- General Electric yields 3.26% and looks to be the winner for the Alstom deal.
- Transocean is a 6.61% yielding deep value deep water drilling contractor.
- Consolidated Edison yields 4.44% and distributes natural gas and electricity to New York City.
New highs after new highs, are you getting tired of it? Probably not. But it makes you wonder. This past week was rather strong again with Dow gained 1.02% for the week while the S&P 500 was up 1.38% and the Nasdaq gained 1.33%. It seems like all stocks have been rising without any discrimination. We seem to be hearing less about Iraq these days and that is probably what's causing the markets to move higher, but unless we hear an absolute all clear the situation can potentially escalate and the market may give back a lot of the gains. 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.
General Electric Company (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 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 among the lowest of any stock in the misc. capital goods industry and signals that investors have not been willing to pay a premium for this company's business prospects, 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 19Jun14 with a $0.22 per share dividend which will be paid on 25Jul14 for a yield of 3.26%. In terms of news pertaining to the company during the week, it appears that the company is going to prevail in the bid for Alstom. In other news aside from the Alstom deal (yes, there was other GE news aside from Alstom), GE Capital was fined $225 million by The Consumer Financial Protection Bureau to consumers which were harmed by discriminatory credit card practices.
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 59.10, while the MACD chart below shows the black line below the red line with divergence bars increasing in height ever so slowly, meaning the bullish momentum is trying to get started but just isn't there. The trend for the stock has been upwards since the beginning of February so I'm going to play this one cool and not buy a position here. Perhaps if it breeches the 50-day simple moving average (blue line on the chart below) and the 200-day simple moving average (red line on the chart below) continues to act as support then I'd be a buyer.
Transocean, Inc. (NYSE:RIG)
Transocean is an international provider of offshore contract drilling services for oil and gas wells by operating in the contract drilling service and drilling management services business segments. On 07May14, Transocean reported first quarter 2014 earnings of $1.43 per share. This result beat the $1.02 consensus of the 34 analysts covering the company and beat last year's first quarter results by 53.76%. Transocean's PE ratio is among the lowest of any stock in the oil well services & equipment industry and signals that investors have not been willing to pay a premium for this company's business prospects, 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 28May14 with a $0.75 per share dividend which was paid on 18Jun14 for a yield of 6.61%. In terms of news pertaining to the company, there were no alerts issued during the past 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 overbought territory with a current value of 69.45, 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 starting to get tired. This stock has rallied dramatically during the past week as oil started to increase in price with the conflict in Iraq which was escalating. The conflict is not a good fundamental reason to by buying the stock right now as it is in overbought territory. I'm going to wait it out and not put any additional capital to work right now but definitely have it on the radar.
Consolidated Edison, Inc. (NYSE:ED)
ConEd is a holding company that owns Consolidated Edison Company of New York and Orange & Rockland Utilities. On 08May14, ConEd reported first quarter 2014 earnings of $1.17 per share. This result beat the $1.05 consensus of the 13 analysts covering the company and beat last year's first quarter results by 8.33%. ConEd's PE ratio is among the lowest of any stock in the electric utilities 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 12May14 with a $0.63 per share dividend which was paid on 15Jun14 for a yield of 4.44%. In terms of news pertaining to the company, no alerts 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 64.29, while the MACD chart below shows the black line just above the red line with increasing divergence bars, meaning there's bullish momentum in the name right now. Because the RSI is a drop from overbought territory I don't doubt we see that momentum will begin to drop in a day or so. I'm not going to be buying into the name right now but will definitely have it on the radar.
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: The author is long GE, RIG, ED. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.