THREE Undervalued Dividend Stocks WE'RE BUYING! | Adding Passive Income to Reach Financial Freedom!
Summary
TLDRIn this episode of the Dividend Diplomats, hosts Mr. Buckeye and Lanny discuss three dividend stocks on their watch list, emphasizing their focus on passive income through dividend growth. The stocks highlighted are Johnson & Johnson, Starbucks, and Pepsi, all of which have strong histories of dividend increases and are currently trading at attractive valuations. The hosts use specific metrics such as price-to-earnings ratio, dividend payout ratio, and dividend growth rate to evaluate these stocks, highlighting their appeal for long-term investors seeking financial freedom.
Takeaways
- 📈 The video discusses three dividend stocks that the hosts, Mr. Buckeye and Lanny, are closely watching and have recently invested in.
- 💰 The hosts emphasize the importance of investing in dividend stocks as a pathway to financial freedom and building a passive income stream.
- 🔍 The video focuses on three key metrics for evaluating dividend stocks: price-to-earnings (PE) ratio, dividend payout ratio, and a history of growing dividends.
- 🏆 Johnson & Johnson (JNJ), Starbucks (SBUX), and Pepsi (PEP) are identified as the three stocks being discussed, with two of them being dividend kings.
- 📉 The PE ratios for all three stocks are below that of the S&P 500, with J&J at 14.3, Starbucks at 21.4, and Pepsi at 20.75, indicating potential undervaluation.
- 💹 The dividend payout ratios for J&J and Starbucks are within the desired range of below 60%, while Pepsi's is slightly above at 62%.
- 📊 J&J has a 5-year dividend growth rate of 5.75% and has increased dividends for over 50 years, making it a dividend king. Starbucks has a growth rate of 9.79% and has increased dividends for over 13 years. Pepsi has a growth rate of 6.43% and has a history of increasing dividends for over 50 years.
- 🌟 The hosts mention that they have personally bought all three stocks in 2024, highlighting their confidence in these investments.
- 🤑 The video encourages viewers to share their own stock investments in the comments and to subscribe to the channel for more content.
- 🚀 The hosts conclude by reiterating that all three stocks (JNJ, SBUX, PEP) are great choices for dividend investors, with Starbucks offering the best dividend yield and growth combination.
Q & A
What is the main focus of the Dividend Diplomats YouTube channel?
-The main focus of the Dividend Diplomats YouTube channel is to help viewers reach financial freedom by building a passive income stream through investing in dividend stocks.
What are the three stocks that Lanny is watching and potentially buying according to the video?
-The three stocks that Lanny is watching and potentially buying are Johnson & Johnson (ticker symbol JNJ), Starbucks (ticker symbol SBUX), and Pepsi (ticker symbol PP).
What are the three metrics used by the Dividend Diplomat stock screener as mentioned in the video?
-The three metrics used by the Dividend Diplomat stock screener are: 1) Price earnings ratio less than the S&P 500, 2) Dividend pay ratio less than 60%, and 3) A history of growing dividends with strong dividend growth rates.
What is the significance of a company being a 'Dividend King' or a 'Dividend Aristocrat'?
-A 'Dividend King' or a 'Dividend Aristocrat' refers to a company that has a strong history of consistently increasing its dividends over a significant number of years, indicating a reliable and growing passive income stream for investors.
What is the price-to-earnings (PE) ratio of Johnson & Johnson as discussed in the video?
-The price-to-earnings (PE) ratio of Johnson & Johnson discussed in the video is 14.3.
What is the dividend payout ratio for Starbucks and how does it compare to the ideal threshold?
-The dividend payout ratio for Starbucks is 56.3%, which is slightly above the ideal threshold of 60% for ensuring dividend safety.
What is the five-year dividend growth rate for Pepsi and how long has the company been increasing its dividends?
-The five-year dividend growth rate for Pepsi is 6.43%, and the company has been increasing its dividends for over 52 years, making it a Dividend Aristocrat.
