I don’t know what’s going to happen to stock prices over the short term.
I don’t.
But what I do know is that during the 2022 market crash, there are A LOT of strong companies
selling at attractive long-term prices.
Companies that generate real growing free cash flow and distribute that out to shareholders
via a dividend.
In a market downturn, dividends have repeatedly shown to be the most resilient way to receive
shareholder returns.
They provide reliable cash flow that you could live off of or choose to reinvest.
In this video, I’m going to discuss 5 dividend stocks that are a great value to buy now.
I own all of these stocks and have been adding to my positions in recent months.
Each stock has a history of consistent annual dividend increases.
All of them offer a strong starting dividend yield between 3.5-5%, with one yielding over
8%.
With that said, let’s analyze some stocks.
Roll the Intro!
(intro vid)
My name is Zach and you should leave a like and subscribe to the channel if you enjoy
the video.
Throughout this analysis, I’m going to be using my research software available at dividenddata.com.
Here you can upload multiple portfolios, track your dividend income, and get in-depth research
on over 8,000 stocks.
You can sign up with a 30-day money-back guarantee.
So there’s no risk in trying it out.
This is something that I’m working hard on and will keep improving over time.
If you have the software, you can follow along and research some stocks with me.
First, we have Intel, stock ticker INTC.
It’s currently valued at $164.5 billion, with about 4 billion shares outstanding, giving
it a price per share of $40.22.
The stock price has been as low as $35 in recent weeks.
At those low prices, the dividend yield nearly hit 4%.
This is incredibly high for a company with a dominant position in the long-term growing
industry like semiconductors.
At current prices, the dividend yield is around 3.6%.
Still great.
Intel has an interesting story going on.
They are investing massive amounts of money into building new semiconductor manufacturing
plants throughout the U.S. & Europe.
These Fabs will not only manufacture Intel-designed chips, but give them capacity to manufacture
chips for other semiconductor companies.
This is a business model similar to Taiwan Semiconductor, which manufacturers chips for
other designers like Nvidia, AMD, and Apple.
Intel hopes that over time they can win over some of their business, as well as manufacture
for other companies.
Demand for semiconductors is only continuing to increase, as the world becomes more digitized.
This is a huge tailwind for Intel.
On top of this, there are geopolitical priorities that make Intel a more attractive manufacturer.
Through the pandemic, the supply chain crisis, and the war in Ukraine, it’s becoming obvious
how important domestic manufacturing really is.
It’s a national security problem.
The elephant in the room here is what the heck will happen to business relations with
Taiwan Semiconductor if China ends up invading Taiwan.
This is something that’s been speculated for a long time.
In the United States, the government is working to create the CHIPS Act, which would provide
tax breaks to help semiconductor companies build these fabrication plants.
The Senate just voted to move ahead on it, prior to the bill even being finalized or
passing the house.
The goal is to have this passed before their recess in August.
Without this bill, Intel has stated they will have to slow down their expansion plans.
So the CHIPS Act passing would be great news for Intel.
I think Intel’s large investments will be a great long-term strategy.
However, all this will mean that their free cash flow will go down over the short term.
Intel’s capital expenditures have exploded upward and will stay high for the foreseeable
future.
In the fiscal year 2021, Intel had over $20 billion on capital expenditures up nearly
$6 billion from the year prior.
This investment is likely to continue increasing, especially if the CHIPs Act passes.
The reason Intel can do this is because their coming from such a position of economic strength.
The company has generated over $30 billion in operating cash flow each of the last 3
years and it’s been rewarding its shareholders with large share buybacks and a growing dividend.
They are strategically choosing to invest heavily for future growth, rather than take
current profits.
Intel has stopped its share repurchase program but has continued supporting and growing it’s
dividend.
Their dividend has grown at 5.7% ten-year compound annual growth rate and they recently
had a 4.9% dividend increase.
The payout ratio is low and well supported.
I’d expect dividend growth to remain slow over the short term.
However, I’m very bullish on the growth of Intel’s earnings and dividend over the
very long term.
I made a full stock review on the company and you should check that out if you’re
interested.
Stock number 2 is T Rowe Price, stock ticker TROW.
It’s currently valued at $27 billion, with about 227 thousand shares outstanding, giving
it a price per share of $119.
The stock has fallen over 45% from its recent high.
This decrease in price gave it a forward-looking dividend yield of 4%.
This is a fantastic starting yield for a company with such fast-growing earnings and dividends.
T Rowe Price is in the business of providing mutual funds, advisory services, and trusts
to its customers.
The stock has gone down so much because the market overall has gone down.
Especially growth stocks, which is one of their specialties.
They primarily make money through the management fees on these funds.
So as the value of their funds goes down this so will the company's earnings.
You can already start to see this reflected in their recent quarter.
However, it seems like the market may have oversold this stock dramatically.
TROW is a money printing machine.
This is a very different situation from Intel.
There have next to no capital expenditures and they can use virtually all their operating
cash flow to grow their dividend and buyback shares.
It’s a very high-margin business with 60% gross margins and 40% net margins.
