Over the last several weeks, the number of dividend stocks my model identified as a buy has greatly declined. On July 3rd it flagged 14 stocks as potential buys verses only 7 stocks on August 29th. The August 29th list had the advantage of using a quarter point lower minimum dividend. Needless to say the recent market rally has made many dividend stocks expensive.
Several market observers believe the market has moved too high too fast. In a recent Wall Street Journal article Jason Zweig expressed his concern. Here are some points he made:
I have long believed that most people will lose money in the stock market over their lifetime. The above provides indirect evidence of my hypothesis. Emotion is a powerful thing the fear of losing it all or missing out when everyone else is making money drives some people to make bad decisions. To be a successful investor, you need a winning process and a firm conviction to stand by it during the good and bad times. Otherwise, you would be better off not investing in stocks.
Here are five dividend stocks that are trading below their calculated fair value:
Automatic Data Processing Inc (ADP) - Analysis
Automatic Data Processing Inc. is one of the world's largest independent computing services companies, provides a broad range of data processing services.
Cardinal Health Inc (CAH) - Analysis
Cardinal Health Inc. is one of the leading wholesale distributors of pharmaceuticals, medical/surgical supplies and related products to a broad range of health care customers.
Dover Corp. (DOV) - Analysis
Dover Corp. manufactures a broad range of specialized industrial products and sophisticated manufacturing equipment.
Emerson Electric Co. (EMR) - Analysis
Emerson Electric Co. primarily makes backup power equipment for telecom and Internet providers and users, climate control components, and electric motors.
Sysco Corp. (SYY) - Analysis
SYSCO Corporation, through its subsidiaries, engages in the marketing and distribution of a range of food and related products primarily for food service industry in the United States and Canada.
My investing process involves selecting stocks from quality companies that have a history of consistently increasing their dividends. I believe in this methodology enough to stick with it through the good and bad times.
Related Articles:
Stocks Are Getting Expensive
Posted by D4L | Thursday, September 03, 2009 | commentary | 3 comments »________________________________________________________________
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Are these large enough discounts to produce acceptable returns? I agree that stocks are expensive, and would want a greater margin of safety than what is noted above.
Investorpoet: The discounts are probably not large enough from a pure value standpoint. However, I am dividend/income investor first and apply value principles to identify good entry points. If the intended holding period is "forever",that provides some room on the entry point.
Best Wishes,
D4L
Makes sense. Those are all fine companies that you mentioned. Most of those yields beat any CD or short-term treasury bond out there. Plus there is the likelihood of dividend increases on the horizon. I added your site to my blogroll.
Thanks!