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TWO Undervalued CHEAP Dividend Aristocrats w/ Yields OVER 4%?! | Building Passive Income | Investing

Passive Income Tip: IRS defines passive income as only coming from two sources, or "passive activities": rental activity or "trade or business activities in which you do not materially participate." Other financial and government institutions also recognize it as an income obtained as a result of capital growth or in relation to negative gearing . Passive income is usually taxable Active income is earned income including all taxable income and wages the earner receives for working. Active income includes wages, self-employment income, and material participation in an S corporation or partnership. (en.wikipedia.org)

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We go over TWO Cheap Dividend Stocks to buy right now! These dividend aristocrats are undervalued against the entire stock market. Buying dividend stocks is a great way to build passive income.

Why do dividends matter? Dividends are one of the best passive income sources. Dividend investing increases your passive income, as you reach financial freedom!

Reference items:
►Fundrise – Dividend Diplomats Use this for Real Estate Investing: https://fundrise.sjv.io/9aJWW
►Dividend Diplomats Stock Portfolios: https://www.dividenddiplomats.com/our-dividend-stock-portfolios/
►Dividend Diplomats Blog: https://www.dividenddiplomats.com/

When we evaluate dividend growth stocks, we focus on three dividend diplomat stock screening metrics, to determine if the stock is undervalued:

1.) Price to Earnings Ratio Less than the S&P 500 and the competition
2.) Dividend Payout Ratio Less than 60%. This shows the stock can continue to pay the dividend and increase that passive income stream
3.) Dividend Growth Rate: We want to see a history of the dividend increasing, as well as a high dividend growth rate
**Bonus Metric**: The Dividend Yield, which determines how much you get paid to own the stock!

The two dividend stocks that are on the list to buy now, as the stock market has hit turbulence, are T. Rowe Price (TROW) and Leggett & Platt (LEG). Here are the results when reviewing the two stocks that are DOWN over 30% since this time last year.

First, the price to earnings ratios are below 14x forward earnings for both dividend stocks. The S&P 500 currently trades at 20x earnings. Therefore, both dividend growth stocks are undervalued against the stock market.

Second, the dividend payout ratios are both at or below 60%. In fact, T. Rowe price has a perfect dividend payout ratio that is just over 40%. Therefore. TROW has plenty of room to pay AND increase their dividend going forward. LEG is just a tad over 60%, at 60.22%.

Third, dividend growth. That's what these 2 cheap dividend stocks have in common. Both dividend stocks have increased dividends for OVER 25 years. In fact, LEG has increased their dividend for over 50 years! Leg is a dividend KING! Now, what about the growth rate, because inflation is also at all time highs? LEG is just about 5%, so slightly below the current rate of inflation. TROW, though, rocks an amazingly high dividend growth rate, with a growth rate over 13%!

Lastly, as you know, the dividend yields are high for these two dividend stocks. TROW is just at 4%, at 3.94%. Then, LEG comes in hot with a 4.48% dividend yield! You are definitely getting paid to own these stocks, much higher than your savings rate at your bank.

Both Dividend Diplomats are saying they would buy T. Rowe under $120 and Leggett & Platt below $36! Those are their price points that they'd add to their current stock positions.

The question then is – do you think these are two dividend stocks to buy now? Are you buying T. Rowe Price stock? Are you buying Leggett & Platt Stock? Let us know in the comments if you've been buying these two dividend aristocrats. What other stocks are you buying right now? Share your feedback in the comments, as we want to hear what assets you're buying to produce passive income!

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As always, we recommend conducting your own research to make your own decisions.

References
  • Cantner, U. , Joel, K. , & Schmidt, T. (2009). The use of knowledge management by German innovators. Journal of Knowledge Management13 (4), 187–203. doi:10.1108/13673270910971923  [Crossref][Web of Science ®][Google Scholar]
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