These Dividend Stocks Are A STEAL - I'm Buying More
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The stock market is a roller coaster. By now, that’s no surprise.
All year, we’ve been riding it to all-time highs, with my own portfolio value soaring from about $50k at the start of 2024 to a recent peak of just under $70k, and I haven’t been alone in this ascent.
Source: getquin | My portfolio performance
As sweet as these last few months have been, this crazy ride to the top has made us forget the #1 rule of rollercoasters: What goes up must come down. These last couple of weeks have certainly reminded us of that.
The market had been banking on the Federal Reserve to cut interest rates starting in June, but with inflation still going strong and the likelihood of interest rate cuts diminishing, stocks reacted with gut-wrenching drops, sending our portfolio values back down to Earth on a bittersweet descent.
I say “bittersweet” because it’s not all bad.
Sure, it stings to see the value of your assets going down, but as I’ve written before, there’s a bright side to every downside, and lower share prices can actually be beneficial for investors.
Warren Buffett actually touched on this in one of the Berkshire Hathaway annual shareholder letters. He wrote:
“Even if our partially-owned businesses continue to perform well in an economic sense, there will be years when they perform poorly in the market. At such times our net worth could shrink significantly. We will not be distressed by such a shrinkage; if the businesses continue to look attractive and we have cash available, we simply will add to our holdings at even more favorable prices.”
In other words, if the business fundamentals remain strong, a lower share price simply means that you can purchase the stock at a discounted rate, and you can buy more shares for the same dollars invested. That’s a win!
And if you’re buying dividend stocks, there’s an extra dimension to all of that.
When the share price goes down, the dividend yield goes up. So you can lock in a higher cash flow return on the shares you purchase at the lower price.
In my portfolio, there’s quite a few great opportunities to do exactly that. Out of the bunch, two stocks, in particular, have caught my eye during this downturn.
Johnson & Johnson (JNJ)
Following a 9% decline just in the last month, Johnson & Johnson is sitting within arm’s reach of its 52-week low. As a result, my own position is in the red by 9.6%, presenting a great opportunity to buy shares at a discount while reducing my average cost per share.
Johnson & Johnson is one of the most steady, dependable dividend payers out there. This company is a dividend king with a 61 year growth streak, and right now the yield is sitting about 26.2% above the 5-year average, which means there’s a chance to lock in a higher-than-usual cash flow return.
Starbucks (SBUX)
Starbucks has also seen a substantial downturn, with a near 4.5% drop in the last month and an even more significant year-to-date drop of almost 10%. This leaves my own position down 5.6%, once again creating a prime opportunity to purchase shares at a discount and lower my average cost per share.
Buying at today’s price—$86 at the time I’m writing this—allows you to secure a yield that’s 32% higher than the 5-year average, which pairs perfectly with the company’s track record of tremendous dividend growth.
Starbucks has increased its dividend for the past 13 years, with an average annual growth rate of nearly 10% over the last 5 years.
All in all, both Johnson & Johnson and Starbucks are getting too good to ignore. These are two of my core positions, and I’m excited to have the opportunity to buy more shares of them at discounted prices.
In fact, that’s exactly what I did this week after experiencing my biggest day of dividends ever (over $100 🤯), which I’m telling you all about here.
With that said, I want to hear from you: Which dividend stock discounts have you been taking advantage of? Write to me here and let me know.
And a big thank you to all of the readers who responded to last week's newsletter! You can read some of the responses down below in the "Hot Takes" section. 👇
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IN MY PORTFOLIO 📈
Track your portfolio for free with getquin. You can also follow mine there (@ryne) to see all of my purchases, dividends, and other updates in real-time.
ICYMI 🎥
My Dividend Portfolio Is Dropping FAST - What I'm Buying
My dividend portfolio has been dropping fast, and in this video, I'm sharing which discounted dividend stocks I'm buying on the dip.
CAREFULLY CURATED 🔍
📺 From Broke To Millionaire in Eleven Years - This was a really insightful conversation between Russ and Fabio Marciano, a self-proclaimed "millionaire-next-door" who went from having a negative net worth at 25 years old to becoming a millionaire at 36.
🎧 The Path Toward Investment Wisdom - Dr. Aswath Damodaran, AKA "The Dean of Valuation," is a fountain of knowledge when it comes to stock analysis and valuation. I think you'll really enjoy this conversation with him on the Investing The Templeton Way podcast.
📚 Smart Words From Smart People - This blog article written by Morgan Housel is exactly what it sounds like: A collection of insightful quotes from some truly insightful people, ranging from Chris Rock to Dee Hock.
SINCE YOU ASKED 💬
"I want to have some cash on the sideline in case a good deal pops up. What do you do with your cash position?"
- Andrew | Email Submission
I usually don't keep much money directly in my brokerage account unless I sell out of something and have cash to reinvest. But I do keep a decent amount of cash on-hand in general, maybe more than I should.
Some of it sits in my checking account, but I keep the majority in a high-yield savings account that currently pays 4.25% in interest. If I'm going to hold onto cash, I might as well get paid for it.
Within the high-yield savings account, I have different buckets for different things like general savings, travel, or to buy a house. Every month, I transfer some money into that account and divvy it up across those different buckets.
Have a question? Ask me here to see it featured in an upcoming newsletter.
HOT TAKES 🔥
Last week, I asked readers about their biggest struggle as an investor. Here are some of the responses:
Pat said: My biggest struggle has become ethics. Not just the old Chevrons and Altrias of the world, which destroy humanity but kick out nice dividends. Increasingly, though, insurance companies have made me re-think what I want to have in my dividend portfolio. As a Floridian, I've been absolutely hammered by home and auto insurance rates the past two years. These companies are making obscene profits with impunity.
Diane said: My biggest struggle would have to have been listening to the white noise and not blocking it out completely!!! I took the advice of random investing gurus and either sold quickly, or overbought. In the end, it stung!!! Now, I am learning to do my own research, and trust my instincts!!!
Mark said: One thing I struggle with is checking everything daily, and sometimes getting caught up in one bad day or one bad week in the market. As my accounts grow, a 1-2% selloff has me losing closer to 5 figures (combined between accounts), so I have to remind myself that this is what the market will do, and as bad as things were in 2022, 2023 made up for it, and that entire time, I was just continuing to accumulate shares and reinvest dividends. As a long term investor, the selloffs can be a great opportunity to DCA into some positions, so I need to always try to remain positive when all you hear is doom and gloom about a bear market.
Clay said: To be honest, my biggest struggle faces me in the mirror. I've had to do some real soul searching on my investment thesis, goals, and desires. For a long time, I was approaching it for income, so I too sought after high yielding investments. To my dismay, after taking taxes into account, my returns were way off the S&P 500 benchmark. I've struggled with growth over income for a couple years, and I've adjusted my positions to provide growth with income, while being more tax efficient.
LAST WORD 👋
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