It was another volatile week for stocks this week with triple digit losses on Thursday for the Dow Jones Industrial Average Index and a Friday that was mostly down until the last hour of the day when it just shot upwards all of a sudden. There's a lot to do bond yields going lower and taking stocks with them as if a recession is getting priced in. The Dow lost 0.55% for the week while the S&P 500 dropped 0. 03% and the Nasdaq was up 0.46%. In times like these I love picking up some more shares of value dividend stocks.
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.
Emerson Electric Co. (NYSE:EMR)
Emerson is a diversified global technology company which is engaged in designing and supplying products and technology, and delivering engineering services and solutions in the industrial and commercial worlds. On 06May14, Emerson reported second quarter 2014 earnings of $0.80 per share. This result missed the consensus of the 25 analysts following the company by a penny and beat last year's second quarter results by 3.90%. Emerson's PE ratio is below the Scientific & Technical Instr. 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 went ex-dividend on 14May14 with a $0.43 per share dividend which will be paid on 10Jun14 for a yield of 2.58%. In terms of news pertaining to the company, no press releases were released this week.
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 dropping from overbought territory with a current value of 46.48, while the MACD chart below shows the black line below the red line with divergence bars decreasing in height, meaning there may be some bearish momentum on the stock price. I anticipate the stock to drop some more and will not be putting any capital to work in the name right now.
KLA-Tencor Corp. (NASDAQ:KLAC)
KLAC is engaged in the design, manufacturing and marketing of process control and yield management solutions for the semiconductor and related nano-electronics industries. On 24Apr14, KLAC reported third quarter 2014 earnings of $1.23 per share. This result beat the $1.11 consensus of the 17 analysts covering the company and beat last year's third quarter results by 21.78%. 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 15May14 with a $0.45 per share dividend which will be paid on 02Jun14 for a yield of 2.85%. In terms of news pertaining to the company, no press releases were released this week.
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 45.32, while the MACD chart below shows the black line above the red line with increasing divergence bars, meaning there is bullish momentum on the stock price. I will consider buying a small batch of the stock at this price.
I've highlighted these names because they are poised to increase their dividends in 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 is choppy. 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 EMR, 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.