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Summary

  • Value dividend stocks are what I'm preaching about.
  • Wells Fargo should be raising its dividend next quarter.
  • Phillips 66 is undervalued with respect to 2015 earnings.
  • KLAC is up 9.06% including dividends versus the S&P 500's 5.41% gain since winning my Dividend Portfolio Super Bowl back on 28Jan14.

The week played out with intensifying tensions between Russia and Ukraine but yet, the Dow Jones Industrial Average rose 0.8% on the week for its second week of gains in as many tries, while the S&P 500 rose 1% and the Nasdaq escalated 0.7% for the week. What does this all mean you think? Remember in last week's roundup I told you the market is so jittery that, "it's just going to take an elephant at the San Diego Zoo to sneeze and the market will drop"? It meant that last week's selloff was just another buying opportunity for excellent stocks. Granted, Friday was a wild ride after the jobs number; all the major indices started off sizzling but cooled off towards the end of the day. Though the market declined after the jobs report, I don't believe it was anything to worry about because it was just an okay number. I believe the indices remained flat after the jobs report because it was so hot during the week that it just needed a breather.

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.

Wells Fargo & Co (NYSE:WFC)

Wells Fargo is a bank holding company which operates in three segments: Community Banking, Wholesale Banking and Wealth, Brokerage and Retirement. On 14Jan14, Wells Fargo reported fourth quarter 2013 earnings of $1.00 per share. This result was in-line with the consensus of the 32 analysts following the company 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 was paid on 01Mar14 for a yield of 2.50%. In terms of news pertaining to the company this week, it settled a law suit to repay homeowners up to 11% of the premiums paid.

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 overbought territory with a current value of 73.69, while the MACD chart below shows the black line above 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 just for a little bit but I wouldn't be initiating a new position here.

(click to enlarge)

Phillips 66 (NYSE:PSX)

Phillips 66 is engaged in producing natural gas liquids and petrochemicals. On 29Jan14, Phillips reported fourth quarter 2013 earnings of $1.34 per share. This result beat the $1.10 consensus of the 16 analysts covering the company and missed last year's fourth quarter results by 34.95%. Phillips' PE ratio is below the Oil & Gas Operations industry average and signals that investors are not willing to pay a premium for this stock, 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 13Feb14 with a $0.39 per share dividend which was paid on 03Mar14 for a yield of 2%. In terms of news pertaining to the company this week, there were no press releases issued during the week by the company.

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 overbought territory with a current value of 62.61, while 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 for now but wouldn't be buying any new positions here.

(click to enlarge)

KLA-Tencor Corp (NASDAQ:KLAC)

KLAC is engaged in the design, manufacture and marketing of process control and yield management solutions for the semiconductor and related nano-electronics industries. On 23Jan14, KLAC reported second quarter 2014 earnings of $0.85 per share. This result beat the $0.80 consensus of the 17 analysts covering the company and beat last year's second quarter results by 34.92%. KLAC's PE ratio is below the Semiconductors industry average and signals that investors are not willing to pay a premium for this stock, 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 13Feb14 with a $0.45 per share dividend which was paid on 03Mar14 for a yield of 2.69%. In terms of news pertaining to the company this week, there were no press releases issued during the week by the company.

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 overbought territory with a current value of 69.55, while 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 for now but wouldn't be buying any new positions here.

(click to enlarge)

Conclusion

I've highlighted these names because they have all raised their dividend 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!

Disclosure: I am long WFC, PSX, KLAC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: Wait For Wells Fargo And These Other 2 Value Dividend Stocks To Come In