Consider the following...
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:
McDonald's Corporation (MCD) is the largest fast-food restaurant company in the world, with about 35,000 restaurants in 119 countries.
Current Yield: 3.0% | Current Stars: 2
10% Correction Yield: 3.3% | 10% Correction Stars: 3
Abbvie Inc. (ABBV) is a global research-based pharmaceuticals business that emerged as a separate entity following its spin-off from Abbott Laboratories at the start of 2013. AbbVie's key drug is Humira for rheumatoid arthritis.
Current Yield: 3.9% | Current Stars: 2
10% Correction Yield: 4.3% | 10% Correction Stars: 3
W. P. Carey Inc. (WPC) is a leading global net-lease REIT that provides long-term sale-leaseback and build-to-suit financing solutions for companies worldwide.
Current Yield: 6.5% | Current Stars: 2
10% Correction Yield: 7.1% | 10% Correction Stars: 3
UGI Corp. (UGI) operates propane distribution, gas and electric utility, energy marketing and related businesses through subsidiaries.
Current Yield: 2.8% | Current Stars: 3
10% Correction Yield: 3.0% | 10% Correction Stars: 4
Wal-Mart Stores, Inc. (WMT) is the largest retailer in the world, operating a chain of over 10,000 discount department stores, wholesale clubs, supermarkets and supercenters.
Current Yield: 3.2% | Current Stars: 3
10% Correction Yield: 3.6% | 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: No position in the aforementioned securities. See a list of all my dividend growth holdings here.
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Tags: MCD, ABBV, WPC, UGI, WMT,