“Dividends Stocks Posed to Rally”
Food for thought, in this volatile market there are opportunities for growth in dividend paying stocks. In the daily blog from Mike Boyle from Advisors Asset Management, Inc., (AAM) dated September 21st, 2011 he stated it best….
“We have been discussing for quite some time, both in our writings and speaking engagements, that we thought the U.S. equity markets were attractive based on current valuations and earnings growth (both current and projected), and that is still the case. The S&P 500’s current P/E (price to earnings) ratio sits at 13.15, which is well below its long-term average. Its year-over-year actual earnings growth sits at 16.24%, which is well above its long-term average, and its year-over-year earnings are projected to grow by 17.96%. In addition, the S&P 500’s current yield of 2.17% is now above the 1.92% yield of the U.S. 10-year obligation which we believe is going to embolden a lot of income-focused investors to begin to up their equity exposure.
It should also be noted that the S&P 500’s yield of 2.17% understates the opportunity as the index includes stocks that don’t currently pay a dividend. If we take an equal-weighted look at only the dividend paying securities in the index, we see the average yield is 2.53%. In addition, there are 134 members (26.8%) in the index currently yielding over 3% and 57 members (11.4%) in the index currently yielding over 4%. Whenever we discuss stocks with attractive yields we usually hear a few grumblings that these securities are accidental high yielders or value traps. That is the case with some of them and that is why investors need to do their homework when picking dividend stocks (or any investment for that matter). However, we do show there are currently over 30 stocks in the S&P 500 that not only are yielding over 3%, but have also grown their dividend at least 10% year-over-year as well as their earnings 10% year-over-year. Thus there are many stocks offering the potential for quality growth as well as an attractive income stream.
Add it all up and we think the trifecta of valuation, growth and dividend yield make U.S. stocks very attractive for long-term investors. Dividends have historically provided a large portion of the total return of the equities market and over the last twenty years (8/31/91 – 8/31/11) that portion has been 42%.”
For more information, please visit on Mike Boyle’s blog.
G.R. Reid Consulting Services, LLC and AAM is not a registered investment advisor and is independent of American Portfolios Financial Services Inc.and American Portfolios Advisors Inc.
Unless specifically stated otherwise, the written advice in this memorandum or its attachments is not intended or written to be used for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.
Information is time sensitive, educational in nature, and not intended as investment advice or solicitation of any security.
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