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Long only, value, growth, dividend investing
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Summary

  • General Electric provides an excellent dividend and the company is priming itself for earnings growth.
  • Cisco is an excellent value dividend stock and the stock price is turning back around and heading in the right direction.
  • Williams-Sonoma isn't a name you hear about at all, but it pays an excellent dividend.

How is your portfolio looking after Friday's selloff in the market with the Dow Jones Industrial Average Index falling 0.85% for the day while the S&P 500 dropped 0.81% and the Nasdaq was down 1.75%? Jeff Bezos, the CEO of Amazon (NASDAQ:AMZN) lost $2.8 billion in a day because his high flying momentum company lost 9.88% on the back of earnings. It seems as if Wall Street is taking money out of the high flying momentum names and putting that money to work in the large cap value names of the Dow. I have a diversified value dividend portfolio which usually beats the markets handily on days like Friday. But that wasn't the case this Friday as KLA-Tencor (NASDAQ:KLAC) announced guidance which didn't meet analyst expectations and dropped 7.13% on the back of that. KLAC is my sixth largest position in the dividend portfolio and with that huge loss I was still even with the markets with the dividend portfolio only losing 0.86% of its value even with the horrible announcement from KLAC. To tell you the truth, I'm pretty happy about the way the portfolio has been performing of late. That's because I invest in value dividend paying stocks as opposed to high flyers because I believe that slow and steady wins the race.

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.

General Electric Company (NYSE:GE)

GE is a diversified technology and financial services company operating in the segments of aircraft engines, power generation, industrial products, water processing, household appliances, medical imagine, and business and consumer financing. On 17Apr14, GE reported first quarter 2014 earnings of $0.33 per share. This result beat the consensus of the 10 analysts following the company by a penny and missed last year's first quarter results by 5.71%. GE's PE ratio is below the miscellaneous capital goods industry average and signals that investors are not willing to pay a premium for this stock, making it a value story. Additionally, during the past year, earnings growth has outpaced its historical five year growth rate.

The company went ex-dividend on 20Feb14 with a $0.22 per share dividend which was paid on 25Apr14 for a yield of 3.31%. In terms of news pertaining to the company this week, it was rumored by Bloomberg that the company was in talks to buy French conglomerate Alstom for $13 billion. Alstom (OTCPK:ALSMY) later then dismissed reports about a GE takeover. The French Economy Minister then said that they are working on an alternative to the deal where Alstom can possibly sell only its energy assets to GE. GE also announced that it named ex-Vanguard chairman John Brennan as the lead board director.

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 approaching overbought territory with a current value of 63.19, while the MACD chart below shows the black line above the red line with flattening divergence bars, meaning the bullish momentum on the stock price is getting tired. I anticipate the stock to start dropping near here and will not pull the trigger on a new batch.

(click to enlarge)

Cisco Systems, Inc. (NASDAQ:CSCO)

Cisco designs, manufactures and sells internet protocol-based networking and other products related to the communications and information technology industry and provides services associated with these products and their use. On 12Feb14, Cisco reported second quarter 2014 earnings of $0.47 per share. This result was in-line with the consensus of the 35 analysts following the company and missed last year's second quarter results by7.84%. Cisco's PE ratio is below the communications equipment industry average and signals that investors are not willing to pay a premium for this stock, making it a value story. Additionally, during the past year, earnings growth has outpaced its historical five year growth rate.

The company went ex-dividend on 01Apr14 with a $0.19 per share dividend which was paid on 23Apr14 for a yield of 3.3%. 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 in middle-ground territory with a current value of 54.91, while the MACD chart below shows the black line just about to cross below the red line with decreasing divergence bars, meaning there is bearish momentum on the stock price. I anticipate the stock to drop a bit more and will not pull the trigger on a new batch.

(click to enlarge)

Williams Sonoma, Inc. (NYSE:WSM)

Williams-Sonoma is a specialty retailer of products for the home, operating stores under the name of Williams-Sonoma, Pottery Barn, Pottery Barn Kids, West Elm and Rejuvenation. On 12Mar14, the company reported fourth quarter 2014 earnings of $1.38 per share. This result beat the consensus of the 25 analysts following the company by $0.03 and beat last year's fourth quarter results by 2.99%. The company's PE ratio is below the furniture & fixtures 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 23Apr14 with a $0.33 per share dividend which will be paid on 28May14 for a yield of 2.12%. 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 in middle-ground territory with a current value of 45.89, while the MACD chart below shows the black line below the red line with increasing divergence bars, meaning there may be some bullish momentum on the stock price. Due to the bullish technicals I'll be making a purchase in the stock at these levels.

(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!

Source: 1 Value Dividend Stock To Buy Now And 2 To Wait For

Additional disclosure: Amazon is in my growth portfolio and KLAC is in my dividend portfolio.