Their free cash flow per share has been growing at a 15% ten-year CAGR.
TROW grows earnings at a high rate and pays a fast-growing dividend with large special
dividends.
Over the past 10 years, the CAGR of dividends is 14%.
Its most recent dividend increase was 11%.
The payout ratio is 35%, excluding special dividends.
Over the past 5 years, they have been buying back shares as well.
At current prices, I think this will prove to be a great long-term buying opportunity
for TROW stock.
Check out my full stock review on the company if interested.
Stock number 3 is 3M, stock ticker MMM.
It’s currently valued at $75 billion, with about 569 thousand shares outstanding, giving
it a price per share of $132.13.
The stock has fallen over 35% from its recent high.
3M is currently trading at a trailing PE ratio of 13 and a dividend yield of 4.5%.
This is pretty cheap considering their reliable earnings and dividend growth.
It’s free cash flow per share is growing at a 6.25% ten-year CAGR.
3M has been buying back shares consistently for decades.
On top of this, they have over 60 years of consecutive dividend growth.
Over the past 5 years the dividend is growing at a 4.8% 5-year CAGR.
Their most recent increase was 0.68%.
Dividend growth has been slowing in the past few years, but is very sustainable at a 57%
payout ratio.
So what’s the catch?
Why is this reliable industrial conglomerate down so much lately?
The biggest risk to 3M is a lawsuit related to one of their products, specifically ear
plugs which they supplied to the military.
The lawsuit alleges that the ear plugs they did not work as well as stated, causing hearing
damage amongst some service members.
This lawsuit is massive with hundreds of thousands joining and some of the early and worst cases
being settled for tens of millions of dollars.
However, I do have the feeling this risk is being overstated.
When I think about dollar amounts that have been associated with drug company lawsuits,
which are far worse, I can’t imagine this has a meaningful long-term impact on 3M.
That may be naive and I need to do more research.
Also, my intuition about knowing what a small portion of their business these earplugs are
I feel like the liabilities of that can’t be too high.
3M is a giant diversified company that makes $6 billion a year in free cash flow.
In my opinion, I think this is a great long-term buying opportunity for 3M.
I made a stock review on the company, which was one of my first videos.
Comment below if you want a new updated video all on 3M.
Stock number 4 is Walgreens Boots Alliance, stock ticker WBA.
It’s currently valued at $33 billion, with about 864 thousand shares outstanding, giving
it a price per share of $38.6.
The stock has fallen 27% year to date.
It’s currently valued at a 7 PE ratio and a 4.95% dividend yield.
Recently earnings have been flat, but stable.
Historically, it’s a reliable grower and it has 46 consecutive years of dividend growth.
This is a pharmacy-led health and beauty retail company.
WBA is focused on expanding more into general health and pharmacy automation services.
They are investing in primary care through village MD to pair with their Walgreens pharmacy
locations.
They’ve also discussed selling their UK-based Boots pharmacy.
However, this was recently shelved due to market conditions.
I think Walgreens is a great value dividend stock right now.
They just announced a 0.5% dividend increase.
Given their low growth rates, that means you would need to buy the stock cheap, which it
currently is.
You can watch my full stock review video on the company.
Finally, Stock number 5 is the Altria Group, stock ticker MO.
It’s currently valued at $77.7 billion, with about 1.8 million shares outstanding,
giving it a price per share of $42.96.
The stock has recently fallen 25% due to the FDA banning Juul which they own part of.
We’ll discuss this more later.
After falling in price, the dividend yield has risen to 8.4%.
This is an amazing yield, considering how reliably the company has been growing their
dividend over time.
Altria is a dividend king, meaning they have consecutively increased their dividend payout
for over 50 years.
Their dividend is growing at a 8% ten-year compound annual growth rate.
Their most recent increase was 4.65%.
This seems like something Altria can continue based on their free cash flow growth.
If you’re wondering why this big dip is here in 2008, it’s because that’s when
Philip Morris international was spun out of the company.
Since that split, Altria includes Philip Morris USA and its other operating companies and
investments.
Their earnings have continued to grow, despite decreasing smoking rates.
This is because they’ve been able to continually raise prices.
Altria has massive pricing power, which is great in a time of high inflation.
Additionally, the company has continued growing its product portfolio outside of cigarettes
and investing in new areas.
For example, Juul was one of those investments.
I recently made an entire video, breaking the FDA Juul ban and how that will impact
Altria and their dividend.
You should definitely check that out for the full information.
The long story short is that Altria owns 35% of Juul and it doesn’t contribute to operating
financials.
This means that their free cash flow and ability to pay a dividend will be unaffected.
However, they will take a big on paper loss associated to the Juul investment, as they
write down its value.
This is something they’ve already done multiple times since the initial investment.
Overall, I think this recent stock price decline has made Altria a great value dividend stock
to buy.
I currently own all 5 of these stocks in my long-term dividend growth stock portfolio.
However, don’t take my advice blindly, and be sure to do your own research before making
any investment decisions.
Thank you for watching Dividend Data.
You can sign up for DividendData.com to use my software and join a discord community of
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