Top 5 Dividend Stocks Near a New Low

by: New Low Observer

The Dow hit 12,000 intra-week but closed decisively lower at 11,823. The S&P 500 was flat for the week. Our watch list has 16 companies that are within 10% of their 52-week low. The complete list of companies can be found here.

January 28, 2011 Watch List

Symbol Name Price % Yr Low P/E EPS Dividend Yield Payout Ratio
ABT Abbott Labs 45.49 2.02% 15.01 3.03 1.76 3.87% 58%
WABC Westamerica 50.13 2.94% 15.62 3.21 1.44 2.87% 45%
WEYS Weyco Group 22.78 3.03% 19.64 1.16 0.64 2.81% 55%
SHEN Shenandoah Tel. 16.31 4.82% 17.92 0.91 0.33 2.02% 36%
CL Colgate-Palmolive 76.99 5.29% 17.99 4.28 2.12 2.75% 50%
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Watch List Summary

Abbott (NYSE:ABT) topped our list this week after falling 5%. Wall Street wasn't happy with the company's short-term outlook, even after being given guidance for double digit growth in the coming year. With Abbott trading close to its historically high dividend yield range, we couldn't help but accumulate some on its way down. Given an estimated double digit growth, we estimate that the company could easily raise its dividend from $0.44 to $0.48 (9% increase) in the coming months. At the current price, estimated dividend yield will be north of 4%.

The majority of the companies on our watchlist have dividend yields that are higher than 7-year T-Bill and are trading near their historical high yield. According to the book, Dividends Don't Lie by Geraldine Weiss, this marks great value propositions for long-term holder.

Top Five Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from January 29, 2010 and have check their performance one year later. The top five companies on that list can be seen in the table below.

Name Symbol 2010 2011 % change
First Financial THFF 27.6 31.46 13.99%
Exxon Mobile XOM 64.43 78.99 22.60%
Shenandoah Tel. SHEN 17.2 16.31 -5.17%
Aqua America WTR 16.59 23.18 39.72%
California Water CWT 36.32 36.58 0.72%

Average 14.37%

DJ Industrials DJI 10,067.33 11,823.70 17.45%
S&P 500 SPX 1,073.87 1,276.34 18.85%
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Our top five under performed both the Dow and S&P. Only Exxon (NYSE:XOM) and Aqua America (NYSE:WTR) beat those two indices. Although Shenandoah (NASDAQ:SHEN) fell 5% over one-year, it rose above 15% in less than two months, giving investors an opportunity to take some profit off the table.

Disclaimer: On our current list, we excluded companies that have no earnings. Stocks that appear on our watch lists are not recommendations to buy. Instead, they are the starting point for doing your research and determining the best company to buy. Ideally, a stock that is purchased from this list is done after a considerable decline in the price and extensive due diligence. We suggest that readers use the March 2009 low (or the companies' most distressed level in the last 2 years) as the downside projection for investing. Our view is to embrace the worse case scenario prior to investing. A minimum of 50% decline or the November 2008 to March 2009 low, whichever is lower, would fit that description. It is important to place these companies on your own watch list so that when the opportunity arises, you can purchase them with a greater margin of safety. It is our expectation that, at the most, only 1/3 of the companies that are part of our list will outperform the market over a one-year period.

Disclosure: I am long ABT.