6 High Yield Dividend Stocks You'll Wish You'd Bought

In one form or another, I get the question daily, “What do you think of the market? Where’s it headed?” Normally, I politely respond as expected, but occasionally I will startle the person with a reply like, “I don’t know. For me it really doesn’t matter much.” My investing goals are not defined by movements in the market.

Many people define the market broadly as the S&P 500. Very little of my total portfolio is in a S&P 500 index. Its movements up or down have minimal effect on my goals. As a value-based dividend investor, it is in my best interest to have stocks depressed and yields high, at least for the short-term. This provides a choice between worthy investments, unlike the market boom years when it was a struggle to find fairly priced stocks.

Focus On Solid Dividend Stocks, Not The Market

Instead of looking at the market and its direction, investors in dividend stocks should focus on quality, price and ultimate value. Below are several quality 3, 4 and 5 Star dividend stocks selling below their calculated fair value (as of 8/11/09):

• McDonald’s Corp. (MCD) – 3-Star – Buy Price: $67.86 – Recent Price: $56.02 – Analysis
• Walgreen Co. (WAG) – 3-Star – Buy Price: $35.79 – Recent Price: $30.74
• Lowe’s Companies Inc. (LOW) – 4-Star – Buy Price: $30.92 – Recent Price: $23.26 – Analysis
• Emerson Electric Co (EMR) – 5-Star – Buy Price: $38.34 – Recent Price: $35.97 – Analysis
• Cardinal Health, Inc. (CAH) – 5-Star – Buy Price: $41.49 – Recent Price: $32.90 – Analysis
• Dover Corp. (DOV) – 5-Star – Buy Price: $33.37 – Recent Price: $35.97 – Analysis
  

The time will come at some point in the future where we once again struggle to find fairly priced stocks. At that point, we will likely look back and regret not buying more when we had the opportunity.

Full Disclosure: Long MCD, EMR. See a list of all my income holdings here.

Comments

[Ernesto Gom...:]

Your investing goals are not "defined" by movements in the market?

WTF does that mean?

There is only ONE "investment goal" worth having: Maximum Capital Appreciation.

And only one path worth following to get there: Minimum Risk.

The trick is how to do it.

Anyone who is going to simply keep buying regardless of market direction or trend, ought to at the very least, adopt a plant of picking only solid companies and selling slightly in-the-money short-duration puts as a means of entry.

If you are wrong, and the share price drops, you save a few $$ off the net prices you would have otherwise paid.

If you are right, and the share price climbs, you keep the put $$ for free and gain free cash flow - which is what dividend investors seek.

Aug 19 07:23 AM

[redbaron:]

Ernesto, if you would click on the blue link within the sentence in the article you are quoting, you would get a full page explanation on the authors investment goals and philosophies, and how he measures performance towards those goals. Perhaps you might find that helpful.

Aug 19 07:55 AM

[BlueOkie:]

This sounds like a investment of buying the company not the stock. Not bad for the long term! The downside for dividends is that they are taxable where stock price increase is not. If the 2010 tax laws are allowed to expire, dividend stocks could take a big hit.

Aug 19 08:40 AM

[Michael D.:]

Investment goal: Growth in dividend income.

Aug 19 08:40 AM

[Advill:]

What opinion you have of WINDSTREAM CORP (WIN) providing a 12% yield?...sustainable?.

Regards.

Aug 19 08:41 AM

[indefinitelee:]

how is WAG a high yield stock at 1.8%?

Aug 19 09:45 AM

[jculley:]

The only problem I see with WIN is that the payout ratio is sitting at 117% which they obviously can't keep doing. The CEO has said the dividend is safe but remember that Liveris (DOW) and Immelt (GE) said the same thing before slashing dividends.

The economy appears to be coming back faster then anyone anticipated which could help restore some of that 57% loss in revenue for WIN and cover that dividend.

I don't think a position in WIN would be a terrible idea if it is part of your speculative portfolio.

Aug 19 10:50 AM

[Advill:]

Thanks, Jcully appreciate the info.
Regards


On Aug 19 10:50 AM jculley wrote:

> The only problem I see with WIN is that the payout ratio is sitting
> at 117% which they obviously can't keep doing. The CEO has said the
> dividend is safe but remember that Liveris (seekingalpha.com/symbo...)
> and Immelt (seekingalpha.com/symbo...) said the same thing
> before slashing dividends.
>
> The economy appears to be coming back faster then anyone anticipated
> which could help restore some of that 57% loss in revenue for WIN
> and cover that dividend.
>
> I don't think a position in WIN would be a terrible idea if it is
> part of your speculative portfolio.

Aug 19 02:01 PM

[El rosarino:]

I like your investment approach, but you should look the indexes and have a good timing for entry points. It is part of the value investor to wait and have patience for the right moment.

Aug 19 05:52 PM