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For the most part dividend stocks have performed relatively well in a very tough market. However, a number of dividend stocks have declined in 2011, and are now getting hit even more with tax-loss selling. There might be some light at the end of the tunnel in just a few weeks thanks to the "January Effect." This is known to occur each year, particularly with small and mid-cap stocks that have seen declines. Stocks that fit this profile typically see heavy selling in the last few weeks of the year as investors sell shares they have losses in, so that they can offset gains in other stocks and harvest tax losses. This process pushes already hard-hit stocks even lower, and that can create a great buying opportunity at this time of year. If you buy the right stocks now, they are likely to rebound substantially in January because they won't be under tax-loss selling pressure. Some investors who sold in 2011, will be buying in January to re-establish positions in companies they like. Here are a number of beaten-down dividend stocks that might benefit from the January Effect:

R.R. Donnelley & Sons (NASDAQ:RRD) is a leading commercial printer of products like catalogs, magazines, forms, labels. This stock was trading around $19 per share in early August, but has since plummeted about 20% just in the last few weeks. It looks like an exceptional value on any dips now because it yields over 7%. It is also trading near the 52-week lows, which means it is probably being sold for tax losses now. That could be setting it up for a rebound in January.

Here are some key points for RRD:

Current share price: $15.12

The 52-week range is $12.90 to $21.34

Earnings estimates for 2011: $1.89 per share

Earnings estimates for 2012: $2.08 per share

Annual dividend: $1.04 per share, which yields 7.2%

CenturyLink, Inc. (NYSE:CTL) provides communications services, such as local and long distance, Internet access, data services, and video services. This is one of the top yielding stocks in the S&P 500 (NYSEARCA:SPY) index. This stock is trading well off its 52-week high. That means some investors are probably selling it now to harvest tax losses. This could lead to a rebound in January.

Here are some key points for CTL:

Current share price: $35.48

The 52-week range is $31.16 to $46.87

Earnings estimates for 2011: $1.61 per share

Earnings estimates for 2012: $1.77 per share

Annual dividend: $2.90 per share, which yields 8.2%

Windstream Corporation (NASDAQ:WIN) provides communications services (primarily to rural areas), such as local and long distance, Internet access, data services, and video services. This is also one of the top yielding stocks in the market and has recently dipped, which has created a solid buying opportunity. Any more dips to around $11 are likely to payoff for investors buying and willing to hold through at least January.

Here are some key points for WIN:

Current share price: $11.76

The 52-week range is $10.76 to $14.40.

Earnings estimates for 2011: 79 cents per share

Earnings estimates for 2012: 85 cents per share

Annual dividend: $1 per share, which yields 8.5%

Pitney Bowes, Inc. (NYSE:PBI) offers mail processing equipment and provides equipment, supplies, software, services, and solutions for mailing. This stock has dropped with the markets and now trades at bargain levels, near the 52-week low. Some are concerned that the demand for this company's products and services will be diminished as email continues to grow, but chances are there is enough demand for both mail and email to prosper. After a tough year and probable tax loss selling now, this stock has some rebound potential in January.

Here are some key points for PBI:

Current share price: $18.53

The 52-week range is $17.33 to $26.36

Earnings estimates for 2011: $2.25 per share

Earnings estimates for 2012: $2.16 per share

Annual dividend: $1.48 per share, which yields 8%

Chimera Investment Corporation (NYSE:CIM) is a real estate investment trust (REIT) that invests in residential mortgage-backed securities, and both commercial and residential mortgage loans. With a yield of about 20%, and a share price below book value, this looks like a great buying opportunity. Chimera stock is probably seeing plenty of tax loss selling now. This is one of my top picks for a January Effect rally. I believe it could easily jump from about $2.63 to around $2.90+ in January, which would lead to gains of about 8% in just about one month.

Here are some key points for CIM:

Current share price: $2.63

The 52-week range is $2.38 to $4.36

Earnings estimates for 2011: 57 cents per share

Earnings estimates for 2012: 47 cents per share

Annual dividend: 52 cents per share, which yields 19.8%

Compass Diversified Holding (NYSE:CODI) invests in small- to mid-sized companies. Compass recently agreed to acquire Camelbak and already has invested in companies like Staff Mark, Liberty Safe, Ergo Baby Carrier and others. With a yield of nearly 12%, this stock looks like a solid buy for income investors. Because it is trading near the 52-week low, it also is a good candiate for a rebound in January.

Here are some key points for CODI:

Current share price: $12.55

The 52-week range is $11.21 to $18.58

Earnings estimates for 2011: $1.80 per share

Earnings estimates for 2012: $1.89 per share

Annual dividend: $1.44 per share, which yields 11.5%

Frontier Communications (NASDAQ:FTR) provides communications services, such as local and long distance, Internet access, data services, and video services. It appears the dividend at FTR could be at risk since it is not covered by earnings estimates in 2011 or 2012. Until it bottoms out, I would avoid this stock as a long-term investment, but I would consider it as a trade and buy it on dips and sell on rallies. With the stock now trading for almost half off the 52-week high, it is likely seeing major tax loss selling through the end of 2011. This could be setting up the stock for gains in January, which I would take immediately.

Here are some key points for FTR:

Current share price: $5.55

The 52-week range is $5.22 to $9.84

Earnings estimates for 2011: 24 cents

Earnings estimates for 2012: 26 cents

Annual dividend: 75 cents per share, which yields 13.5%

Data sourced from Yahoo Finance. No guarantees or representations are made.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Disclaimer: Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.

Source: 7 Dividend Stocks Poised For A Big January Rally