Three Dividend Stocks Worth Revisiting

Includes: MATW, NWN, WTR
by: New Low Observer
There are three stocks that I wish to bring to your attention that are on our Dividend Achiver Watch List. The most important element of these three stocks is that they were individually recommended by our team in the past and are now worth re-examining at this time to verify their respective merits.

First on our list is Matthews International (NASDAQ:MATW). Matthews International was initially recommended on March 31, 2009 near the lows of the bear market. At the time, according to Dow Theory, we felt that the company had upside targets of $31, $40, and $49. On August 4, 2009, we issued a sell recommendation of MATW when it was trading at $31.95, a gain of 10% in four months. Subsequently, MATW was able to get within $0.50 of the $40 target. After hitting the $39 range, MATW has fallen to the current level of $32.50. MATW has increased the dividend for 14 consecutive years in a row.

According to Value Line, MATW has a book value of $14.32. If we assume the lowest quarterly earnings during the worst of the economic crisis from Q4 2007 to Q1 2009 and project those earnings (the most conservative estimate) into the future, we get a Q1 2011 P/E ratio of 16.92. Value Line also considers MATW at fair valuation around $41.86 or 13 times cash flow per share. Using the most optimistic scenario according to Dow Theory, MATW is considered fairly valued at $35.77.

The next company of interest on the Dividend Achiever Watch List is AquaAmerica (NYSE:WTR). For what it is worth, our team recommended WTR at one of the lowest points in 2009 on October 31, 2009. Our December 16, 2009 sell recommendation achieved a gain of 10% in 46 days. After hitting the high of $17.89, WTR has fallen to the current level of $16.59.

According to Value Line, WTR is considered at fair valuation when it trades at $19.30. If we take the worst period of earnings during the market decline from Q4 2007 to Q1 2009 and project those earnings into the future, AquaAmerica would have a P/E ratio of 37.70. Again, we're seeking the worst case scenario in our future projections. This allows us to better assess the risks we are about to take. As long as WTR can stay above the $14 low of 2008, the fair value should be around $18.70.

Finally, the stock with the most potential among the three is Northwestern Natural Gas (NYSE:NWN). NWN was recommended on October 3, 2009 when the stock was trading a $40.94. At the time the recommendation was made the stock was at a relative low and proceeded to move higher. In the research that I did on NWN I found that since 1970, the stock has typically bottomed in the first four months of the year 72% of the time. Additionally, NWN has bottomed in the month of February eleven of the last 39 years or 28% of the time. This makes the decline from December at the price of $46 all the more interesting. We issued a sell recommendation of NWN on December 21, 2009 when the stock was selling around $45.25.

According to Value Line, NWN is considered to be fairly valued at $36.66. This implies that NWN has further to fall. However, with the consistency of hitting bottom in the first quarter of the year, especially in February, NWN is worthy of consideration at these levels. Suffice to say, I am most tempted by NWN and will continue to follow this stock for an ideal entry point.

Disclosure: No positions