Many Blue-Chip Dividend Stocks Aren't Overvalued

As major stock indexes repeatedly hit record highs, some market commentators warn that the market is overvalued. But high-quality dividend stocks aren't overpriced, and that bodes well for the market as a whole, says Mark Hulbert editor of Hulbert Financial Digest. "There turns out to be plenty of high-quality, dividend-paying blue-chip stocks that are not overvalued," he writes in an article for MarketWatch. "On those past occasions when there were as many of those stocks as there are now, the stock market performed quite well, thank you."

Hulbert cites research from Kelley Wright, editor of Investment Quality Trends newsletter.
Wright looked at 254 blue-chip dividend stocks and found that 42.9 percent have currently risen out of undervalued territory, but not into overvalued territory. That compares with an average of 30.7 percent since 1966. This metric has "statistically significant explanatory power for the market's direction over the subsequent three years," Hulbert writes. "By no means should we consider the bullish message of Wright's data to apply to the near term. For example, even if that message turns out to be right and the market is higher in the summer of 2017, stocks could still undergo a nasty decline along the way," he warns.

Source: Money News

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