Looking For Bargain Dividend Stocks

Searching for yield, investors have been racing to buy dividend-paying stocks. Favorite choices include AT&T(T_) and Duke Energy(DUK_), which both yield more than 4.6%, a rich payout at a time when 10-year Treasuries yield only 1.63%. Now some fund managers worry that high-yield stocks have become too rich. According to T. Rowe Price, a warning signal went off recently when dividend-paying stocks became more expensive than non-dividend payers -- a big change from the pattern that has held for past three decades.

"A few years ago, it was like shooting fish in a barrel because all the dividend stocks were so cheap," says David Abella, portfolio manager of Rochdale Dividend & Income(RIMHX_). "Now you have to search for names that have been overlooked." Should you stay away from dividend-oriented funds? Not necessarily. But for safety, consider one of the top-performing funds that have been altering strategies to avoid buying overvalued stocks. A solid choice is T. Rowe Price Dividend Growth(PRDGX_). During the past five years, the fund returned 2.3% annually, outdoing 88% of large blend funds.

Source: TheStreet

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