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Wed. May. 19, 2010

Five Dividend Stocks To Buy On A Dip *

Did May 6th frighten or excite you? I received a few emails from frightened dividend investors letting me know they were getting out of the market, while others asked if this was the beginning of another significant downturn. The first group are destined to always lose money in the market (sell low/buy high) and my answer to the second group was,  ‘I hope so!’ Let me explain.

As a long-term dividend investor I love buying blue-chip companies when they go on sale and there is no underlying fundamental business reason.  If you can buy a Ferrari at the price of a Camaro, most people would consider that a good thing, but for some reason many long-term investors fret whenever there is a major clearance sale on the stocks they want to own.

I keep a list of great stocks that I would love to buy or add to my current position.  Here are a few on that list:

Automatic Data Processing, Inc. (ADP) | Yield @ Buy Price: 3.57%
Buy Price: $38.11 | Recent Price: $41.80 | Premium: 9.68% | Analysis

International Business Machines (IBM) | Yield @ Buy Price: 2.18%
Buy Price: $119.11 | Recent Price: $131.19 | Premium: 10.14%

Pepsico, Inc. (PEP) | Yield @ Buy Price: 3.04%
Buy Price: $59.28 | Recent Price: $66.07 | Premium: 11.5%

Genuine Parts Company (GPC) | Yield @ Buy Price: 4.68%
Buy Price: $35.04 | Recent Price: $41.25 | Premium: 17.7% | Analysis

Eaton Vance Corp. (EV) | Yield @ Buy Price: 2.59%
Buy Price: $24.67 | Recent Price: $32.80 | Premium: 32.93%

If the market drops, there is no need to panic if you are a long-term, buy-and-hold investor. While others are content to give away their stocks, I will pull out my wish list and see if any of my targets ready for harvesting.

Full Disclosure: Long ADP, PEP, GPC. See a list of all my income holdings here.

(Photo Credit)


6 Responses to “Five Dividend Stocks To Buy On A Dip *”

  1. Brendan says:

    You should tell the so called “dividend investors” who are getting out of the market and stick with GIC’s.
    They really weren’t dividend investors, because if they were, they would welcome days like may 6th, and hope that we are in for a significant downturn.

    People love when cars, electronics, etc are on sale. For the life of me I can’t explain why they hate dividend sales?????

    Let’s hope for another may 6th, or even better, another March/09!

  2. TMT says:

    D4L,

    So do you have Limit orders set to take advantage of those buy prices?

    OR

    Do you have a watch list created and daily/weekly pull up the prices and see what to buy?

  3. D4L says:

    TMT: As May 6th showed limit order can get you in trouble. I pull prices weekly and see where the positions are.

    Best Wishes,
    D4L

  4. ch says:

    But if we know for example that the Dow is attractively priced when it yields 5-6% or so and right now it yields 2-3% or so, why would we not wait until the high valuations come down and buy the yield on a cheaper cost. If you are fully invested and the market drops %30, how do you have any money to take advantage of the sale the earlier poster refers to? I appreciate any thoughts and strategies.

  5. D4L says:

    ch: I invest a set amount each month, but I am not fully invested in the market. I have a cash reserve that I will utilize during pullbacks.

    Best Wishes,
    D4L

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