel has a new CEO Pat Gelsinger who is an engineering nerd and has a vision to bring
the company back to dominance. They’re entering the FAB business and building 2 new $20 Billion
fabrication plants in Arizona. This will manufacture chips for third parties, not just
chips designed by Intel. Also, they’re entering the GPU space which is filled with opportunity.
I just made an entire stock review video on Intel and you should definitely check that out.
Intel Stock is trading at a PE ratio of 10, while they’ve been growing at high rates
over the recent years. The ongoing chip shortage creates a great environment where demand is high.
You can see their earnings per share has been increasing. If we look at their free cash flow,
it’s been growing at a 30% compound annual growth rate of the last 3 years. 10% over the
last 10 years. They’ve been consistently buying back shares at a high rate. They have a reliably
increasing dividend. Over the last 10 years, the compound annual growth rate is 5%. The current
dividend yield is 2.5%. The payout ratio is 26% so there is plenty of room to grow the dividend
over time. The free cash flow is growing much faster than their dividend, so they have a high
capacity to invest in their business and increase future earning power. This will have a downstream
effect of dividend increases. Again, you should watch my full stock review video for more info.
Stock number 3 is Visa. This company has a dominant market position and operates one
of the largest digital payment networks in the world. The stock is down over the last year,
and offers an attractive entry point given their growth rates. The company is a growth machine with
crazy good margins. Recently, I made an entire stock review video on Visa and I would definitely
watch that for a deep dive on their business. The stock is trading at a trailing PE of 38. If
you factor in the dominant market position and reliably high growth rates, I would say
this is well justified. The earnings per share has been growing rapidly, with a slight dip in
2020 due to decreased transactions globally. They’re now back on their growth trajectory
and likely going to report great earnings for the holiday season next earnings release.
Visa’s free cash flow has a 20% compound annual growth rate over the last 10 years. They have
absurdly good margins, with 79% gross margins and 51% net margins for the fiscal year 2021.
They consistently buy back shares at a high rate, which is great for shareholders. They pay
a super fast-growing dividend with reliable annual increases. Over the last 5 years,
the compound annual growth rate of the dividend is 17.84%. They just had a 17.19% dividend increase.
The payout ratio is 22%, so they have tons of room to grow the dividend over time. With how reliably
fast the actual business is growing, we could see this rapid dividend growth well into the future.
The current dividend yield is low at 0.7%, but if you hold long term the dividend growth could
make this yield on cost significant. Visa has never had a starting yield over 1%, but if you
bought in 2010 you’d have an 8% yield on cost. This is the power of dividend growth in action.
Alright, so those are my Top 3 dividend stocks for 2022: AT&T,
Intel, and Visa. There were plenty of others to mention, but these are the ones who have been on
my radar lately. Finally, I have a bonus stock for 2022, which is the Walt Disney Company.
Disney currently has their dividend suspended since the pandemic closed down the Parks and movie
theatres. These were significant revenue streams and profit drivers for the company. However,
Disney is a historical dividend payer and would increase their payouts on an annual
basis. This past fall, the Disney CFO said that Dividends are a part of the
long-term capital allocation strategy at the company. So I assume sometime over the next
1-2 years they will reinstate their dividend. Disney’s stock price is down over the past year
and I think this an attractive buying opportunity for a long-term investor. The parks division is
now profitable again and will likely return to being a large profit driver by the end of 2022.
Theaters are returning to strength, as show by the recent Spiderman movie release.
Billion Dollar plus blockbuster films are back. Especially, for strong brands like Marvel.
In 2022, we have a new Thor movie, Doctor Strange movie, and Black Panther movie. This will be
huge. On top of this, Disney+ reaches it full content schedule in Q4 2022. This means major
releases from every Disney studio each quarter. We have the Book of Boba Fett, Obi-Wan Kenobi,
the Mandalorian season 3, Star Wars Andor, Ms. Marvel, She-Hulk, Moon Knight, and much more.
Also, Disney+ will continue it’s international expansion into more countries. I expect a strong
next decade for the Walt Disney Company, as the streaming services reach profitability in 2024.
But all of this is my opinion, and you should do your own research
before making any investment decisions. Thank you for watching Dividend Data. I’d greatly
appreciate it if you leave a like and subscribe to the channel. If you follow me on Twitter,
link in the description, you can real-time updates of my buys and dividends coming in. You can sign
up for DividendData.com and try out the free beta test of my dividend investing software.
Link in the description. Please leave a comment below and thank you for watching!