Sunday, May 24, 2015
15 years, 1 month and 13 days is precisely how long it took Nasdaq to beat the record it had set for itself in 2000 – at the peak of the dot-com bubble.
With a diversified portfolio consisting a few dependable tech high-fliers, the index soared to an all-time high last week. It gained 0.4% to close at 5,056.06 on Apr 23 (versus 5048.62 recorded on Mar 10, 2000).
However, is the Nasdaq high a breakout or a bubble this time around? With memories of the dot.com bubble still fresh, a hot debate is brewing on the fate of the index.
Breakout or Bubble?
Investors’ irrational exuberance over the previous Nasdaq high led the index to crash. However, after a long wait, the Nasdaq gained momentum on favorable macro issues like low interest rates, a strong U.S. dollar and an improving U.S. economy. As a result, a breakout is more likely.
Instilling more confidence in the upsurge is the fact that this high is supported by a much more reliable foundation of tech behemoths such as Apple Inc. AAPL, Google Inc. GOOGL, Amazon.com Inc. AMZN and Microsoft Corp. MSFT, which have gained significantly over the years.
Moreover, the index is considerably diversified now than it was during the previous high. As evident, many biotech stocks like Biogen Inc. BIIB and Gilead Sciences Inc. GILD have emerged as key players, jumping 9.6% and 9.3% year to date, respectively. Social media is also a major contributor now, with the iconic Facebook, Inc. FB being the fourth largest component of the index.
The Smart Way to Play
We suggest that under such circumstances, investors should simply resort to income investing by picking stocks that have the potential to pay steady dividends.
Although impressive dividend yield remains one of the deciding factors, a company’s fundamentals should also be considered before investors arrive at an investment decision. It would be a good idea to look at a stock’s Zacks Rank before investing in it, as a solid rank indicates favorable estimate revisions by analysts with the optimism over the company's future performance.
5 Dividend Plays
That said, we picked 5 stocks based on their dividend yield. All these stocks carry a Zacks Rank #1 (Strong Buy). Some of these stocks also flaunt an impressive Zacks style score for value.
Please note that our value Style Score takes into account all valuation metrics to give us an actionable picture that helps identify stocks truly trading at a discount to the intrinsic value. Back-tested results show that stocks with a Style Score of ‘A’ or ‘B’ when combined with a Zacks Rank #1 or #2 (Buy) handily beat all other stocks.
Calamos Asset Management Inc. (CLMS - Snapshot Report) has a dividend yield of 4.9% and long-term earnings growth expectation of 10%. This Naperville, IL-based diversified global investment firm delivered positive earnings surprises over the past four quarters, with an average beat of 75.4%. The company has also witnessed upward estimate revisions in the last 30 days, with the Zacks Consensus Estimate for 2015 and 2016 climbing 1.9% and 1.7%, respectively. Further, Calamos Asset Management has a value style score of ‘A’.
Cypress Semiconductor Corp. (CY - Analyst Report), with a dividend yield of 3.4% company has witnessed upward estimate revisions in the last 60 days, with the Zacks Consensus Estimate for 2015 and 2016 surging 28% and 117.6%, respectively. This California-based semiconductor solutions provider delivered positive earnings surprises over the past four quarters, with an average beat of 83.2%. Also, its long-term earnings growth expectation stands at 13.5%.
OFS Capital Corp. (OFS - Snapshot Report) has a dividend yield of 11.2% and long-term earnings growth expectation of an impressive 22.6%. This business development company has witnessed upward estimate revisions in the last 60 days, with the Zacks Consensus Estimate for 2015 and 2016 jumping 9.6% and 16.8%, respectively.
Silvercrest Asset Management Group Inc. (SAMG - Snapshot Report) has a dividend yield of 3.1% and carries a value style score of ‘A.’ The company has witnessed upward estimate revisions in the last 30 days, with the Zacks Consensus Estimate for 2015 and 2016 increasing about 1% and 3.7%, respectively. This New York-based financial advisor posted an average earnings beat of 8.5% over the past four quarters.
First Community Bancshares, Inc. (FCBC - Snapshot Report) has a dividend yield of 3.1%. Holding a value style score of ‘A,’ the company has witnessed upward estimate revisions in the last 60 days, with the Zacks Consensus Estimate for 2015 and 2016 increasing 1.6% and 3.7%, respectively. Also, the company posted an average earnings beat of about 21% over the past four quarters.
Dividend payments not only reflect a company’s sound financial status, it also speaks about its commitment toward investors. Further, a robust earnings history and solid long-term earnings expectations underscore its growth potential.
Copyright © 2015 Zacks Investment Research
Posted by Marian at 5/24/2015 09:39:00 PM