On a shortened trading week due to Thanksgiving the stock markets continued to climb and hit all-time highs. The S&P 500 (SPY) was up 0.1% on the week while the Nasdaq (ONEQ) and Dow Jones Industrials Average Index (DIA) were up 1.9% and 0.1%, respectively. This positive week marked the third straight month of gains for stocks and the eighth consecutive week of gains for the S&P 500 and Dow Jones, the longest streak for the indices since January 2004 and January 2011, respectively. The early numbers indicate that it is going to be a stronger shopping season than anticipated and that is why we may be experiencing a Santa Claus rally in stocks.
For now, I will continue the course and purchase value stocks for my dividend portfolio. Value investing is the bread and butter of Warren Buffett's money making strategy. The essence of value investing is basically purchasing a stock at less than market value based on certain metrics. My philosophy on dividend investing is to utilize the forward price to earnings ratio and use a one-year PEG ratio, along with a dividend. I don't necessarily look for a stock with a high yield because I like to see capital appreciation. Because the market is still at all-time highs I maintain that it is difficult to find good stocks these days. That's why I'm highlighting a select set of excellent value companies in my dividend portfolio, which have had ex-dividend dates or paid out a dividend during this past week or early next week that people should place on their radar.
Waste Management, Inc. (WM)
Waste Management is a provider of waste management services in North America which collects, transfers, recycles and disposes of waste. On 29Oct13, Waste Management reported third quarter 2013 earnings of $0.65 per share. This result beat the consensus of the 9 analysts following the company by three cents and beat last year's third quarter results by 6.56%. Waste Management's PE ratio is below the industry average and signals that investors are not willing to pay a premium for this stock, making it a value stock. However, during the past year, earnings growth has lagged its historical five year growth rate.
The company goes ex-dividend on 02Dec13 with a $0.365 per share dividend which will be paid on 20Dec13 for a yield of 3.2%. It was a pretty quiet week in terms of news pertaining to the company specifically with no press releases being issued.
Let's take a quick look at the technicals here to see if it can be bought at these levels or if a pullback is coming. As we can see, the relative strength index is dropping from overbought territory with a current value of 67.4, while the MACD chart below shows the black line crossing below the red line with downward trajectory and decreasing divergence bars, meaning there may be some downward pressure on the stock price. I anticipate the stock to drop for now and then I will evaluate again before buying shares.
(click to enlarge)
Union Pacific Corp. (UNP)
Union Pacific Corporation owns transportation companies, of which its principal operating company, Union Pacific Railroad Company, connects 23 states in the western 66% of the United States. On 17Oct13, Union Pacific reported third quarter 2013 earnings of $2.48 per share. This result beat the consensus of the 23 analysts following the company by a penny and beat last year's third quarter results by 13.24%. Union Pacific's PE ratio is below the railroads industry average and signals that investors are not willing to pay a premium for this stock, making it a value play. Additionally, during the past year, earnings growth has outpaced its historical five year growth rate.
The company went ex-dividend on 29Nov13 with a $0.79 per share dividend which will be paid on 02Jan14 for a yield of 1.95%. It was a pretty quiet week in terms of news pertaining to the company specifically with no press releases being issued.
Let's take a quick look at the technicals here to see if it can be bought at these levels or if a pullback is coming. As we can see, the relative strength index is in overbought territory with a current value of 71.07, while the MACD chart below shows the black line above the red line with the decreasing divergence bars flattening in height, meaning the current bullish move is losing steam and we may be coming up on some downward pressure for the stock. I anticipate the stock to drop for now and then I will evaluate again before buying shares.
(click to enlarge)
Williams Sonoma, Inc. (WSM)
Williams-Sonoma is a specialty retailer of products for the home, operating stores under the name of Williams-Sonoma, Pottery Barn, Pottery Barn Kids, West Elm and Rejuvenation. On 20Nov13, Williams-Sonoma reported third quarter 2014 earnings of $0.58 per share. This result beat the $0.55 consensus of the 25 analysts covering the company by three cents and beat last year's third quarter results by 18.37%. Williams-Sonoma's PE ratio is below the furniture & fixtures industry average and signals that investors are not willing to pay a premium for this stock, making it a value story. Additionally, during the past year, earnings growth has outpaced its historical five year growth rate.
The company went ex-dividend on 23Oct13 with a $0.31 per share dividend which was paid on 25Nov14 for a yield of 2.1%. It was a pretty quiet week in terms of news pertaining to the company specifically with no press releases being issued.
Let's take a quick look at the technicals here to see if it can be bought at these levels or if a pullback is coming. As we can see, the relative strength index is near overbought territory with a current value of 67.49, while the MACD chart below shows the black line above the red line with the decreasing divergence bars decreasing in height, meaning the current bullish move off of the earnings beat is losing steam and we may be coming up on some downward pressure for the stock. I anticipate the stock to drop for now and then I will evaluate again before buying shares.
(click to enlarge)
Conclusion
I've highlighted these names, because they have all raised their dividend or initiated them within the past year and are poised to do so again in the coming years. It is important in this market to be able to hold onto companies, which raise their dividend rates or initiated them, because it is a sign that the underlying company is doing well financially. The importance of these stocks I've highlighted is that they are value plays while the broader market is at all-time highs. I believe we are at a point in the market where we have to look for value.
Disclaimer: This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!
Disclosure: I am long WM, UNP, WSM, SPY, DIA, ONEQ. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)
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