Tuesday, May 18, 2021

Dividend Investors Should Focus On Stocks, Not The Market

The election may be settled, but investors fears are not. When Trump was first elected, the market plunged on worries of what he would do.  Since then the markets have gone up and down based on what crazy news story came out that day, but the overriding direction has been up over the last year. Is it a stock market, or a yo-yo?
Looking at this CNN Money chart might lead you to believe that "yo-yo" is the more appropriate term:

Fear & Greed Index

Where's The Market Going From Here?

In one form or another, I routinely get this question, "What do you think of the market? Where's it headed?" Normally, I politely respond as expected, but occasionally I will startle the person with a reply like, "I don't know. For me it really doesn't matter much." My investing goals are not defined by movements in the market.

Many people define the market broadly as the S&P 500. Very little of my total portfolio is in a S&P 500 index. Its movements up or down have minimal effect on my goals. As a value-based investor in dividend growth stocks, it is in my best interest to have stocks depressed and yields high, at least for the short-term. This provides a choice between worthy investments, unlike the market boom years when it was a struggle to find fairly priced stocks.

Focus On Solid Dividend Stocks, Not The Market

Instead of looking at the market and its direction, investors in dividend growth stocks should focus on quality, price and ultimate value. Below are several quality dividend stocks selling below their calculated fair value:

Aflac Incorporated (AFL) provides supplemental health and life insurance in Japan and the U.S. Products are marketed at work sites and help fill gaps in primary coverage.
- Calculated Fair Value: $59.43
- Recent Price: $56.32
- Yield: 2.3%

Chevron Corporation (CVX) is a global integrated oil company (formerly ChevronTexaco) has interests in exploration, production, refining and marketing, and petrochemicals
- Calculated Fair Value: $134.65
- Recent Price: $109.97
- Yield: 4.1%

Texas Instruments Inc. (TXN) is one of the world's largest manufacturers of semiconductors, this company also produces scientific calculator products and DLP products for TVs and video projectors.
- Calculated Fair Value: $229.34
- Recent Price: $179.40
- Yield: 2.2%

T. Rowe Price Group Inc. (TROW) operates one of the largest no-load mutual fund and life cycle fund complexes in the United States, with June 30 AUM of $776.6 billion.
- Calculated Fair Value: $298.99
- Recent Price: $191.07
- Yield: 2.3%

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.
- Calculated Fair Value: $418.27
- Recent Price: $116.43
- Yield: 4.5%

Markets go up. Markets go down. Over time they tend to drift higher. Recently we have seen higher stock prices. In these times when we struggle to find fairly priced stocks, we look back and regret not buying more when the market was crashing all around us.

Full Disclosure: Long AFL, CVX, TXN, TROW, ABBV, 

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