Stock markets are recovering, at least in the near term. The S&P 500 Index is no longer in a bear market territory, although the Nasdaq and Russell 2000 still have 20% declines. As a result, some investors are moving back into the market, and an excellent place to look is the worst performing Q2 2022 dividend stocks.
The US economy is humming along. If you listen to some media, however, it does not sound like it. That said, the US added nearly 400,000 jobs in June, the fourth month of gains at that level and well above expectations of 250,000. The unemployment rate held steady at 3.6%. Jobs are plentiful and easy to find.
Next, gas prices have declined for about 24 straight days. After weeks of paying over $5 per gallon, I paid $4.99 last week and $4.75 yesterday. According to AAA, average gas prices are $4.696. This value is much better than before. Oil prices and other commodity prices are down too. So the next inflation report may be better than expected.
Consequently, according to the Freddie Mac website, mortgage rates are down from the recent high across the board.
The fears of a recession are intense, and the most accurate predictor, the yield curve, inverted. However, the 3-month and 10-year curves have not inverted, and the US Federal Reserve’s research shows that it is most accurate. So perhaps the US economy is poised for growth.
In any case, the worst performing Q2 2022 dividend stocks are an excellent place to look for undervalued investment opportunities. As Warren Buffett likes to say,
Price is what you pay; value is what you get.
We focus on dividend growth stocks.
Worst Performing Q2 2022 Dividend Stocks
Of the 39 Dividend Kings, according to Stock Rover*, 27 are down for the year. The worst performing stock is Stanley Black & Decker (SWK), while the best performing stock is Sysco (SYY). One of our authors argues that the company is not a good investment, and investors should pass on SWK.
However, there are many stocks to choose from the list, and some have dividend yields of more than 4%. One reader once said when a Dividend King yields more than 4%, it’s a no-brainer or something to that effect. Our favorite King is 3M Company (MMM), despite the legal issues surrounding PFAS and ear plugs.
Next, of the 141 Dividend Champions, 124 are down for the year. Some of these stocks are Dividend Aristocrats too. Again, the worst performing one is SWK, while the best performing one is Exxon Mobil (XOM), which is no surprise considering the price of oil and XOM’s relatively low breakeven point. The chart below shows only the stocks with negative returns due to space.
Several stocks with a 4%+ yield and in a bear market territory are Franklin Resources (BEN), International Business Machines (IBM), Federal Realty Investment Trust (FRT), VF Corporation (VFC), and T. Rowe Price (TROW). Additionally, Walgreens Boots Alliance (WBA) is yielding about 5.1%.
We have written articles about most of these stocks.
- T. Rowe Price (TROW): Attractive Valuation and 4% Dividend Yield
- 3M Company (MMM): Dividend Safety Analysis
- Franklin Resources (BEN): Dividend Safety Analysis
- IBM Dividend Safety Analysis
- VF Corporation (VFC): Undervalued Dividend Aristocrats
The following articles include an analysis of some of these stocks and a few others.
- 3 Low Volatility Stocks with High Yields
- 3 Highest Yielding Dividend Champions in 2022
- 3 Stocks to Buy in the Market Carnage
- 3 Undervalued Dividend Growth Stocks
- 5 Low Volatility Stocks in Rough Markets
- 3 Beaten Down Stock Yielding 4%
There are 347 Dividend Contenders, many of which have negative returns year-to-date (YTD). The worst performing stock is Culp (CULP), and the best performing one is Unum Group (UNM). Notably, one of our authors highlighted Unum earlier this year when it was undervalued. However, the stock price is up more than 32% YTD, so it is no longer the deal it once was.
Several of the Dividend Contenders with negative returns are undervalued with a 4%+ yield. Investors should further research Best Buy (BBY), Washington Trust (WASH), Northwestern (NWE), Medical Properties Trust (MPW), and Whirlpool (WHR). Cisco (CSCO) is undervalued but only has a 3.5% yield, while Verizon (VZ) is up for the year but is still yielding 5.1%.
- Cisco Systems (CSCO): Time to Buy
- Whirlpool (WHR): Undervalued and 4% Yield
- Best Buy: Overlooked Retailer is a Buy
- 3 Everyday Retail Stocks Yielding Over 3%
- Medical Properties Trust (MPW): Undervalued and 7% Yield
Final Thoughts on Worst Performing Q2 2022 Dividend Stocks
Investors trying to retire on $1 million and live off of dividends have an opportunity to purchase undervalued dividend growth stocks. A combination of 4%+ yield and undervaluation occurs only so often, and investors should take advantage.