What are the dividend yields for the three stocks featured in the video?
-The dividend yields for the three stocks are as follows: Johnson & Johnson has a yield of 3.12%, Starbucks has a yield of 2.63%, and Pepsi has a yield of 2.99%.
What advice does Lanny give regarding buying Pepsi stock according to the video?
-Lanny advises that Pepsi stock is a good buy, preferably below $165 per share, but acknowledges that it can be difficult to catch Pepsi at a great valuation. He also mentions that for those who are not in a position to be as selective as he is, Pepsi could still be a good foundational stock to start building a position in.
How does the video emphasize the importance of dividend growth rate and yield for dividend investors?
-The video emphasizes that a combination of a strong dividend growth rate and a modest dividend yield is ideal for dividend investors. This combination indicates not only a reliable passive income stream but also the potential for that income to grow over time, increasing the investor's overall return on investment.
What is the state of the S&P 500 index as of the end of the period discussed in the video?
-As of April 5th, the S&P 500 index was up 99.73%, indicating a strong performance over the period discussed in the video.
Outlines
📈 Dividend Investing with Top Stocks to Watch
This paragraph introduces the viewers to the dividend investment strategy discussed on the channel, highlighting the focus on three specific stocks that are being closely watched by Lanny. The hosts, Mr. Buckeye, Ber, and Lanny, emphasize their commitment to investing in dividend stocks and share their excitement about potentially buying these stocks. They outline their strategy for evaluating stocks using the Dividend Diplomat stock screener, focusing on metrics such as price-to-earnings ratio, dividend pay ratio, and a history of dividend growth. The paragraph sets the stage for a detailed analysis of three stocks, two of which are dividend kings, and one is close to becoming a dividend aristocrat.
💹 In-Depth Analysis of Dividend Stocks: J&J, Starbucks, and Pepsi
This paragraph delves into a detailed analysis of three specific dividend stocks: Johnson & Johnson, Starbucks, and Pepsi. It begins with an examination of the undervaluation metric, comparing the price-to-earnings (PE) ratios of these stocks to the S&P 500. The discussion then moves to the dividend payout ratio, which indicates the safety of the dividend. The paragraph also covers the history of dividend growth over a five-year period and the number of consecutive years these companies have increased their dividends. Finally, the yields of the three stocks are compared, with Starbucks offering the best dividend growth combination. The hosts share their personal investment strategies, noting their preference for buying these stocks at certain prices, and encourage viewers to do their own research before investing.
Mindmap
Keywords
💡Dividend Diplomats
💡Financial Freedom
💡Passive Income
💡Dividend Stocks
💡Price Earnings Ratio (PE Ratio)
💡Dividend Payout Ratio
💡Dividend Growth
💡Yield
💡Dividend Kings
💡Stock Screening
💡Investment Strategy
Highlights
The Dividend Diplomats YouTube channel focuses on helping investors achieve financial freedom through dividend stock investments.
The hosts, Mr. Buckeye and Lanny, not only discuss stocks but also invest in them, demonstrating their commitment to the strategies they share.
Three dividend stocks are featured in the video, all of which are closely watched by Lanny and have been added to his dividend stock watch list.
One of the stocks had a price increase earlier in the year but has since returned to a desirable level for investment.
The Dividend Diplomats Stock Screener is introduced, focusing on three key metrics: P/E ratio, dividend pay ratio, and a history of growing dividends.
The importance of a strong dividend growth rate is emphasized for building a reliable passive income stream.
All three companies discussed have a history of increasing dividends, with two being Dividend Kings and one close to becoming a Dividend Aristocrat.
Johnson & Johnson (JNJ) is highlighted as a favorite dividend stock with a current P/E ratio of 14.3, making it undervalued.
Starbucks (SBUX) is noted for its solid stock performance and a P/E ratio of 21.4, which is well below its historical average.
Pepsi (PEP) is discussed as a consistent performer with a P/E ratio of 20.75, despite a slight drop in stock price.
