3 Ridiculously Undervalued Dividend Stock Picks
I am excited to share three #dividend #stock #picks that are true values right now! One of them, AbbVie (ABBV), I have already discussed recently. However, I want to shed some new light on this value stock, since some investors are thinking about acquiring shares via Allergan (AGN). I also want to share two other stock picks I have not discussed too much recently, Johnson & Johnson (JNJ) and also Caterpillar (CAT). I truly enjoy a good stock market sale.
0:00 Introduction – There are three dividend stocks that offer ridiculous value (as compared to the broader stock market)
0:55 Value stock pick 1 - AbbVie (ABBV)
3:00 Is it better to buy AbbVie (ABBV) or Allergan (AGN)?
9:09 Here’s why it makes no sense for me to buy Allergan (AGN).
12:35 Who would this AGN strategy work for? Probably someone who is extremely heavy on cash (perhaps 50% cash and 50% stocks).
15:17 Value stock pick 2 – Johnson & Johnson (JNJ)
23:08 Value stock pick 3 – Caterpillar (CAT)
Stock Pick 1: AbbVie (ABBV)
On Friday, I bought more at $69.72. That’s after starting my position in ABBV a few weeks back at $69.02. Buying in this range is a no brainer, in my opinion, for a few reasons:
* Starting dividend yield is 6.14%
* Payout ratio (forward 2019) is 49%
* PE ratio (forward 2019) is 7.94
* 5-year dividend CAGR is 21%
Some subscribers are wondering what I think about buying ABBV via shares of AGN, since there is an arbitrage opportunity. Justin Law just wrote a really good article on this topic for Seeking Alpha: https://seekingalpha.com/article/4274785-like-abbvie-buying-allergan
* Here’s the deal: Each share of AGN gets you $120.30 in cash and 0.866 share of ABBV
* AGN is currently at $165.85/share
* With ABBV currently at $70.28 for Justin’s analysis, AGN should be trading at $120.30 + (0.866* $70.28) = $181.16/share.
* There is 9.2% upside on that $165.85 purchase price.
* Put another way… $165.85 - $120.30 = $45.55 for 0.866 shares of ABBV
* $45.55 / 0.866 = $52.6 per share of ABBV
* $70.28 - $52.6 = $17.68
* $17.68 / $70.28 = 25% discount
1) What if the deal doesn’t go through?
2) Paying $165.85 for $45.55 worth of ABBV
a. Low leverage way of buying ABBV (need a lot of money deployed for a meaningful position in ABBV)
b. 27% goes to ABBV, 73% goes back to cash
3) When the cash comes back in 2020, will have to redeploy (what if there are no great opportunities at the time?)
Stock Pick 2: Johnson & Johnson
* Watch today's video for more on this stock pick.
Value Stock Pick 3: Caterpillar
* Watch today's dividend investing video for more!
Learn more about AbbVie (ABBV) in my recent video stock analysis: https://www.youtube.com/watch?v=PencxhwwfIY
I’m now using dividends to pay some of my bills: https://www.youtube.com/watch?v=bM3J2NRq27M
Johnson & Johnson (JNJ) tanked in December. Here’s my video from that time: https://www.youtube.com/watch?v=2tqig5D3l8c
Here’s my complete dividend stock portfolio for your download: https://www.youtube.com/watch?v=hx6pMUZZb9U
Here’s my international dividend stock analysis: https://www.youtube.com/watch?v=WrAR-BK1opU
DISCLOSURE: I am long 3M (MMM), Cedar Fair (FUN), Apple (AAPL), AbbVie (ABBV), Johnson & Johnson (JNJ), and Caterpillar (CAT). I own these stocks in my stock portfolio.
DISCLAIMER: All information and data on my YouTube Channel, blog, email newsletters, white papers, Excel files, and other materials is solely for informational purposes. I make no representations as to the accuracy, completeness, suitability or validity of any information. I will not be liable for any errors, omissions, losses, injuries or damages arising from its display or use. All information is provided AS IS with no warranties, and confers no rights. I will not be responsible for the accuracy of material that is linked on this site.
Because the information herein is based on my personal opinion and experience, it should not be considered professional financial investment advice or tax advice. The ideas and strategies that I provide should never be used without first assessing your own personal/financial situation, or without consulting a financial and/or tax professional. My thoughts and opinions may also change from time to time as I acquire more knowledge. These are, as discussed above, solely my thoughts and opinions. I reserve the right to delete any comments for any reason (abusive in nature, contain profanity, etc.). Your continued reading/use of my YouTube Channel, blog, email newsletters, whitepapers, Excel files, and other materials constitutes your agreement with and acceptance of this disclaimer.
COPYRIGHT: All PPC Ian videos, Excel files, guides, and other content are (c) Copyright IJL Productions LLC. PPC Ian is a registered trademark (tm) of IJL Productions LLC.