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The Stock of the Week
Today we highlight Washington Trust (WASH), a small bank with operations in New England. According to Stock Rover*, the stock price was down about 12% in 2022 but is up 0.6% in the past 1-year. Banks are faced with lower mortgage demand as interest rates rise. However, WASH is countering this decline with loan demand, its wealth management business, and higher deposits.
The stock currently has a dividend yield of about 4.45%, the highest since the pandemic and more than the 5-year average of roughly 4%. In addition, WASH is a Dividend Contender and, according to Dividend Radar, has 12 years of dividend increases. The stock price is below the 50-day and 200-day exponential moving average (EMA). The forward P/E ratio is about 12.7X, near the lower end of its range in the past ten years.
Dividend Increases and Reinstatements
Search for a stock in the list of dividend increases and reinstatements. This list is updated weekly. In addition, you can search for your stocks by company name, ticker, and date.
Dividend Cuts and Suspensions List
The dividend cuts and suspensions list was most recently updated at the end of June 2022. As a result, the number of companies on the list has risen to 560. Thus, well over 10% of companies that pay dividends have cut or suspended them since the start of the COVID-19 pandemic. The list is updated monthly.
Three new additions indicate companies are experiencing solid profits and cash flow in June.
The new additions were National CineMedia (NCMI), Sissecam Resources LP (SIRE), and Sculptor Capital Management (SCU).
Dow Jones Industrial Averages (DJIA): 31,339 (+0.78%)
NASDAQ: 11,635 (+4.56%)
S&P 500: 3,899 (+1.94%)
The S&P 500 is trading at a price-to-earnings ratio of 19.71X, and the Schiller P/E Ratio is about 30.13X. These multiples are based on trailing twelve months (TTM) earnings.
Note that the long-term means of these two ratios are 15.97X and 16.95X, respectively.
The market is still overvalued despite the recent market correction and a bear market. Earnings multiples more than 30X are overvalued based on historical data.
S&P 500 PE Ratio History
Shiller PE Ratio History
Stock Market Volatility – CBOE VIX
This past week, the CBOE VIX measuring volatility was down about 2.0 points to 24.64. The long-term average is approximately 19 to 20. The CBOE VIX measures the stock market’s expectation of volatility based on S&P 500 Index options. It is commonly referred to as the fear index.
The two yield curves shown here are the 10-year US Treasury Bond minus the 3-month US Treasury Bill from the NY York Fed and the 10-year US Treasury Bond minus the 2-year US Treasury Bond from the St. Louis Fed.
Inversion of the yield curve has been increasingly viewed as a leading indicator of recessions about two to six quarters ahead, according to the NY Fed. The higher the spread between the two interest rates, the higher the probability of a recession.
The US Bureau of Labor Statistics Job Openings and Labor Turnover Survey, or JOLTS, reported 11.3 million job openings as of the last day of May, a decline from April’s revised 11.68M. April was adjusted up from 11.4M openings. This month marks the second straight monthly decline. Industries contributing to the decrease include professional and business services (-325,000), durable goods manufacturing (-138,000), and nondurable goods manufacturing (-70,000). On the other hand, there have been 78.4M hires and 72.0M separations over the past 12 months, resulting in a net employment gain of 6.4M.
The US Energy Information Administration reported that US commercial crude oil stockpiles increased by 8.2M barrelsto 423.8M (10% below the five-year average) on July 1st. Crude oil refinery inputs averaged 16.4M barrels per day, a decrease of 228K per day compared to the previous week’s average. Gasoline inventories decreased by 2.5M barrels (8% below the five-year average). Refineries operated at 94.5% of their operable capacity as gasoline production increased, averaging 10.3M barrels per day.
The US Bureau of Labor Statistics reported 372,000 jobs were added in June, as the unemployment rate stayed at 3.6% for the fourth month in a row, with 5.9M unemployed. February 2020’s pre-pandemic reading was 3.5%, with 5.7M unemployed. May’s payrolls were revised down (-6K) to 384K. The June increase in payrolls included notable gains in leisure and hospitality added (+67K), professional and business services (+74K), health care (+57K), transportation, and warehousing (+36K), manufacturing (+29K), and information (+25K). Retail trade payrolls were little changed and are still 159K above pre-pandemic levels. Private sector jobs are up (+140K) over February 2020, while government employment is down (-684K). Average hourly earnings increased 0.3% in June. At $32.08, average hourly earnings are up 5.1% from a year ago. Currently, there are 5.7M unemployed and 11.3M job openings.
Thanks for reading Worst Performing Q2 2022 Dividend Stocks – Week in Review!
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Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence. His writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial sites. In addition, he is part of the Portfolio Insight and Sure Dividend teams. He was recently in the top 1.0% and 100 (73 out of over 13,450) financial bloggers, as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.