Monday, September 18, 2006

More low PEs and sweet dividends

Portfolio sweetness: a well above average chance for portfolio outperformance!

With the number of articles I've written over the past while about dividends and low PE ratios, I thought I'd continue the trend.

A fairly recent report issued by RBC Dominion Securities identified a list of stocks that met a trifecta of tests for outperformance: relatively low PE ratio, relatively high dividend yield, and positive dividend growth over the past five years. The following S&P 500 companies were included in the report:

  • Bank of America, BAC
  • Pfizer, PFE
  • KB Home, KBH
  • Cincinnati Financial, CINF
  • Fannie Mae, FNM
  • Conoco Phillips, COP
  • DR Horton, DRI
  • Home Depot, HD

Note that these stocks all have a dividend yield above 1.5%, with most above 2.5%, and a PE below 20 (but most are below 13).

The report also included some Canadian TSX-listed stocks, including:
  • Russel Metals, RUS
  • Reitman's Canada, RET.A
  • Teck Cominco, TCK.B
  • National Bank, NA
  • Rothmans, ROC
  • Power Financial, POW
  • Bank of Nova Scotia, BNS
  • Encana, ECA

An investor could do a lot worse than look at these stocks as a great starting point for core holdings in a conservative stock portfolio.


JW

The Confused Capitalist

2 comments:

WITY said...

Those names are not bad, though I'd stay away from the homebuilders and the housing-correlated HD for a while.

The financial are true gems. BAC,CNF are very good. WM is another name I'd mention.

Just stumbled onto this blog googling dividend yield. Interesting stuff!

Jay Walker said...

I'd tend to agree with you (and in fact have argued so on my blog and others' blogs), but Geoff Gannon has a pretty compelling argument the other way ...

See his informative blog postings on the same at:

http://www.gannononinvesting.com/
2006/08/on_homebuilders_1.html

JW