New Low Observer's  Instablog

Below are the approximate ex-dividend dates for the month of February 2013 for companies that appear on our U.S. Dividend, Nasdaq 100, Dow Jones Transportation/Industrial Index and International Dividend Watch Lists. All companies are ranked by ex-dividend dates.

Companies that show up on our Watch Lists could be considered the equivalent of the bargain bin of high quality blue chip stocks. Because these companies have increased their dividends every year for at least 10 years in a row (or have had similar dividend policies in the past) or are part of major indexes and within 20% of their respective 52-week low, you know that you're not overpaying for a company that has demonstrated profitability and the ability to rebound from challenging times. The remaining list of February ex-dividend stocks can be found here.

Watch List Summary

The first stock on our list is IBM (IBM). After our April 19, 2012 titled "What Does Warren Buffett See In IBM?" (found here) the stock has been in a consolidation pattern. Despite the critics, IBM managed to fall within 5% of the 52-week low on November 14, 2012. With the stock currently trading within 12% of the 1-year low and a healthy payout ratio of 24%, the stock is well positioned for those interested in long-term positions. We're including an updated version of Edson Gould's Altimeter which suggests that IBM is significantly undervalued based on the on dividend relative to the stock price.

(click to enlarge)

According to Gould's Speed Resistance Lines, IBM has the downside targets of $137.45 and $72.

Another notable stock on our list is Apple with an ex-dividend date of February 11, 2013. On April 17, 2012, we projected the conservative downside target for Apple (AAPL) at $424.15 and the extreme downside target of $212.08 (found here). On an intraday basis, Apple fell within 3% of our April 2012 conservative downside target.

Regardless of the market conditions, according to Dow Theory, Apple has upside targets of $528.28 and $616.68 before re-testing the previous highs, as shown below.

(click to enlarge)

If you happen to be researching these companies for potential investment, it would be advisable to consider the ex-dividend date prior to possible purchases. Owning the shares of the company that you're interested in before the ex-dividend date entitles you to the upcoming dividend payment.

Owning the shares on or after the ex-dividend date means that you would have to wait at least three months before receipt of the next dividend payment. Please verify the ex-dividend date and payout ratio before committing funds to these stocks. Additionally, do not base your next long or short-term purchase on the dividend payment or yield. Instead, get as much research in as you possibly can before the ex-dividend date "just in case" you're actually interested in buying the stock. Payout ratios that exceed 100% should be considered speculative investments.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Subscriber F.H. asks:

"[Have you] ever consider[ed] constructing a market trend indicator like Richard Russell's PTI?"

Our Response:

This is a great question and one that we've examined in the past.

We are familiar with Russell's Primary Trend Indicator [PTI]. In fact, we know the exact constituents of the indicator. According to Richard Russell, editor of The Dow Theory Letters since 1958( www.dowtheoryletters.com), the PTI is a "technical spectrum of the stock market" that cannot be manipulated. Russell goes on to say "…you can fool one or two of these technical items, but you can't fool all eight of them, and that's what the PTI is all about." The goal of the indicator is to provide solid indications of market direction that cannot be manipulated.

As a subscriber to Russell's Dow Theory Letters, you are well aware of the many times that the PTI was right and Russell was wrong about the direction of the stock market. However, we're more concerned with the fact of how much advantage does the PTI provide compared to simply using Dow Theory.

Here is what we've found. According to Dow Theory, on July 23, 2009 a new cyclical bull market began. At the time we recommended investing in the highest weighted stocks of either the Industrials or Transports index or the purchase of ETFs for the Industrials (DIA) or Transports (IYT) (article found here).

On the other hand, the Primary Trend Indicator [PTI] gave the first hint that we were in a cyclical bull market on August 25, 2009. In addition, the PTI didn't give the "all clear", in terms of being in a bull market, until November 30, 2009 (as seen in chart below). In fact, a good technical analyst would have had tremendous difficulty in getting a clear indication based on the PTI until after the December 8, 2009 rebound.

