Monday, November 25, 2013

Dividend Stocks hitting 52 Week Lows on a Day When the Market Inched to New All-time Highs

The Dow Jones Industrial average inched up to hit all-time highs today. Most components of the Dow are beyond fully valued. The neighborhood I live to live in are where quality stocks are within 10% of their yearly lows. I'm an anti-momentum investor who is always looking for a bargain where the market has irrationally and temporarily driven prices down. Looking at today's 52-week low list, I see some possible opportunities for the dividend investor:

Exelon - is an electric utility in the eastern and mid-western US. It is a low quality utility that has a poor history of enhancing shareholder value. The goal of management seems to be enrich themselves first, then worry about the shareholders later. Not the kind of stock a dividend investor wants to own.

CenturyLink is the third largest phone company in the US, trailing only Verizon and AT&T. CenturyLink was built from the mergers of a number of smaller telephone companies, such as Qwest and Embarq. Unless you're one of the big two, the telephone business can be challenging. CenturyLink cut it's dividend earlier in the year to use the money to pay down its hefty debt load. It is not outside the realm of possibilities that another dividend cut lies in the future. This is a marginal holding in my book that might be worth an investment were it to dip to the high $20s.

HCP Inc. is one of the premier health care REITS. This is the sweet spot of the REIT world with typically long leases and a stable tenant, hence the premium valuations of many of these companies. HCP has paid increasing dividends for 28 straight years, and is rated BBB+ by S&P. HCP has $22B in assets under management in the areas of senior housing, post-acute skilled nursing, life sciences, medical offices, and hospitals. This is a quality REIT that I'd love to pick up at even cheaper prices.

Health Care REIT is another solid health care REIT that owns 1183 properties consisting of senior housing, post-acute skilled nursing, hospitals, medical offices and life science buildings in 43 states, the UK and Canada. HCN pays out about 78% of FFO as dividends. Investors can expect modest dividend growth over the years along with modest FFO appreciation. Again, this is a REIT that is beginning to dip into the upper range of what I would consider an attractive price.

Ventas is also one of the premier health care REITS in the country. The company owns over 1470 separate properties in the areas of senior housing, skilled nursing facilities, hospitals and medical office buildings. With a market cap of around $18B, Ventas' high growth days may be behind it, but there is plenty of room for dividend growth, and share price appreciation at a more modest pace in line with a company of this size. I'd love to pick up a high quality name list Ventas at a few bucks cheaper than today and if the downdrafts in the REIT world continue I may get that opportunity.

AvalonBay Communities is an apartment REIT catering to upper end clientele. It seems to be reasonably well-run and has a premium portfolio of apartment building. But as an apartment REIT, it tends to have primarily short term leases with a lot of tenant turnover, leading to choppy, uneven earnings. For these reasons, and being a long-term shareholder, I would rarely consider investing in an apartment REIT, and will pass on this opportunity.

NameTickerCurrent PriceYieldBuy Price
HCP Inc.HCP$37.705.57%$36.50
Health Care REITHCN$57.335.34%$55.00
AvalonBay CommunitiesAVB$116.863.58%Pass


  1. Good Morning Grouch,
    I've also been looking through the pile of companies in the bond proxy sectors (like Utilities, Telecom, REITs,etc). Those sectors will get slammed if bond yields start to climb again, as I expect. Which utilities are you most interested in?

    1. Just keep in mind I'm no utility expert. Utilities are expected to be low to no growth stocks for the next several years, and if there capital projects aren't managed well they can impact bottom line and stock price. That being said, here's a handful that interest me.... SO, NGG, FE, D, DUK, ED EDE, PPL.

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