This year, 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 is good reason to start viewing these stocks more positively 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 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. Here are a number of beaten-down dividend stocks that offer high-yields (the average stock in the S&P 500 Index currently yields only about 2%) and also might benefit from the January Effect Rally:
Calumet Specialty Products Partners (CLMT) processes and sells fuels and specialty products such as asphalt. This company has been in business since 1916. This stock was trading around $20 just a few weeks ago and it now offers a very strong dividend yield of over 10%, plus a chance for capital gains if the stock rebounds back to former levels.
Here are some key points for CLMT:
- Current share price: $18.79
- The 52 week range is $15.99 to $24.95
- Earnings estimates for 2011: 73 cents per share
- Earnings estimates for 2012: $1.74 per share
- Annual dividend: $2 per share which yields 10.7%
Alliance Bernstein Holding (AB) is an investment management company offering products and services such as mutual funds, financial consulting, and institutional services. This sector has been hit by the market correction because some investors have pulled money from stock investments and that can reduce fees for companies like this. However, the stock is starting to trade at bargain levels and it looks like a good buy on dips for a January rebound.
Here are some key points for AB:
- Current share price: $13.02
- The 52 week range is $12.46 to $24.20
- Earnings estimates for 2011: 68 cents per share
- Earnings estimates for 2012: $1.20 per share
- Annual dividend: $1.04 per share which yields 8%
Nutrisystems, Inc. (NTRI) provides weight loss programs and food to men and women. Nutrisystems has been reporting disappointing earnings, which has recently sent the stock to new 52 week lows. It appears that the weak economy and heavy competition is impacting the financial results at this company. However, if the company can maintain the current dividend the shares are undervalued and could see strong upside in 2012 after a very tough past year.
Here are some key points for NTRI:
- Current share price: $12.87
- The 52 week range is $10.46 to $22.64
- Earnings estimates for 2011: 46 cents per share
- Earnings estimates for 2012: 96 cents per share
- Annual dividend: 70 cents per share which yields 5.4%
Invesco Mortgage Capital (IVR) is a mortgage real estate investment trust (REIT) company, based in Georgia. This is one of the highest yielding mREIT stocks and it is also trading at a very large discount to book value. The stock yields nearly 18% and trades at a discount to book value, which is $16.45. The stock appears extremely undervalued, and poised to rally in January when tax-loss selling pressure will be over.
Here are some key points for IVR:
- Current share price: $15
- The 52 week range is $12.55 to $24.07
- Earnings estimates for 2011: $3.44 per share
- Earnings estimates for 2012: $2.93 per share
- Annual dividend: $2.60 per share which yields 17.5%
MFA Financial (MFA) is a real estate investment trust that invests in residential mortgage-backed securities. MFA trades at a discount of about 7% to book value, which is $7.43 per share.
Here are some key points for MFA:
- Current share price: $6.98
- The 52 week range is $6.23 to $8.64
- Earnings estimates for 2011: 97 cents per share
- Earnings estimates for 2012: 98 cents per share
- Annual dividend: $1 per share which yields 14.5%
Veolia Environnement (VE) is based in France and is a leading provider of water, recycling, environmental services, waste collection and processing etc., with operations worldwide. Veolia stock has been hit very hard over the crisis in Europe, and now offers a very rich yield. However, the dividend is poised to be cut in 2012. Also, the European economy appears to be weakening and this could further reduce profits for Veolia. In spite of these negatives the stock is trading for about a third of its 52 week high, so it could rebound sharply as tax loss selling comes to an end soon. This is a riskier bet because if France sees a credit rating downgrade, Veolia stock could drop further.
Here are some key points for VE:
- Current share price: $10.57
- The 52 week range is $10.45 to $33.86
- Earnings estimates for 2011: $1.41 per share
- Earnings estimates for 2012: $1.47 per share
- Annual dividend: $1.47 per share which yields about 13.7%
Total SA (TOT) is a major integrated oil company, based in France with operations worldwide which include refining, exploration, and service stations. Total stock has been declining based on lower oil prices and debt concerns in Europe. It now trades at a very cheap price to earnings ratio of about 7, and pays a strong dividend. Total derives most of its revenues from Europe but it will probably trade along with the price of oil more than anything else. If Europe manages to stabilize the current debt crisis, Total shares could be poised to rally due to increased confidence in the Eurozone and the end of tax-loss selling in January.
Here are some key points for TOT:
- Current share price: $47.26
- The 52 week range is $40 to $64.44
- Earnings estimates for 2011: $7.14 per share
- Earnings estimates for 2012: $7.05 per share
- Annual dividend: about $2.75 per share which yields about 5.8%
Data is sourced from Yahoo Finance.
Disclaimer: No guarantees or representations are made. 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.