|Our team at the Dividend Manager wanted to provide our latest thoughts on the markets and highlight ten dividend stocks trading at very reasonable prices.
The Dow Jones Industrial Average has climbed from 22,000 to 24,700 since last August. a gain of nearly 15%. But most of this gain came from October to February. In February the market declined by just over 10% to 21,200. Since then stocks went sideways – but then start advancing again by several thousand points. But it was not enough to make up for the fall in February. For the year, the Dow is now even on the year with today’s 287 point drop.
Only a handful of stocks have kept up this past ten months, which is very common late in the up-stock market cycle. Remember, this “up” cycle started way back in March 2009. It’s not to say that we cannot continue on this run, but the last time this happened is the go-go 1990s when internet stocks ruled. Its now that we start to look for events that could take the market down.
I also noted that this market is eerily similar to that of the stock market of the turn of the century that was previously led by stocks like pets.com, Nokia, Motorola, AOL, Palm, and Blackberry. How many of those stocks are around today I ask??
Yes, the stock market is being led by the “new” tech and other “hot stocks”. But like a hot air balloon, eventually these stocks run out of air.
But many dividend stocks have been forgotten since last fall including some Top 100 listings like Pepsi, Duke Energy, and Walgreens Boots. All pay great dividends and are still growing their earnings and revenue by strong single digits.
Now as we approach the summer, August is on the horizon. August is usually not a great month for stocks, up a mere 5 times in the last 21. Last year the market fell once again in late August. The August through October period is also the weakest three-month period of any. This year is even more poignant, with the November elections looming. The thought of Congress changing parties could have a negative impact on the market. But, we feel the market won’t take this into consideration until August when the congressional races start to gather steam with the media.
On the economic front, it looks rosy. Unemployment is at 3.9%. Growth this quarter will approach 4%. Company earnings are solid. Consumers are gaining conviction in the economic expansion, with The Conference Board reporting a jump in consumer confidence. Businesses are equally confident, with regional manufacturing surveys continuing to surprise on the upside; backed up by the national Institute for Supply Management’s (ISM) manufacturing index rising to a solid 58.7, while the new order reading rose to 63.7. Meanwhile the larger service side of the ledger remains strong, with the ISM non-manufacturing index rising to 58.6, while the new order component ticked higher to a robust 60.5. Thus both the economy and the consumer are on strong footing.
Almost always, we need a recession for a large market fall, as what happened in 2000 and 2008. With confidence high, both on the personal and business side, most experts do not expect a recession for the next six months. This means any recession is a long-shot at this point in time. But the list of 4 below could alter the economic outlook. The big oil spike in 2007 along with the housing crisis were the two big causes of the Great Recession.
But dividend investors have the solace to know that even during a recession, the prices of these type of defensive stocks falls far less than that of the market. The key element is to avoid riskier, growth stocks that pay scant or no dividends.
From our Top 100 list, these ten companies stand out at present prices;
- Duke Energy
- Walgreens Boots
- Société Générale