Is this rally going to keep on going? Can anything end the rally? A strong gross domestic product report on Friday gave the bulls another reason to take the market higher. The end of the bond buying program is here and a budget deal was struck. These are just a few of the top headlines that took place during the week of 16Dec13. The S&P500 (SPY) marched higher to the tune of 2.4% during the week while the Dow Jones Industrial Average and the Nasdaq logged a 3% gain and 2.6% gain, respectively.
Call me a pessimistic optimist, but 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.
General Electric Company (GE)
General Electric is a diversified technology and financial services company operating in the segments of aircraft engines, power generation, industrial products, water processing, household appliances, medical imagine, and business and consumer financing. On 18Oct13, GE reported third quarter 2013 earnings of $0.36 per share. This result beat the consensus of the 14 analysts following the company by a penny and was the same as last year's third quarter results. GE's PE ratio is below the Misc. Capital Goods industry average and signals that investors are not willing to pay a premium for this stock, making it a value stock. Additionally, during the past year, earnings growth has outpaced its historical five year growth rate.
The company went ex-dividend on 19Dec13 with a $0.22 per share dividend which will be paid on 27Jan14 for a yield of 3.22%. During the week the company said they expect revenue growth for 2014 to be between 0% and 5%.
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 65.56, while the MACD chart below shows the black line crossing above the red line with upward trajectory and increasing divergence bars, meaning there may be some upward pressure on the stock price but not much. I anticipate the stock to top out around here for now but I will not be buying it.
(click to enlarge)
Transocean Ltd. (RIG)
Transocean is an international provider of offshore contract drilling services for oil and gas wells. On 06Nov13, Transocean reported third quarter 2013 earnings of $1.37 per share. This result beat the $1.07 consensus of the 37 analysts covering the company and beat last year's third quarter results by 6.20%. Transocean's PE ratio is among the lowest of any stock in the Oil Well Services & Equipment industry and signals that investors have not been willing to pay a premium for this company's business prospects, 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 13Nov13 with a $0.56 per share dividend which was paid on 18Dec13 for a yield of 4.77%. Citigroup (C) downgraded the stock during the week from a "neutral" to "sell" rating with a $40 price target citing that pricing power is beginning to erode.
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 oversold territory with a current value of 27.51, while the MACD chart below shows the black line below the red line with downward trajectory and increasing divergence bars, meaning there may be some upward pressure on the stock price. I anticipate the stock to bottom out around these levels for now and will be looking to buy it.
(click to enlarge)
Waste Management, Inc. (WM)
Waste Management is a provider of waste management services in North America which collects, transfers, recycles and disposes of waste. 29Oct13, Waste Management reported third quarter 2013 earnings of $0.65 per share. This result was 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 Waste Management Services 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 went ex-dividend on 02Dec13 with a $0.365 per share dividend which was paid on 20Dec13 for a yield of 3.29%. 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 middle-ground territory with a current value of 53.5, while the MACD chart below shows the black line below the red line with upward trajectory and increasing divergence bars, meaning there may be some upward pressure on the stock price. I anticipate the stock to bottom out around these levels for now and will be looking to buy it.
(click to enlarge)
Consolidated Edison Inc. (ED)
Consolidated Edison Inc. is a holding company that owns Consolidated Edison Company of New York and Orange & Rockland Utilities. On 04Nov13, Edison reported third quarter 2013 earnings of $1.48 per share. This result beat the consensus of the 15 analysts following the company by six cents and beat last year's third quarter results by 2.78%. Edison's PE ratio is below the Electric Utilities industry average and signals that investors are not willing to pay a premium for this stock, making it a value stock. Additionally, during the past year, earnings growth has outpaced its historical five year growth rate.
The company went ex-dividend on 08Nov13 with a $0.615 per share dividend which was paid on 15Dec13 for a yield of 4.49%. 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 middle-ground territory with a current value of 42.21, while the MACD chart below shows the black line crossing above the red line with upward trajectory and increasing divergence bars, meaning there may be some upward pressure on the stock price. I anticipate the stock to bottom out around these levels for now and will be looking to buy it.
(click to enlarge)
L-3 Communications Holdings Inc. (LLL)
L-3 Communications is a prime contractor in command, control, communications, intelligence, surveillance, and reconnaissance systems, aircraft modernization and maintenance, and government services. On 29Oct13, L-3 reported third quarter 2013 earnings of $2.23 per share. This result beat the $1.95 consensus of the 14 analysts covering the company and beat last year's third quarter results by 12.63%. L-3's PE ratio is among the lowest of any stock in the Aerospace & Defense industry and signals that investors have not been willing to pay a premium for this company's business prospects, making it a value story. However, during the past year, earnings growth has lagged its historical five year growth rate.
The company went ex-dividend on 14Nov13 with a $0.55 per share dividend which was paid on 16Dec13 for a yield of 2.09%. 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 67.61, while the MACD chart below shows the black line crossing above the red line with upward trajectory and increasing divergence bars, meaning there may be some upward pressure on the stock price but only for a short time. I anticipate the stock to top out around these levels for now and will not be looking to buy it.
(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 GE, C, ED, LLL, RIG, SPY, WM. 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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