Dividend Watch List Balloons as Market Deflates

by: New Low Observer

At the end of the week, our watch list ballooned to 62 companies. Below are the top 10 ten companies on the list. The complete watch list of current and former Dividend Achievers within 20% of their respective 52-week low can be found here.

Symbol Name Price % Yr Low P/E EPS Div/Shr Yield Payout Ratio
MON Monsanto Co. 59.09 3.14% 24.62 2.40 1.06 1.79% 44%
HSC Harsco Corp. 26.38 3.37% 19.69 1.34 0.82 3.11% 61%
FRS Frisch's Restaurants, Inc 20.77 4.32% 10.49 1.98 0.52 2.50% 26%
SHEN Shenandoah Telecom 16.95 5.28% 26.48 0.64 0.32 1.89% 50%
VIVO Meridian Bioscience Inc. 18.29 5.66% 23.15 0.79 0.76 4.16% 96%
ADM Archer Daniels Midland Co. 25.94 6.97% 10.67 2.43 0.60 2.31% 25%
HCC-OLD HCC Insurance Holdings, Inc. 24.71 7.06% 7.95 3.11 0.54 2.19% 17%
DNB Dun & Bradstreet Corp. 74.10 7.24% 14.88 4.98 1.40 1.89% 28%
THFF First Financial Corp. Indiana 27.19 7.34% 15.72 1.73 0.90 3.31% 52%
LLY Lilly (Eli) & Co. 34.62 7.55% 8.92 3.88 1.96 5.66% 51%

Watch List Summary

The best performing stock from last week's list was Simmons First National (NASDAQ:SFNC) which was at break-even. The worst performing stock was Harsco (NYSE:HSC) which fell 14.8%. Overall, the Dividend Achiever watch list lost 4.9% versus the Dow which was down 5.7%.

Never before have we seen this many companies on our watch list. Part of the reason could be because the 52-week time frame now ranges from May 2009 to May 2010. You may remember that when the market bottomed in March 2009, I suggest that investors look at the company's performance at its worse possible level, which in many cases was the March 2009 low.

Use this list to your advantage. There are (and will be) great companies paying nice dividends with low payout ratios. Place these companies in your own watch list so that when opportunities arise, you can purchase them with a greater margin of safety.

Market Commentary

As you may have noticed from our watch list, the market took a turn similar to what happened in January when the Dow retraced about 7% from the peak. At the close of Friday at 10,380, we've pulled back 7% from the closing high. It is interesting to note that in January, the Greek tragedy was already known so this shouldn't have surprised us. Our only concern at this point is, will the Dow fail to hold above the 150-day moving average which has been a strong support level for the market since July (see chart below, click to enlarge).

After seeing what took place on Thursday, I have increased my requirement for a margin of safety in new investment stakes. For example, I may look at companies that are within 15% of a new low instead of 20%. In considering companies to buy or sell, I would aim for a deeper discount (lower price) if I plan to buy and take smaller "fair profits" if I plan to sell.

Remember, the market isn't cheap by any standard. With the latest figures I calculated, based on the Friday close, the Dow is now trading at 15x trailing earnings and 11x forward earnings. This assume 36% earning growth for the Dow. On a yield basis, the Dow is trading at 2.76%. Using the Thursday low, the yield was close to 3%.

Disclosure: Author holds a long position in MON, VIVO, XOM, T