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Just as yield famine investors have sought dividend paying equities as the Federal Reserve has driven down short-term interest rates, these equities are starting to underperform the overall market. Year-to-date, the S&P 500 (NYSEARCA:SPY) has outperformed these popular dividend paying equities.


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Company

Price

% Change

Altria Group Inc. (NYSE:MO)

$28.43

-0.46%

SPDR S&P 500 ETF (SPY)

$132.47

3.90%

Johnson & Johnson (NYSE:JNJ)

$65.69

-0.29%

Wal-Mart Stores Inc. (NYSE:WMT)

$62.18

3.07%

Medtronic, Inc. (NYSE:MDT)

$39.62

2.40%

Kimberly-Clark (NYSE:KMB)

$72.05

-1.60%

Investors who have flocked to dividend yielding equities should monitor this trend of underperformance over the next few months to see if they should rotate out of dividend equities. As the 10-year treasury remains below 2.0% investors have sought yield from equities. The equities below are large-capitalization U.S. equities that yield over 2.0% and trade at modest price-to-earnings ratios.

Altria Group (MO)

  • Dividend Yield: 5.8%
  • Price to Earnings: 17.3x
  • Market Capitalization: $59.5 billion

Johnson & Johnson (JNJ)

  • Dividend Yield: 3.5%
  • Price to Earnings: 18.8x
  • Market Capitalization: $179.4 billion

Wal-Mart Stores (WMT)

  • Dividend Yield: 2.4%
  • Price to Earnings: 14.0x
  • Market Capitalization: $212.9 billion

Medtronic, Inc. (MDT)

  • Dividend Yield: 2.5%
  • Price to Earnings: 12.5x
  • Market Capitalization: $41.8 billion

Kimberly-Clark (KMB)

  • Dividend Yield: 3.9%
  • Price to Earnings: 18.0x
  • Market Capitalization: $25.8 billion

I am maintaining long positions in my dividend paying equities as I think these securities will perform better in a weakening economy but I will closely watch the underperformance of dividend equities.

Continue to Part II >>

Source: Dividend Stocks Underperforming The Market: Part I