US Stocks On Sale

On 2011/08/20, in Blog, by

Earlier this year, it was getting difficult to find good dividend paying stocks at a reasonable price. Markets had been climbing higher and higher, reaching peak levels back in March and April, with the Dow closing at 12,810 on April 29th, 2011. The S&P 500 also reached a peaked level on April 29th, closing at 1,363. Then on August 4th, all that changed when global markets reacting to a possible U.S. default along with European debt woes, began to tumble.

The Dow ended up losing -16%, and the S&P off -18% from those April highs as well. Many investors began “backing up the truck” in the days to follow, finding some of their best investments on sale. Although the future direction of the economy and markets remains uncertain, many high-quality dividend paying stocks are still trading at reasonable price points, as compared to only a few months ago. Here are a few of my favorite U.S. Stocks on sale.

Procter & Gamble (PG)

I can’t think of a better inflationary hedge, or recessionary proof stock than Procter & Gamble. This 167 billion-dollar company, markets more than 250 products to more than five billion consumers in 130 countries. The range of well known home and beauty products which PG manufactures is staggering. Let’s face it, economic downturn or not, people still buy their favorite brand names.

PG currently has a P/E ratio of 15.49, a dividend payout ratio of 53.4%, and a dividend yield of 3.4%. It’s debt to equity ratio is currently at 0.80 which is considered modest. PG is currently trading at $60.86 per share, down -9.6%
from its high of $67.38 back on May 18th. $60 is a significant support level for PG, when compared over a 5 year horizon. A breakout below this level may indicate further price declines.

Sysco Corp. (SYY)

If you’re a chicken, Sysco would be your least favorite company. As an investor it should be at the top of your list, since it’s trading near its 52 week lows. This global food giant distributes food products and supplies to restaurants, healthcare and educational facilities, as well as to lodging establishments. SYY has a market capitalization of 15.9 billion, a P/E ratio of 13.92, and a dividend payout ratio of 53%, with a dividend yield of 3.70%.

The debt-to-equity ratio is higher however at 1.73, and this may be a factor in its current share price. SYY is currently trading at $27.30 per share, slightly above its 52 week low of $27.13. This may be a good entry point on this company, and the current market turmoil has had less influence on Sysco as compared to other companies. $27 is also a 5-year support level for SYY that you may want to watch closely before buying.

PepsiCo Inc. (PEP)

While everyone was loading up on Coca-Cola (KO), PepsiCo (PEP) flew right under the radar. A less than stellar earnings report on July 21st, 2001, sent PepsiCo shares down from $68.49 to $63.86 by July 27th, a decline of over -6.7% in a few days. PepsiCo found it difficult to raise its prices to offset soaring commodity costs, and this eventually affected its bottom line. As with PG, PepsiCo is a consumer discretionary which is less influenced by market declines. Even with price increases due to inflation, people will still buy Pepsi, eat potato chips, or eat Quaker oatmeal for breakfast.

Brand recognition is one of the most important factors among the consumer staples. PepsiCo has a market capitalization of nearly 100 billion dollars, a P/E ratio of 16.05, a dividend payout ratio of 52.4%, and a debt-equity ratio of 0.99. The current dividend yield is 3.20%. PEP is currently trading at $63.09 per share, off -10.5% from its high of $70.52 back on July 7th, 2011. This may be a good entry point for PepsiCo (PEP).

Home Depot (HD)

During our home renovation, I became very familiar with Home Depot (HD). I found a company which dominated our Canadian equivalent Rona Inc. (RON-TSX), was focused on customer service, and was the favorite of local contractors and renovation fans alike. And you can even get a Harvey’s hot dog after buying power tools! Back on October 1st, 2010, I recommended Home Depot on my blog when it was trading at $31.68 per share.

With the recent market declines, Home Depot (HD) is again looking attractive at $32.16 per share, off -16.4% from its high of $38.48 back on February 18th, 2011. Its price before the market declines on July 25th, was $36.65 per share, or a -12.2% difference from its current price. Home Depot (HD) has a market capitalization of 51.2 billion, a P/E ratio of 15.45, and a dividend payout ratio of 48%. The dividend yield is currently at 3.00% for HD, and the debt to equity ratio is higher at 1.41.

Wal-Mart (WMT)

Many investors have been frustrated buying Wal-Mart (WMT) and seeing little capital appreciation in the stock price over the years. Many of these investors also view Wal-Mart as an income only investment, buying solely for the dividend yield. Yet if you were to buy Wal-Mart on the dips, and hang on long-term for the ride, you would have grown a nice nest egg on this global retail giant. Wal-Mart is also a great defensive stock during market declines.

During the 2008-2009 financial crisis for example, Wal-Mart lost $15.88 per share, or a -25.4% loss from its peak of $62.41 per share back on September 8th, 2010. That may sound like a big loss, but the entire Dow Jones Industrial Average lost nearly -40% during the same time period. In other words, Wal-Mart held its ground, and still paid you a dividend.

Since March 2009, Wal-Mart has regained its share price back to $51.79 per share. This is at a -4.8% discount, from its price of $54.47 on July 21st, and definitely a good buy opportunity. Wal-Mart has over 179 billion dollars in assets, a P/E ratio of only 11.31, a dividend payout ratio of only 31.8%, and a current debt ratio of .90. The dividend yield is currently 2.8%.

Disclaimer

Please note the Dividend Ninja is not a professional financial advisor or an investment dealer. This article does not offer professional or financial advice is not a recommendation to buy securities mentioned, and is intended to provide general information only. The Dividend Ninja is not responsible for the investment decisions you make.


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2 Responses to “US Stocks On Sale”

  1. Moneycone says:

    Great time for investors, bad time for traders. Know who you are! Totally agree, lots of good stocks on sale!

  2. I think PG and PEP are the cream of the crop on this list. Both very solid, and great defensive plays in an uncertain market. They are trading at very attractive levels right now! Both are wonderful buys.