The dividend payout ratios for JNJ, Starbucks, and Pepsi are examined, with JNJ and Starbucks having ratios below 60%, and Pepsi just above at 62%.
JNJ's status as a Dividend King is highlighted, with 50 consecutive years of dividend increases and a 5-year dividend growth rate of 5.75%.
Starbucks is noted for its impressive 5-year dividend growth rate of 9.79% and consecutive annual dividend increases.
Pepsi's 5-year dividend growth rate is 6.43%, marking its status as a Dividend King with over 50 years of increasing dividends.
The yields for JNJ, Starbucks, and Pepsi are discussed, with JNJ offering the highest yield at 3.12%, followed by Starbucks at 2.63%, and Pepsi at 2.99%.
The combination of modest yields and strong dividend growth rates is praised as the ideal investment strategy for dividend-focused investors.
The hosts share their personal investment activities, noting that they have been buying all three stocks, particularly favoring JNJ and Starbucks at their current prices.
The video encourages viewers to share their own stock investments in the comments and to subscribe to the channel for more investment insights.
Transcripts
welcome back to the dividend diplomats
YouTube channel you got Mr Buckeye there
ber The Hurt Locker and your boy Lanny
the best dividend investors here on
YouTube helping you reach Financial
Freedom by building that passive income
stream by talking and investing into
dividend stocks baby subscribe to the
channel give this video a thumbs up
can't wait we have three stocks that
Lanny is watching Lanny is keeping very
close to the top of his dividend stock
watch list and oh wait he might actually
be buying the stocks that are going to
be featured in today's video as well
absolutely guys you know we just don't
talk about stocks we put our money
withth our mouth is we buy these stocks
and in fact I know for sure I've bought
all three of these stocks in
2024 um One stock you know actually had
a little bit of run up so I didn't grab
as much as I wanted to um earlier this
year but now they're finally back below
a certain price so my eyes are back on
the stock so which makes me very happy
um so we're going run them through guys
three stocks here we're going to run
them through the dividend Diplomat stock
screener focused on those three
wonderful metrics and I'll run them down
the price earnings ratio less than the
S&P 500 the dividend pay ratio less than
60% and third that history of growing
dividends strong dividend growth rates
looking at the longevity to Growing the
passive income stream because that's
what Berke and I are going to do we're
going to be living off the dividend
income so we want those income streams
to go that way that's what it's all
about yeah and all three of these
companies have great histories of
increasing dividends two of them are
dividend Kings cannot wait to do it and
the other one is over halfway to
becoming a dividend Aristocrat so it's
getting close to that journey of the
consistent dividend increases so we
cannot wait to talk to you about these
three stocks exactly guys I mean you
guys tell us what stocks have you been
buying here while the S&P 500 is up
99.73% to finish off on April 5th um let
us know in the comments guys um you know
it's been it's been a fun year you know
we're all building um we're all trying
to keep our eyes out on those high
quality stocks right now and for bird
it's high quality dividend stocks and we
got three of them here for you two of
them are dividend Kings and Bert and I
we were talking before this we're going
to go again metric by Metric across all
three stocks versus bouncing from one
stock to the next to the next so this
way you'll know all three stocks and
then you'll just follow along with the
metrics and let us know if you own all
three or what are the three stocks we're
featuring here today all right number
one one of my favorites one of the goat
Johnson and Johnson ticker symbol J N J
dividend stock number
two one of my favorites right now
Starbucks ticker symbol s b u x number
three another dividend King here
everybody we're talking the soda battles
Buffett sorry we're not with you on this
one we're talking about heepsy today
ticker symbol p
p yes we are oh it's true it's damn true
guys so let's look at the undervaluation
metric the price to earnings ratio J&J
if you didn't catch it on Monday's video
J&J's PE ratio right now is at 14.3
because that stock price now is in the
low 150s at
5239 um down about
4.74% this year so the PE Ratio is under
15 for this dividend K Wow Johnson and
