Disclaimer: This monthly series focuses on dividend stocks that offer good value based on historical valuations. The selection process uses specific criteria to identify safe stocks that are trading at attractive prices compared to their historical valuations. Please note that this article provides general information and is not a recommendation to buy these stocks. Investors should conduct their own research before making any investment decisions.
Market Overview
In recent months, there has been a decrease in recession fears, and experts are now discussing a potential soft landing. The Federal Reserve raised interest rates in July, and it is expected to raise them again in the future. Although inflation is decreasing, there are mixed signals in the market.
The bull market’s future is uncertain, so it is best to invest regularly in dividend-paying stocks with attractive valuations. It is also important to have cash reserves available to take advantage of opportunities.
The Selection Process
We start with a pool of approximately 7,500 stocks listed on U.S. exchanges. Using specific criteria, we narrow down the list to around 700 dividend-paying stocks. We then calculate a “Dividend Quality Score” for each stock, taking into account factors such as dividend history, payout ratios, revenue growth, debt ratios, and EPS growth. We also consider valuations and the companies’ business models, dividend histories, debt levels, and credit ratings.
This month, we have three lists with five stocks each, categorized by dividend yield and risk level.
List A: Relatively Safe Income
Average Yield: 2.86%
- Automatic Data Processing Inc (ADP)
- Cigna Corp (CI)
- Qualcomm Inc (QCOM)
- United Parcel Service Inc (UPS)
- Chevron Corp (CVX)
List B: High Yield, Moderate Risk
Average Yield: 4.95%
- Automatic Data Processing Inc (ADP)
- Truist Financial Corp (TFC)
- United Parcel Service Inc (UPS)
- Enbridge Inc (ENB)
- NRG Energy Inc (NRG)
List C: Yield-Hungry, Elevated Risk
Average Yield: 7.36%
- United Parcel Service Inc (UPS)
- Crown Castle International Corp (CCI)
- MPLX LP (MPLX)
- Verizon Communications Inc (VZ)
- Ares Capital Corp (ARCC)
Conclusion
These lists provide options for investors with different risk profiles and income goals. The A-list offers a conservative approach with a focus on safety and preservation of capital. The B-list offers higher yields with marginal additional risk. The C-list is designed for yield-hungry investors willing to accept higher risk. The combined list includes ten diversified stocks with an average yield of 5.28%. It’s important for investors to perform their own research and due diligence before making any investment decisions.