(click to enlarge)

There is an alternative view on interpreting an earlier signal than the Dow Theory indication using the PTI. However, you would need to apply Dow's theory in order to properly achieve the earlier signal based on the PTI movement. Using the purple line above, an individual could have interpreted that a cyclical bull market tentatively started as early as May 4, 2009, when the PTI exceeded the January 2009 peak. Subsequent to the May 4th peak, the PTI did not decline below the 89-day moving average on May 27, 2009, suggesting that more upside existed.

However, when we refer back to Russell's June 3, 2009 issue there is no indication that a tentative new bull market was in play. No mention that May 4, 2009 or May 27, 2009 were possible indications of a new bull market in stocks. In fact, Russell commented that "…ridiculous but unseen green shoots is now repeated everywhere. I've stated that a true bear market bottom usually requires many weeks or even months before the crowd turns bullish." This comment along with the picture of a bear at the top of his newsletter was the only indication that we had that we were still in a bear market, according to Richard Russell.

Because we have studied the PTI in detail, we've determined that it is not worth including in our work. In fact, we've found that it is more noise on the market when compared to correct, albeit conservative, interpretation of Dow Theory. If we get Dow Theory right, then we don't need another indicator to follow that could potentially confuse our primary indications based on Dow's work. Yes, we will take in as many views as possible, however, we will rely on Dow Theory as the primary indicator for market direction.

Finally, to create an indicator that is supposed to be impervious to manipulation while at the same time practicing Dow Theory is doubling the effort necessary in watching the movements of the market. We've outlined in extensive detail the role that manipulation plays in the stock market and how the interpretation of Dow Theory mitigates the most extensive manipulation possible (found here).

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

On November 2, 2012, our valued subscriber S.D. asked us about our thoughts on Dell being the second stock on our Nasdaq 100 Watch List. We said the following (found here):

"From what I can see, Dell is within 13% of the 2009 low. This suggests that the stock is under considerable strain even though we're not in "crisis mode" as was the case when Dell bottomed in 2009. I expect that Dell will retest that low ($8), at minimum. The $4.15 level is the next technical support.

"However, if you're interested in purchasing Dell, I would consider making the purchase in three stages with $8 and below as the starting point, with the understanding that it is a pure speculation. Dell appears much more speculative than I'd like and believe that there are reasonable alternatives that could take its place.

"Contrast this with our most recent purchase of Intel (INTC). Essentially, we have taken the view that the PC is not dead and that there are values to be found. From a technical standpoint, INTC has maintained a solid uptrend from the 2009 low and has a better fundamentals, including dividend yield.

"Whether HPQ or DELL come out ahead is of less concern since we believe the INTC will be the primary supplier of chips when the cycle turns."

Since November 2, 2012, DELL and INTC have had the following performance (based on the closing price of January 17, 2013).

(click to enlarge)

As should be clearly seen in the chart above, DELL has risen +40.11% while INTC has actually lost value (-4%)based on trading lower on January 18, 2012. It is clear that subscriber S.D. was onto something when it was suggested that DELL was worth consideration. Little did we know that gains of +20% were in store for DELL in two months and +40% in 2 ½ months.

In a follow-up piece on DELL from November 16, 2012, when DELL was trading at $8.86 we said the following (found here):

"We believe that on a short-term basis DELL will rise on a possible market reaction. However, the intermediate-term seems to indicate that DELL will go to $8 before any 'true' indication of prospects is revealed, unless the company gets acquired which seems possible. Dell would be one of the best acquisition target of any computer manufacturer since Lenovo bought the personal computer division from IBM."

The price action between DELL and INTC since November 16, 2012 is charted below (based on the closing price of January 17, 2013):

(click to enlarge)

DELL increased +44.70% while INTC gained slightly more that +5%. The gains at Dell are staggering and we applaud S.D. for bringing up the question so that we could see the potential of a stock that we'd otherwise overlook, even though it was prominently among the top five stocks on our November 2, 2012 watch list. As we've said many times in the past, stocks that appear on our watch lists have often been buyout candidates and therefore worthy of a second look.

Again, thank you S.D. for your contribution to our site. We hope you benefited from your own intuition on DELL.

Disclosure: I am long INTC.