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10 Picks That Prove Dividends Don’t Lie

06/07/2011 4:05 pm EST


Kelley Wright

Managing Editor, Investment Quality Trends

This bevy of blue chips combine historically low prices with solid yields, says Kelley Wright of Investment Quality Trends in this exclusive interview with

Kelley, on the subject of your bands of dividend payouts and what they tell us about the market and about stocks, fascinating work.

Thank you.

Fascinating work with investment quality trends and with Dividends Still Don’t Lie, your book. What is it telling us today about the market?

Well, from 1929 to 1995, the Dow Jones Industrial Average behaved in a very specific pattern between dividend-yield boundaries of 3% and 6%. From 1995 to 2007, the cart kind of came off the tracks, and the price went really high, and the yield dropped really low.

Then, when we got to the waterfall of 2008, those dividend yields from the Dow started to normalize. So, where we are now is, it looks like the Dow has kind of been trading between a range of 2% and 4%, and we’re about 2.30% on the Dow right now.


2.30%. We’re getting a little toward what we would call the top end of the range, in terms of dividend yield anyway.

Okay. What is your work telling you are the best sectors to invest in?

You know, it’s pretty broadly diversified. If you look at our undervalue category, and that’s the section in the newsletter of stocks that are at their historically repetitive area of low price and high yield, it’s pretty diversified.

There’s a smattering of utilities. There are some pharmaceuticals. There are a couple of insurance companies. It’s really unlike back in ’06 and ’07, where it was just full of financials.

Now, pretty much you have a choice between an Abbott Labs (ABT) and a Johnson & Johnson (JNJ). You can take a look at a PPL Corp. (PPL) or a FirstEnergy (FE) if you like utilities. If you like the insurance sector, Cincinnati Financial (CINF) is a super well-run company in the property and casualty area.

Pepsi (PEP) and Coke (KO) are both in there if you like beverages. If you like something with a little harder edge to it, Molson Coors (TAP) is in there.

So, it’s a pretty broadly diversified group, so there’s still value left across a pretty wide range of companies.

That’s terrific. Technology? Are they in there, and what about you’re in the rising trends category?

Yeah, no that’s pretty full. That’s well over 50% of our universes. Well into the rising trends.

From the tech side, you’ve got, well IBM (IBM) has been on a tear. IBM went from about $72 up to around $170 now.

It’s not overvalued yet?

IBM has to go to about $210 before it reaches the overvalued area.

Other than that, Automatic Data Processing (ADP), which is really kind of a tech company. That’s about 15% into its rising trend. Not a lot of tech, though, that’s really available to us in the value...the dividend-value area.

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