Tags: value | growth | stocks | dividend

CNNMoney: Boring Stocks Are Exciting Now

By    |   Tuesday, 08 April 2014 02:56 PM

While high-flying, glamorous growth stocks have crashed, boring, dividend stocks are back in style.

"Investors are flocking to what is known as opposed to what is promised," Jim Russell, Senior Equities Strategist for U.S. Bank Wealth Management, told CNNMoney. "While there is a lot of promise there, we think some stock prices outran any kind of semblance of reality."

Investors, concerned about high valuations of growth stocks, fear being burned if those firms report weak first-quarter earnings due to this season's cold winter, Russell explained.

Editor's Note:
38 Trades That Could Turn $1,000 Into $49,000

For instance, Amazon, which has a price-earnings ratio of 170 based on last year's earnings, saw its stock drop about 20 percent this year. Other high-tech growth stocks, like Tesla and Netflix, have suffered a similar fate.

When you think of boring, utilities come to mind. The Utilities Select Sector SPDR exchange-traded fund (ETF) is up more than 9 percent this year, CNNMoney reported, noting that Duke Energy, the fund's top holding, has a dividend yield of 4.4 percent.

The recent high-tech stumble may make some value investors smile.

"This past month has finally been some positive payback for us," Robert Browne, chief investment officer for Northern Trust, told CNNMoney. Their high valuations didn't make sense to Browne, who opted instead for dividend-paying stocks.

While growth stocks may be viewed as synonymous with high tech, biotech has also taken a beating. The iShares Nasdaq Biotechnology EFT jumped more than 20 percent by mid-February before crashing. It's now down for the year.

However, stable pharmaceutical companies have been healthy. Merk, which has a dividend yield of 3.2 percent, is up 11 percent this year, and Johnson & Johnson, with a yield of 2.7 percent, is up more than 7 percent.

This year is looking up for dividend lovers. Financial data firm Markit predicts 427 of the S&P 500 firms will pay dividends this year, the most since 1997, and many will increase their payouts, according to Forbes.

Vulcan Materials, a construction material producer, said it will increase its dividend by 400 percent, and Starwood is doubling its payout. Bank of America will raise its dividend from 1 cent to 5 cents per share, a small dollar amount but huge percentage increase.

Apple, Exxon Mobil, Microsoft and AT&T will remain large dividend payers.

"This year, we predict Apple will raise its dividend 16% in April to $3.55 per share from $3.05 per share. Apple is sitting on a huge cash pile and is continuing to buy back shares at very cheap levels," a Markit report stated, according to Forbes.

Editor's Note: 38 Trades That Could Turn $1,000 Into $49,000

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While high-flying, glamorous growth stocks have crashed, boring, dividend stocks are back in style.
Tuesday, 08 April 2014 02:56 PM
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