Johnson under a 15 p PE ratio pH
Starbucks we've talked about this one
here their price is 8685 at the time
we're recording earnings is a little
over four that gives you a p ratio 21.4
four well below their historical mark on
their average which has recently been
around 30X before the price started to
drop yep yeah still still solid stock
keeps dropping a few dollars a week they
were hanging in that above that $90 a
share but they finally broke through the
floor guys um lastly you know we talk
about Pepsi
P so stocks down only 2% this year down
almost eight% since last year but it's
hard to always catch Pepsi you know
dropping I think I was buying them in
the 163 to 165 range somewhere in that
range
um they're at 16914 so broke back
through the 170 mark p ratio right now
is at
20.75 yeah so let's summarize the PE
ratios here Johnson and Johnson's PE
ratio is 14.3 Starbucks PE ratio is at
2144 Pepsi's PE ratio is at 20.75 all
three are below the S&P 500 there it is
guys now it's time to get into the
dividend payout ratio which is the
safety in the dividend you don't want to
be up all night sweating here wondering
if that dividend is going to be safe or
not for your stock that you own J&J Good
Old Reliable guys they have a payout
ratio at
45% so sweet Good Old Reliable Starbucks
annual dividends 228 that's a perfect
payout ratio as well of
56.3% now we couldn't get the trifecta
with the perfect payout ratio below 60%
but Pepsi right now is at
62% again typically a lower growth
business you know just depending on how
much penetration that they're doing in
the international markets but Pepsi at
62% so just a hair above that 60%
threshold all right let's look at
dividend growth the history of
increasing dividends we're going to look
at that five-year dividend growth rate
and the number of years increasing that
dividend lny what about Johnson and
Johnson well they're dividend King guys
and a dividend King's increase or
dividence 50 straight years so they're
an aristocrat they're a king guys
5.75% fiveyear growth rate at 61 plus
years Starbuck five-year dividend growth
rat is 99.79% they've increase that
dividend for 13 plus consecutive years
oh then they're rolls right back into
Pepsi for those who think Young fiveyear
growth rate
6.43% again a dividend King dividend
Aristocrat status here um been doing it
for 52 plus years man we've seen a lot
of those years yes we have so let's talk
yield Lanny everybody's favorite topic
for dividend investors Johnson and
Johnson oh I love this yield right now
for Jay and Jay Lanny what is it
3.12% above
2.71% about 41 basis points higher than
that average yes they broke through the
3% yield Starbucks's yield is
2.63% that's 49 basis points above their
fiveyear average of
2.14% woo got to like that as well and
Pepsi oh so close 2.99% yield um which
is about 20 basis points higher than
their
2.79% fiveyear yield average oh man so
all three have pretty modest yields and
strong dividend growth rate combinations
it is beautiful for these dividend
stocks that's the combo you want
Starbucks offering typically and
technically the best yielding dividend
growth combo the onew punch followed by
um pep see than J&J guys you know again
I've been buying all three stocks you
know I like the price where J&J and
Starbucks is obviously do your own
research but I like the stocks these are
two stocks to buy Pepsi you can't go
wrong buying the stock at this price
preferably I'd like it below 165 yeah I
agree all three are great stocks and
you're right Pepsi below 165 is great
but as you've said the one thing to
caution with Pepsi it's really hard to
get Pepsi when the valuation is looking
great so if you're also at a beginning
stage where you're not you don't you're
not in the position to be as stubborn as
Lanny right now um and you're looking
for that Foundation stock Pepsi this
could potentially be a great time to
start building that position let us know
what you guys think of these three
stocks we got Johnson and Johnson stock
Starbucks stock and Pepsi stock do you
think these are three stocks to buy
right now what other stocks are you
buying here in 2024 let us know in those
comments below you haven't already
subscribe to the channel
give this video a good oldfashioned
thumbs up and remember H what do we need
to tell these diplom Maniacs out there
Lanny you listen up to Bronies you're
either with us or you're against us Jack
that was Bert the herd in Lanny from the
dividend diplomats over and
out
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