Higher Values, Lower YieldsOne of my favorite comments from the unenlightened is, 'How could you buy XYZ stock? Its price has been flat for over 10 years!' If a company has increasing earnings, cash flow and dividends for 10 years, and there is nothing fundamentally wrong with the company, I am ecstatic if the stock price is flat.
When this occurs the shares purchased today will have a significantly higher initial yield than the ones purchased 10 years ago. Conversely, when share price appreciates at a higher rate than than the dividend grows, the current yield drops.
As a dividend growth investor, the one thing that will generate more income and increase our wealth is the ability to buy undervalued blue-chip stocks.
Chaos Can Bring OpportunityStocks are rarely fairly priced. On any given day, the market is driven by emotion (either fear or greed), but over the long-term it will trend toward a fair mean.
Knowing this, allows us to overcome the emotional hurdle of buying when the market appears to be a total melt-down. The more perceived chaos and fear in the market, the greater our potential opportunity.
A market correction will drive value.
Dividend Stocks Needing A Market CorrectionHere are five stocks that would be a buy today with a 10% correction:
Medtronic, Inc. (MDT)
Medtronic Inc.is a global medical device manufacturer has leadership positions in the pacemaker, defibrillator, orthopedic, diabetes management, and other medical markets.
Current Yield: 2.2% | Current Stars: 2
10% Correction Yield: 2.5% | 10% Correction Stars: 4
General Dynamics Corp. (GD)
General Dynamics is the world's fifth largest military contractor and also one of the world's biggest makers of corporate jets.
Current Yield: 2.6% | Current Stars: 2
10% Correction Yield: 2.9% | 10% Correction Stars: 5
The Coca-Cola Company (KO)
The Coca-Cola Company is the world's largest soft drink company with a sizable fruit juice business.
Current Yield: 2.8% | Current Stars: 2
10% Correction Yield: 3.1% | 10% Correction Stars: 5
Genuine Parts Company (GPC)
Genuine Parts Co is a leading wholesale distributor of automotive replacement parts, industrial parts and supplies, and office products.Genuine Parts Co is a leading wholesale distributor of automotive replacement parts, industrial parts and supplies, and office products.
Current Yield: 3.3% | Current Stars: 2
10% Correction Yield: 3.7% | 10% Correction Stars: 4
Cincinnati Financial Corp. (CINF)
Cincinnati Financial Corp. markets primarily property and casualty coverage. It also conducts life insurance and asset management operations.
Current Yield: 5.3% | Current Stars: 3
10% Correction Yield: 5.9% | 10% Correction Stars: 5
A correction is not something to be feared, but is necessary for and will benefit those with a long-term view. Fearful investors will sell their blue-chip stocks to someone in a down market, and when the chaos occurs I plan on being at the front of the line.
Full Disclosure: Long MDT, GD, KO, GPC, CINF. See a list of all my income holdings here.
- 9 High-Yield Managed Distribution Policy Funds
- The Elite Dividend Stocks List
- Dividend Stocks Poised To Beat Inflation
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- Stocks That Pay Monthly Dividends
Tags: [MDT] [GD] [KO] [GPC] [CINF]