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This week I have been giving presentations to investors attending the Las Vegas MoneyShow. One of the great parts of what I do at the show is meeting subscribers to my newsletter. My first presentation was a joint discussion of dividend investment strategies with Kelley Wright. Further below I’ll share some of Wright’s top stock picks based on his investment strategy.
Wright is the managing editor of Investment Quality Trends. The IQT service provides buy/hold/sell recommendations on a group of about 350 blue chip stocks. To be included in the database, a company must have paid dividends for at least 25 consecutive years with histories of dividend growth. The service rates stocks based on the current yield in relation to the historic yield range. For example, if a stock’s yield is near the low end of the range it is a sell candidate. When a stock gets to the high end of the range, it would be time to buy. Total returns are generated when the share price cycle upward from a low yield to a high yield.
The IQT method is not so much about high yield stocks as a method to buy stocks when they are undervalued. The stocks in Wright’s watch list will have their highest yields when they are out of favor with the investing public. This is very much of a value strategy, and the analysis will recommend buying out of favor share of long-term high-quality companies.
Here are four stocks from Wright’s presentation that his method separates out currently as good value buys. He used the term “ridiculous values” several times.
Wright remains very bullish on Philip Morris International Inc. (NYSE: PM) after the company’s steep decline in April. He says that the Wall Street analysts are wrong about this company and its prospects for continued profit growth. PM currently yields 5.3%.
In the IQT system, IBM (NYSE: IBM) is an undervalued blue-chip stock. As noted above, the service uses a range of yields to determine whether a stock should be bought or sold. With a current yield of 4.35%, this stock has triggered a Buy signal. This is one stock where the IQT highlights a stock that is very much out of favor with the investing public. This is very much of a value play that could pay off handsomely.
Wright noted that CVS Health Corporation (NYSE: CVS) has not been correctly categorized by the Wall Street analysts and the index information providers. He stated that CVS is more of a health insurance company than it is a retail company. Wright stated that CVS is one of his favorite stocks. Current yield is 3.0%.
Cummins Inc. (NYSE: CMI) will be a great stock if the federal government passes an infrastructure spending bill. This is a great company without such a bill, but that event, if it occurs, would strongly propel the CMI share price to higher levels. The stock currently yields 3.0%.
I really enjoyed providing a joint education session with Kelley Wright. I picked up some good valuation ideas from his presentation. I plan to employ them in my search for higher yield stocks. In my Dividend Hunter service, the focus is on stocks that yield from 5% to more than 10%.
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Category: Dividend Stocks
