THREE Undervalued Dividend Stocks WE'RE BUYING! | Adding Passive Income to Reach Financial Freedom!

Summary

In 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.