Given the historically low interest rate and return environment, investors hungry for yield have been gravitating toward dividend stocks, but the valuation advantage of this asset class has diminished. This according to an article in this week’s Forbes by Validea CEO John Reese. “Since yield no longer provides a reliable valuation tool” writes Reese, “investors in search of such dividends must be sure to use other metrics to gauge value.” He emphasizes the importance of… Read More
Expending more than you take in works for a diet, but it doesn’t for the stock market. That’s the upshot of a recent Wall Street Journal article by Steven Russolillo, who writes that today’s ultra-low interest rate market is allowing share prices to “stay higher for longer than under more normal circumstances.” What could “end this game” he argues, is the amount of cash companies are paying out to investors–which is now exceeding the earnings… Read More
While high dividend yields (yield defined as dividend divided by stock price) are appealing, they become less so if they’re a function of a low stock price that reflects underlying financial weakness. In a recent Forbes article, Validea CEO John Reese says to look for those stocks that show higher-than-average yields along with a history of low dividend payout ratios and high dividend growth. He also offers the following warning signs when a dividend yield… Read More
Shopping for yield when interest rates are at rock bottom levels can attract an investor to low-priced stocks that may not be the best prospects. A recent Barron’s article cautioned investors that high-yielding stocks could be “value traps”. Analysts at Evercore’s ISI Team (a research arm of Evercore Partners, an investment bank and money manager) explain, “Dividend yield as a factor for stock selection [must] be combined with other factors.” These other factors include payout… Read More
Dividend producing stocks are attractive and offer investors compelling values (subscription required) according to this AAII Journal article by John Buckingham, director of research and chief portfolio manager of AFAM Capital and editor of the Prudent Speculator newsletter. Keep in mind, the article was written in mid-2015, but many of the statistics in the article are long term in nature and we believe investors seeking and investing in high dividend paying stocks should take note… Read More
In his latest piece for NASDAQ.com, Validea CEO John Reese takes a look at some dividend stocks that also offer solid fundamentals. In the article, Reese looks at Patrick O’Shaughnessy’s latest research on dividend payers, which shows that high yielding stocks no longer trade at the discount to the market that they traditionally have. According to Reese, the fact that this valuation advantage no longer exists means that investors need to look much more closely at… Read More
Every other issue of The Validea Hot List newsletter examines in detail one of John Reese’s computerized Guru Strategies. This latest issue looks at the Peter Lynch-inspired strategy, which has averaged annual returns of 11.2% since its July 2003 inception vs. 6.4% for the S&P 500. Below is an excerpt from the newsletter, along with several recent top-scoring stock ideas from the Lynch-based investment strategy.
With Christmas just around the corner, John Buckingham says undervalued dividend stocks are on his Christmas list.
Looking for strong dividend stocks? Some top fund managers are finding them in an unlikely place: the tech sector.
In his first-quarter letter to shareholders, top fund manager Bill Nygren of Oakmark says that he’s keying on companies that are putting their cash to work. “Corporations today have unusually strong balance sheets and are generating much more cash than they can profitably reinvest in their own businesses,” Nygren writes. “Unless managements just let the piles of cash keep growing, which is clearly suboptimal, there are only three ways to deploy it: higher dividends, share… Read More