The market has started to wobble, and the recent decline has provided some interesting buying opportunities for investors. The volatility surfacing is a reminder that when stocks are dropping, it is comforting to know that dividend stocks will pay you a yield to hold them.
Dividend payments help smooth out the highs and lows, and they also help support stocks from declining too much when compared to stocks that offer no yield. A few dividend stocks have dropped to levels that should be considered by long-term investors seeking income. Investors who buy dips in fundamentally sound dividend stocks are likely to be well-rewarded over time. With that in mind, here are a number of dividend stocks to consider:
BP PLC. (BP) is one of the largest integrated oil and gas companies in the world and it is based in the U.K. BP shares were trading around $47 in March but have seen a sharp drop in the past week or so. BP is still working to resolve the claims related to the oil spill in the Gulf of Mexico, however, the company seems to be working through these issues.
The combination of the sharp drop in the stock price and the higher than average dividend yield of about 4.4%, gives investors both income and potential for capital gains. At current levels, BP is one of the cheapest oil stocks and it now trades for just about 6 times earnings. That is far less than what the average stock in the S&P 500 Index sells for (which is about 13 times earnings) and BP also offers a high yield.
Here are some key points for BP:
Current share price: $42.30
The 52 week range is $33.62 to $48.34
Earnings estimates for 2012: $6.74 per share
Earnings estimates for 2013: $6.90 per share
Annual dividend: $1.92 per share which yields 4.4%
Total SA (TOT) is a worldwide leader in oil and energy with operations that include refining, exploration, and service stations. Total shares have dropped even more than some of the other major integrated oil companies because it is based in Europe and also because Total had an oil leak at a project located in the North Sea. However, many analysts believe that investors have overreacted to this spill because of the incident a couple of years ago in the Gulf of Mexico.
At this time, the spill looks manageable and the stock looks cheap at just about 7 times earnings. However, the concerns over the cost of the spill and the debt crisis in Europe are not likely to go away soon, so it only makes sense to buy on dips and average in over time.
Here are some key points for TOT:
Current share price: $48.39
The 52 week range is $40 to $64.44
Earnings estimates for 2012: $7.28 per share
Earnings estimates for 2013: $7.63 per share
Annual dividend: about $2.61 per share which yields about 5.2%
Sanofi-Aventis (SNY) is a Paris-based pharmaceutical company that owns a number of blockbuster drugs. Most drug stocks have held up well in the recent market decline, however, shares of this company have taken more of a hit because of the larger declines in European markets.
The debt crisis is a serious matter, but drugs and healthcare revenues are not likely to be impacted by a slower European economy in a signficant way. In addition, this company derives substantial revenues from outside the Eurozone and a weakening euro currency could lead to gains for Sanofi. Because European stocks are more prone to weakness, it makes sense to only buy a little and do so on dips.
Here are some key points for SNY:
Current share price: $36.21
The 52 week range is $30.98 to $40.75
Earnings estimates for 2012: $4.02 per share
Earnings estimates for 2013: $4.18 per share
Annual dividend: about $1.76 per share which yields about 4.7%
Chevron Corporation (CVX) offers a solid dividend yield, a low price to earnings multiple and a very strong balance sheet. Chevron shares have been dropping with the price of oil and also due to concerns over an oil spill in Brazil. The decline appears to be a solid buying opportunity because the fundamentals remain strong.
The company recently stated that earnings for the first quarter should be stronger than expected. This stock trade for about 8 times earnings and offers investors both a solid dividend and potential for capital appreciation.
Here are some key points for CVX:
Current share price: $101.45
The 52 week range is $86.68 to $112.28
Earnings estimates for 2012: $13.16 per share
Earnings estimates for 2013: $13.35 per share
Annual dividend: $3.24 per share which yields 3.1%
Pepsico, Inc. (PEP) owns numerous well-known brands such as Ruffles, Doritos, Quaker oatmeal and cereals, Aunt Jemima, Pepsi, Mountain Dew, Gatorade, etc. Food and beverage products are a defensive way to invest in the market because there is little chance that people will stop eating or drinking, even in tough times. Pepsi shares have been knocked down from about $67 per share and now offer a better entry point and yield for long-term investors.
Pepsi is making efforts to boost margins and increase growth. The many famous brands sold by this company could see growth in the future as emerging market consumers spend their rising disposable incomes on brand name foods and convenient snack and beverage products. Pepsi shares appear to have strong support around $64, so buying near that level makes sense.
Here are some key points for PEP:
Current share price: $64.85
The 52 week range is $58.50 to $71.89
Earnings estimates for 2012: $4.09 per share
Earnings estimates for 2013: $4.44 per share
Annual dividend: $2.06 per share which yields 3.1%
Data is sourced from Yahoo Finance.