Finding healthy dividend companies whose stock is bargain priced can provide above-average rates of return on your investment. This week’s digest covers a screen used to find undervalued dividend-paying stocks and what signs you can look for that indicate the safety of a company’s dividend payment.
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Dogs of the Dow: A Contrarian High-Yield Approach |
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By Derek J. Hageman
AAII financial analyst Derek Hageman presents a contrarian approach to finding undervalued dividend-paying stocks as more investors seek dividend income. The Dogs of the Dow is a simple and purely mechanical approach that focuses exclusively on blue-chip companies and purchasing them when they become undervalued relative to each other. It is a disciplined approach for individuals seeking value-oriented, large-cap stocks and a steady source of dividend income.
Some of the topics covered in the article include:
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The theory behind Dogs of the Dow
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The strengths and weaknesses of contrarian valuation
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The 10 highest-yielding stocks of the Dow (as of 12/13/2019)
The Dogs of the Dow’s biggest advantages as a stock investing strategy are its simplicity and its use of high-profile, high-quality stocks. By mining the Dow’s top dividend stocks, the list is already prescreened to include only the giants of their respective fields. The simple yield-based selection system means there’s no guesswork involved with the Dogs of the Dow approach. Investors who follow the strategy are steered to companies with solid dividend income and prospects for growth. More »
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Dividend Safety Signs and Warnings Flags |
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By Maria Crawford Scott
Many investors have sought shelter from the stock market storm in more mature dividend-paying companies, since the income from these firms provides at least some positive return in an otherwise bleak environment. In the article Dividend Safety Signs and Warnings Flags, former AAII Journal editor Maria Crawford Scott uncovers some of the signs you can look for that indicate the safety of a company’s dividend payment stream.
Some of the indicators highlighted in the article include:
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How to evaluate the quality of payments
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Examining dividend coverage
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Ratios that reveal a company’s level of leverage strain
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Trends that can help you understand if a company’s position is improving or deteriorating
While these safety signs and warning flags are applied at the individual firm level, you should keep in mind that even the most well-managed company can be overwhelmed by changing winds within an industry. When you are evaluating a stock for its dividend payments, make sure you don’t lose sight of the bigger picture in terms of the environment in which the firm is operating. More »
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Stocks Area of AAII.com |
Introducing Stock Grades! AAII’s new stock grading tool gives an A–F rating for stocks based on five key factors: value, growth, momentum, earnings estimate revisions and quality. At the Stocks area of AAII.com, see a daily list of stocks graded B or better and stocks that have seen upgrades or downgrades in at least two of their factor grades compared to the previous trading day. Plus, get fresh stock ideas each day for featured stock approaches. Visit the reimagined Stocks area of AAII.com frequently
as we continue to make enhancements for the benefit of all members. More »
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Member Question
Do you use economic indicators or other specific metrics to monitor risk levels in the economy?
A) Yes
B) No
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Be sure to vote on this week’s question for the opportunity to offer your insights on our open-ended question. |
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