I uncover a high-quality dividend growth stock that appears to be undervalued each week for Daily Trade Alert, which is a site that focuses on dividend growth investing, stocks, and unique investment opportunities. I’ve been writing for them for years now, and they’re just great over there. Each week, I publish an excerpt of my work, when it’s fresh off the press. That way, you readers are given the opportunity to check it out. The content is totally free. I hope you enjoy!
With bank accounts offering skimpy yields, bonds offering very little income, gold being just a shiny chunk of metal, and real estate being a massive headache to buy and manage, where does one go for passive income in today’s world?
Well, I believe that answer is the same as it’s pretty much been for many decades now.
The broader, more general answer is the stock market.
Specifically, a better answer might be high-quality dividend growth stocks.
Indeed, many dividend growth stocks out there offer yields of 4% or higher, along with the upside that exists when investing in wonderful businesses that are increasing profit (which is funding those growing dividends) and their business value.
Image courtesy of: Stuart Miles at FreeDigitalPhotos.net.
Jason,
Many retail investors complain about IBM’s performance and its management. They are shorting IBM (This is what they posted but who knows?). I bought a small position (5K in my regular account and 10K in my IRA) of IBM below $122 in January 2016. The dividend yield to the cost basis is now 4.93% – who can complain about the dividend yield?
Its price has come down since Berkshire Hathaway released 13-F in May. RSI(14) is now slightly above 25. The company’s fundamental is still good. So I think that buying IBM at this level is a bargain. But I want to wait till Berkshire Hathaway’s 13-F is released next month (due 08/09/2017 for Q2). I know that the ex-dividend date is 08/08/2017 and don’t want to miss the next round of the dividend payment. But I would rather wait till 08/09/2017 or later to find a better entry point if Berkshire has further dumped IBM shares or not.
ER2019,
IBM is pretty cheap based on the fundamentals. There’s not much of a hurdle for them to clear. Unless they fade into oblivion, one should do well. But they’ve been more challenged than I think they had anticipated. It’s certainly taking longer than I thought it would. But time will tell.
As for Berkshire, I’m not sure them selling would really do much to the stock. Buying it didn’t support it over these years. It still languished. What will really matter is what IBM does operationally. Short-term blips from whatever Buffett is doing with the stock won’t really matter over the long run. That’s more of the whole “voting machine” aspect of it. But Buffett selling out would indicate he’s lost confidence. Frankly, I wouldn’t blame him.
Cheers!
IBM certainly meets the criteria of being unloved. I know I would have ignored it but your fine write-up prompts me to take a second look. I especially like your comparison to a utility type stock with upside potential.
Thunder God,
Indeed. You’re getting a utility-like dividend that actually exhibits better coverage (at least in the near term) than most other utilities out there. And you’re getting that additional long-term growth potential, which should translate over to the dividend. Plus, the valuation is simply much lower than utilities. The only question is whether or not IBM can eke out any growth at all moving forward. History would say yes. And I would think so. But it’s been a challenge thus far.
Best regards!
IBM is just a company that any person who is an IT fan will appreciate their work. Interesting pick, thanks for sharing.
BHL,
Happy to share! 🙂
Best regards.
Always liked ibm but hadn’t pulled the trigger yet. I think I will during the next correction. Didn’t realize they’d reduced their share count by 34%. That’s pretty amazing over a decade.
DD,
They’re a buyback machine. I usually like this, but we can now see they could have been more prudent. Hindsight is always 20/20. That said, that reduced float bodes well for current shareholders looking forward, assuming they can eke out some growth.
Cheers!
Hi Jason, I’m reading your blog for a couple of weeks now with a lot of pleasure! Thanks for all the good tips and knowledge sharing. Since today I have money available on my IB account and I’m (almost) ready to start investing. IBM will be one of my first stocks!
I’m wondering, how do you screen/scan stocks to create a short list for new investments? Do you use specific tools/programs/subscriptions?
Thanks!
Mono,
That’s a great question. This might sound funny, but I just use my brain. I have 100+ stocks in my portfolio, so that’s a pretty nice list to cull from to start with (as most stocks in my portfolio are on David Fish’s CCC list). Beyond that, I just keep abreast of stocks and movements and valuations, etc. I kind of have a superhuman thirst for this stuff. I’m a sponge.
But keeping a watch list (in addition to your portfolio) with your brokerage would be super easy. And Morningstar’s subscription comes with all kinds of filtering tools. Plus, Google Finance has a pretty robust stock screener. A lot of ways to do it.
Hope that helps!
Best wishes.