Dividend investors have no fewer than 41 high-quality undervalued blue-chip stocks to choose from.
That’s according to Investment Quality Trends[1], a dividend stock advisory service edited by Kelley Wright. According to my firm’s performance tracking, it is one of the best-performing investment newsletters over the long term, beating the broad U.S. stock market by a large margin. In addition, it is in first place for risk-adjusted performance over both the trailing 20-[2] and 30-year[3] periods among services I monitor.
To be sure, this group of 41 stocks constitutes just 16.8% of the 244 blue-chip dividend-paying stocks[4] on Wright’s watch list. But the current size of Wright’s undervalued category is nearly double what it was at the beginning of the year.
That’s a big improvement. Indeed, at the beginning of January, Wright’s valuation model found that, among the 244 stocks he monitored, there were twice as many overvalued as undervalued stocks. Today, in contrast, the two groups are roughly the same. Credit for this improvement goes both to the market’s turmoil over the last several months, as well as continued improvement in blue chips’[5] fundamentals.
Below are five stocks on Wright’s list of top-10 undervalued stocks that are also recommended for purchase by at least one other of the top-performing investment newsletters I monitor:
• Procter & Gamble PG, -0.57%[9]
Does this mean that the market as a whole is undervalued? Unfortunately not.
Consider first what I found upon putting the output of Wright’s model in the context of the 50+ years that Investment Quality Trends has been analyzing dividend-paying stocks. Twice each month since the 1960s, that model has put into four categories several hundred dividend payers with sound balance sheets and a long history of paying dividends:
• The “Undervalued” category contains stocks whose dividend yields are close to the high ends of their historical ranges;
• The “Overvalued” category contains those...