Dividends4Life: 2 Hated Dividend Stocks to Buy Now

2 Hated Dividend Stocks to Buy Now

Posted by D4L | Sunday, November 06, 2016 | | 0 comments »

With interest rates near historic lows, many income investors have flocked to high-yielding dividend stocks. That shift enabled many slow-growth blue chips to outperform the S&P 500, but also inflated their stock prices while reducing their dividend yields to historic lows. As a result, many of these dividend darlings could quickly deflate if interest rates rise. Investors looking for fundamentally cheaper stocks with decent yields might consider looking at "hated" dividend stocks that have underperformed the S&P 500's 6% gain over the past 12 months.

In this article, I'll narrow that field to stocks that trade at lower multiples than the S&P 500's price-to-earnings ratio of 25, while paying higher yields than the S&P 500's 2.1% yield. I'll also explain why these companies underperformed the market, how they're turning around their businesses, and why they might be better buys at current prices than more popular income plays: Gap's (NYSE:GPS) and IBM (NYSE:IBM). Income investors who see their favorite dividend stocks are trading at premiums to the market and their industries, with yields that have fallen to historic lows, might be wise to consider less appreciated dividend stocks like Gap and IBM, which aren't precariously perched atop rallies fueled by low interest rates.

Source: Motley Fool

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