Three Dividend Paying Stocks To Buy Now
The Dynamic Wealth Report
June 20, 2011
by Robert Morris, Editor
Last week I talked about the reasons behind this year's stock market
summer swoon. The article,
Summer Swoon Equals Buying Opportunity,
explains investors are selling stocks after several recent negative
economic reports. They're worried the data suggest the US economy is
slipping back into recession.
However, I also told you I think investors are overreacting to the news.
The reason... a recent Bloomberg survey shows 67 top economists believe
US economic growth will rebound in the second half of the year. Based on
this bullish outlook, I urged you to use the recent market weakness as a
buying opportunity.
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And apparently many of you agree.
My email inbox is literally overflowing with requests from readers. Each
one asks essentially the same question... which stocks do I think
investors should buy now?
As I'm not one to disappoint, I'm going to share three of my best stock
ideas with you today. But before I do, I'd like to give you a little
background on how I picked them.
With the market falling, my number one concern right now is limiting
potential downside risk. The best way to do that is to buy stocks with
attractive dividend yields.
The reason for this is simple.
You see, investors tend to hang on to dividend paying stocks even when
the market is correcting. Most dividend stock investors buy them for the
long haul. Often they're investing for the income as much as the
potential appreciation.
So I began my search with stocks offering dividend yields of at least
3%.
But I'm not interested in just any stock paying a dividend.
I'm looking for dividend paying stocks also offering solid long term
growth potential. You want stocks that will appreciate in value when the
market starts moving higher again.
I focused on stocks with long term earnings growth
projections of 10% or more.
Last but not least, I want to make sure we get good value for our
investment dollars. The last thing we want to do is overpay for a stock
while the market is correcting. How do we do this?
We buy stocks with PEG ratios less than 1.0.
You see, these stocks are trading at a discount to their projected
long-term growth rates. When the market takes off, these stocks offer
the best potential to appreciate in value.
Now that you understand my selection criteria, let's take a closer look
at three stocks to buy right now...
The first stock is Intel (INTC), the largest manufacturer of
semi-conductors in the world. Intel pays an annual dividend of $0.72 per
share, which works out to a dividend yield of 3.42%.
What's more, the company offers solid long-term growth potential. They're expected to grow earnings by 10.2% annually over the next five
years.
And at a recent price of $21.19, the shares are slightly undervalued
relative to their projected earnings growth. The stock's PEG ratio is
0.91.
It's hard to see how you can go wrong buying Intel at these prices.
The next stock I like is Chevron (CVX)... one of the largest integrated
energy companies in the world. Chevron pays a hefty annual dividend of
$3.42 per share for a dividend yield of 3.15%. The company is expected
to grow earnings 12% annually. And the shares are badly misvalued with a
PEG ratio of just 0.63.
Clearly, CVX is a perfect example of an undervalued stock offering
strong growth potential and a juicy dividend yield.
The third stock to buy now is a mid-cap chemical maker by the name of
Olin (OLN). Olin pays an annual dividend of $0.80 per share for a
dividend yield of 3.82%. Of the three stocks, they offer the highest
projected earnings growth at a stunning 40% annually. And, they offer
the best value with a PEG ratio of just 0.27.
If you're looking for a strong income generating stock with sky high
growth potential, Olin's your best bet.
No question about it, the market is serving up a number of tasty buys
right now. Take advantage of the summer swoon by adding one or more of
these fast-growing, undervalued stocks with attractive dividend yields
to your portfolio today.
• Paper (-14%)
Paper stocks have taken a beating over the past month. Investors are fleeing the economically sensitive sector after a slew of
weaker than expected economic data. Some of the worst performers include
Boise (BZ), AbitibiBowater (ABH),
Wasau Paper (WPP), and Clearwater Paper
(CLW).
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