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While some might think that its impossible for any dividend stock to be grossly overvalued with this summer’s volatility, it isn’t. In fact there is a group of dividend stocks that are trading at astronomical price-multiple premiums. While they may be meeting or exceeding the expectations of Wall Street today given market turmoil this seems like dicey and unnecessary game to play. We can’t understand in what world it would make sense from a valuation standpoint to buy dividend stocks that have a P/E ratio of over a 100 and a current ratio of less than 1 but regardless this reality exists today.

The P/E ratio is a price-multiple ratio that paints a picture on how much investors are willing to pay per dollar of earnings. A high P/E ratio generally illustrates an expectation from investors that earnings growth should increase. The lower the P/E ratio the more “value” an investor should be able to attain but that’s easier said than done.

The current ratio is a liquidity ratio that measures a firm’s ability to pay off short-term liabilities with short-term assets. The general rule of thumb is that if a company has a current ratio of less than 1 then technically it cannot pay off its short-term obligations if they all come due at once. Having a current ratio of less than 1 is considered a red flag relative to the topic of liquidity and deserves further attention.

We screened for dividend companies that had a high P/E ratio (X>40). From this group we screened for companies that had poor liquidity (current ratio<1). We did not screen out any sectors or market caps.

The list is ranked from highest to lowest P/E ratio:

1. Essex Property Trust (ESS)

Sector

Real Estate

Industry

REIT - Residential

Market Cap

$ 4,621 million

Beta

0.99

Analyst Sentiment

14/26 – List Buy/ Outperform (Bullish)

The company operates as a self-managed real estate investment trust that operates, owns, and manages real estate. The firm’s P/E ratio is 142.86. ESS’s current ratio is 0.35. The current Dividend Yield is 3.03%. The short interest is 6.50% as of 7/29/2011.

2. Alumina Ltd (AWC)

Sector

Basic Materials

Industry

Aluminum

Market Cap

$4,697 million

Beta

2.14

Analyst Sentiment

9/16– List Buy/ Outperform (Bullish)

The company does bauxite mining, alumina refining, aluminum smelting and more. The firm’s P/E ratio is 136.99. AWC’s current ratio is 0.85. The current Dividend Yield is 3.12%. The short interest is N/A.

3. Regency Energy Partners LP (RGNC)

Sector

Energy

Industry

Oil and Gas Midstream

Market Cap

$3,551 million

Beta

1.53

Analyst Sentiment

8/12 – List Buy/Outperform (Bullish)

The company gathers, processes, markets, and transports natural gas. The firm’s P/E ratio is 133.33. RGNC current ratio is 0.76. The current Dividend Yield is 7.33%. The short interest is N/A.

4. China United Network Communications (CHU)

Sector

Communication Services

Industry

Telecom Services

Market Cap

$43,189 million

Beta

0.80

Analyst Sentiment

13/28 – List Buy/Outperform (Neutral)

The company is an integrated telecommunications company that operates in China and a variety of telecommunications services. The firm’s P/E ratio is 99.01. CHU’s current ratio is 0.24. The current Dividend Yield is 0.60%. The short interest is N/A.

5. AvalonBay Communities Inc (AVB)

Sector

Real Estate

Industry

REIT - Residential

Market Cap

$11,500 million

Beta

1.30

Analyst Sentiment

10/25 – List Hold/ Neutral (Neutral)

The company is a real estate investment trust engaged in the acquisition, development, and operation of multifamily communities within the US that have barriers to entry. The firm’s P/E ratio is 97.09. AVB’s current ratio is 0.17. The current Dividend Yield is 2.76%. The short interest is 10.60% as of 7/29/2011.

6. Berry Petroleum Co (BRY)

Sector

Energy

Industry

Oil and Gas E&P

Market Cap

$2,604 million

Beta

2.50

Analyst Sentiment

11/13 – List Buy/ bullish (Bullish)

The company independently explores, produces, develops, and acquires crude oil and natural gas assets. The firm’s P/E ratio is 93.46. BRY’s current ratio is 0.68. BRY’s current Dividend Yield is 0.62%. The short interest is 8.80% as of 7/29/2011.

7. Mid-America Apartment Community (MAA)

Sector

Real Estate

Industry

REIT - Residential

Market Cap

$2,471 million

Beta

1.12

Analyst Sentiment

7/12 – List Hold / Neutral (Neutral)

The company is a real estate investment trust engaged in the acquisition, development, and operation of multifamily communities within the Sunbelt region of the US. The firm’s P/E ratio is 80.00. MAA’s current ratio is 0.17. The current Dividend Yield is 3.75%. The short interest is 5.50% as of 7/29/2011.

8. Kilroy Realty Corporation (NYSE:KRC)

Sector

REIT - Office

Industry

Real Estate

Market Cap

$1,987 million

Beta

1.52

Analyst Sentiment

7/14 – List Hold / Neutral (Neutral)

The company is a real estate investment trust that owns, operates, and develops suburban office and industrial real estate. The firm’s P/E ratio is 64.94. KRC’s current ratio is 0.42. The current Dividend Yield is 4.12%. The short interest is 12.70% as of 7/29/2011.

9. Cabot Oil & Gas Corporation (COG)

Sector

Energy

Industry

Oil & Gas E&P

Market Cap

$7,546 million

Beta

1.17

Analyst Sentiment

11/21 – List Buy / Outperform (Bullish)

The company independently explores, develops, and acquires oil and gas properties within North America.

The firm’s P/E ratio is 62.89. COG’s current ratio is 0.82. The current Dividend Yield is 0.17%. The short interest is N/A.

10. DCP Midstream Partners LP (DPM)

Sector

Oil & Gas Midstream

Industry

Energy

Market Cap

$1,688 million

Beta

1.25

Analyst Sentiment

5/9 – List Buy / Outperform (Bullish)

The company gathers, compresses, treats, processes, & transports, and sells natural gas along with other natural gas liquids. The firm’s P/E ratio is 60.24. DPM’s current ratio is 0.29. The current Dividend Yield is 6.49%. The short interest is 1.70% as of 7/29/2011.

We hope this helps investors as they do their own due diligence on dividend paying stocks.

Source: 10 Overvalued Dividend Stocks With Poor Liquidity