Hi I'm Jimmy in this video
I'm going to walk through three of
the best dividend stocks that I
could find that have run
into issues recently or run into
negative news and that's hurt their
stock for one reason or another.
Now I actually came up with these
companies because I've been
out looking for
undervalued dividend stocks
that look like they could
do well in the next couple of years.
Now I set up this video a bit
different and that I actually I'm
ranking these three companies
according to their struggles or
according to how much pullback
they've had from least to
most and in
theory that would also imply risk
and upside as well.
And at the end of the video I've
actually got two bonus companies two
bonus dividend paying stocks
that almost made this last
but came just short.
Okay let's get started.
So coming in at number three is one
of my favorite companies that has
struggled a bit in the news recently
and that is Home Depot ticker symbol
HD.
So over the past year.
Home Depot stock is up just
short of 11 percent which isn't too
bad at all.
But the concern with Home Depot is
that they're very steady revenue
growth.
May begin to slow over the next
couple of years.
We haven't seen many signs of it
just yet but when we jump
over Home Depot's stock chart
well here we can see that
in this area some analysts came out
and said that the industry upside
may be limited.
And as we could see the market
didn't seem to like it all that
much.
Then they also ran into some effects
with hurricanes.
There were some concerns about their
impact how they be impacted
by tariffs.
Then right here.
Well once again earnings came out
and there was some disappointment as
to the outlook of Home Depot stock.
Then earnings came out again down
here in this area most recently with
a pullback in the stock market.
Home Depot is down once again.
Now I recognize that there are
concerns over a recession
in the near future.
And if the economy were to go into a
recession in theory that would
trigger less remodeling
and it would also hurt Home
Depot's revenue.
But even if that were to happen
where the the Federal Reserve
has recently lowered interest rates
and bond yields have continued to
fall. So in my mind
this is likely to keep the housing
market at least somewhat active
as mortgage rates are likely
to stay low for at least a little
bit longer as long as that happens.
I expect for Home Depot's stock
and revenue to do fairly well.
And given that they've upped their
dividend fairly consistently
over the past few years and they
have a dividend yield of more than
two and a half percent right now
that's based on the current dividend
rate.
Well even if a recession
does come and
there let's pretend that their
revenue does begin to slow
I would expect for it to begin to
pick up shortly after the recession
ends. And any long term investors
would do quite well.
And in the meantime we get to get
paid with their dividend for
holding their stock.
OK. On to number two on our list
Chevron ticker symbol CVX.
So here's the situation with
Chevron. So Chevron had
made a bid to buy Anadarko Petroleum
and a Darko agreed.
And this would push Chevron up to
the same level as Exxon Mobil
as far as production is concerned by
the way the announcement of this
deal happened right in this area.
And eventually what happened
was Anadarko backs out of the deal
because they've got a better offer
from Occidental Petroleum and
a Darko then has to pay a fee
to Chevron for backing out of the
deal.
And clearly that adds to Chevron's
bottom line at least temporarily
on a one time basis.
Well all this is interesting and all
but all this action in the middle
here doesn't really explain why
Chevron stock is still down over
the past year.
Well a lot of that can be explained
by the price of oil.
This is the price of oil going back
the past few years.
And as we could see oil is weighed
down from the 2014 levels
and it's even down from October of
last year levels.
So clearly this is an issue
since in theory lower oil prices
would mean lower profit margins
for energy companies in general.
OK. But where is the opportunity.
Well Chevron owns one of the
top portfolios of properties in the
Permian Basin which
is one of the best places to drill
for oil.
Now this is allowed for Chevron
to generate a steady amount
of free cash flow over the past
few years.
And this has funded both their
cash dividends and their stock
buybacks.
And personally I believe that even
if oil stays stuck in the 50
or 60 dollar range.
Well I would expect for Chevron's
dividend to remain quite consistent
since it's funded by free cash
flow. And that should help their
stock their buyback program would
also help their stock price which
has trailed the S&P 500 over the
past year.
OK now we move on to our number one
company and then I'll touch on the
two runner up stocks that didn't
quite make this list.
So the number one company on our
list is ad v ticker symbol.
ABBV now AbbVie
is down more than 20 percent over
the past year and their main
problem is actually quite large.
So ad vs a pharmaceutical company.
And as we know oftentimes a
pharmaceutical company can be
very reliant on the success of a
single product.
And AbbVie is no different.
So this is a chart of revenue
generated by product during
2018.
And as we can see there Humana
product dominates their revenue.
Now Humana is supposed to faced
direct competition in the U.S.
when their patents went up in 2023
but things aren't all great until
then when we switch back to their
stock chart.
Well we may first notice that AbbVie
stock has had a rough go of it over
the past year or so.
Now I bring this up because this
drop right here.
Well this drop happened
after Novartis is drug which
is very similar to Humana.
It won approval in Europe and
then this drop here happened
when AbbVie came out with earnings
and no surprise there
Europe business showed sign of
weakness as far as Cameron is
concerned.
So ad v recently announced the
acquisition of Allergan.
When did they announce it right
here.
So we're still a ways away
from this deal being.
Finalized but once
this acquisition is finalized.
Well I believe it would help
diversify advise portfolio
away from the dominance that Humana
has now.
Based on the 2018 revenue
if they combined right now.
Well Humana would still represent
about 38 percent of total
revenue but
that's better than what it
represents right now.
Now I still expect for AbbVie stock
to remain fairly volatile
over the next couple of years.
But right now they're trading at a
forward PE of less than seven
acts which tells me that
during this time period it's
possible that the stock market
oversold them a bit due
to the flurry of bad news that
they've received.
And this brings us to what I really
like about AbbVie at this point
right now at these dividend yields
is about six point seven percent
going off their last given amount of
a dollar 7 per quarter.
Now this is a chart of the
history of at these dividends
and clearly it's been rather good.
So I believe that this has the
potential to keep
in enough long term investors
for Abdi to turn this thing around.
And I would expect for their stock
to begin to recover over the next
couple of years.
So at the end of the day I believe
that at the Chevron and Home Depot
are going to have the potential
to have a net a strong next few
years.
And the fact that they pay solid
dividends could help
protect them if the stock market if
the economy were to struggle in the
next few years with interest
rates being as low as they are I
believe that strong dividend paying
stocks like these companies are
likely to do well because the
yield will be attractive to many
investors.
OK now I know I mentioned to
dividend paying stocks that I
thought were good runner ups to
this top three list.
So the first of those two companies
is Lockheed Martin ticker symbol
LMT.
Now they have a dividend yield of a
bit less than two and a half percent
and I elected not to go
with Lockheed Martin because in my
eyes their stock isn't offering
the same value as the other three
companies although I'm a big fan
of what they're doing and they're a
solid defensive holding.
And then finally we have Medtronic
ticker symbol MDT
now Medtronic has a dividend yield
of a bit over 2 percent.
And although I think that Medtronic
has a decent value right now
and they have some potential upside
I actually like the yield
and potential of Avi a bit
better and since they're both in the
same industry I thought it made
sense more sense to go with Advair
over Medtronic but I do think
Medtronic looks like a fairly stable
company but what do you think.
Do you like these top three or top
five dividend paying stocks.
Do you think that the two
runner ups that I had belong in the
top three.
Do you think a different company
blogs in the top three.
What do you like that I didn't
mention. Please let me know what you
think of the comments below.
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