Stocks have rallied pretty well for the past two days; but is it a head-fake within a broader market decline? What appeared to be a bad jobs report (creating of 113,000 jobs in January versus expectations of 185,000 jobs) on Friday 07Feb14 was shrugged off by the market perhaps on investors thinking the Federal Reserve will continue with the quantitative easing as opposed to proceeding with the tapering of it. Stocks appreciated dramatically on Friday the 7th, assisting the Dow Jones Industrial Average rise 0.6% on the week while the S&P500 and the Nasdaq logged a 0.8% and 0.5% gain on the week, respectively. I've been preaching for quite some time that value dividend stocks are the place to be, I believe there will be more downside to come, and as long as you're in excellent dividend paying value stocks you should be fine.
Call me a pessimistic optimist, but for now I will continue the course and purchase value stocks for my dividend portfolio. Value investing is the bread and butter of Warren Buffett's money-making strategy. The essence of value investing is basically purchasing a stock at less than market value based on certain metrics. My philosophy on dividend investing is to utilize the forward price to earnings ratio and use a one-year PEG ratio, along with a dividend. I don't necessarily look for a stock with a high yield because I like to see capital appreciation. Because the market may be correcting itself from all-time highs I maintain that it is difficult to find good stocks these days. That's why I'm highlighting a select set of excellent value companies in my dividend portfolio, which have had ex-dividend dates or paid out a dividend during this past week or early next week that people should place on their radar.
AT&T Inc. (T)
AT&T is a provider of telecommunications services in the U.S. and worldwide. On 28Jan14, AT&T reported fourth quarter 2013 earnings of $0.53 per share. This result beat the $0.50 consensus of the 27 analysts covering the company and beat last year's fourth quarter results by 20.45%. AT&T's PE ratio is among the lowest of any stock in the communications services industry and signals that investors have not been willing to pay a premium for this company's business prospects, making it a value story.
The company went ex-dividend on 08Jan14 with a $0.46 per share dividend which was paid on 03Feb14 for a yield of 5.7%. During the week the company launched family plans for families looking to share 10 gigabytes of data per month between accounts while getting unlimited talk and texts; this plan is in retaliation to T-Mobile's (TMUS) increasing rivalry to attract AT&T's customers.
Let's take a quick look at the technicals here to see if it can be bought at these levels or if a pullback is coming. As we can see, the relative strength index is bouncing off oversold territory with a current value of 37.44, while the MACD chart below shows the black line below the red line with increasing divergence bars, meaning there may be some upward momentum on the stock price. I anticipate the stock to move up for now and I will be buying it.
Wells Fargo & Co. (WFC)
Wells Fargo & Co (WFC) is a bank holding company which operates in three segments: Community Banking, Wholesale Banking and Wealth, Brokerage and Retirement. On 14Jan14, WFC reported fourth quarter 2013 earnings of $1.00 per share. This result beat the consensus of the 32 analysts following the company by $0.02 and beat last year's fourth quarter results by 8.70%. Wells' PE ratio is among the lowest of any stock in the regional banks industry and signals that investors have not been willing to pay a premium for this company's business prospects, making it a value story. However, during the past year, earnings growth has lagged its historical five year growth rate.
The company went ex-dividend on 05Feb14 with a $0.30 per share dividend which will be paid on 01Mar14 for a yield of 2.64%. In terms of news pertaining to the company this week, the company became the most valuable bank brand on the planet according to Brand Finance and a New York regulator put a stop to the Ocwen-Wells deal where Wells was going to sell $2.7 billion worth of mortgage servicing rights due to concerns that Ocwen (OCN) can't handle more loans.
Let's take a quick look at the technicals here to see if it can be bought at these levels or if a pullback is coming. As we can see, the relative strength index is near middle-ground territory with a current value of 52.98 with upward trajectory, while the MACD chart below shows the black line below the red line with the divergence bars increasing in height, meaning there may be some bullish momentum coming. I anticipate the stock to move up for now and I will be buying it.
Consolidated Edison, Inc. (ED)
Consolidated Edison Inc. is a holding company that owns Consolidated Edison Company of New York and Orange & Rockland Utilities. On 04Nov13, Edison reported third quarter 2013 earnings of $1.48 per share. This result beat the consensus of the 15 analysts following the company by $0.06 and beat last year's third quarter results by 2.78%. Edison's PE ratio is below the electric utilities industry average and signals that investors are not willing to pay a premium for this stock, making it a value stock. Additionally, during the past year, earnings growth has outpaced its historical five year growth rate.
The company will go ex-dividend on 10Feb14 with a $0.63 per share dividend which will be paid on 15Mar14 for a yield of 4.66%. It was a pretty quiet week in terms of news pertaining to the company specifically with no press releases being issued.
Let's take a quick look at the technicals here to see if it can be bought at these levels or if a pullback is coming. As we can see, the relative strength index is in middle-ground territory with a current value of 50.24 but has been gaining steam from the turn of the year. The MACD chart below shows the black line above the red line with the divergence bars increasing in height, meaning there may be some bullish momentum coming. I anticipate the stock to move up a little for now and will be buying it.
I've highlighted these names because they have all raised their dividend or initiated them within the past year and are poised to do so again in the coming years. It is important in this market to be able to hold onto companies which raise their dividend rates or initiated them, because it is a sign that the underlying company is doing well financially. The importance of these stocks I've highlighted is that they are value plays while the broader market may be correcting itself. I believe we are at a point in the market where we have to look for value.
Disclaimer: This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!
Additional disclosure: I am long OCN in my growth portfolio, not my dividend portfolio.