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Dividend Stock Advisor

Volatility Underlines Value of Dividend Stocks

By David Peltier | 08/27/15 - 12:30 PM EDT
Stocks in Focus: SSI, CPB, COP, F, GE, HP, KLAC, PFE, SO, MO, LMT, WM

U.S. stocks experienced the type of volatility that hasn’t been seen for a long time, as the broader market averages moved into correction territory earlier this week for the first time in about four years. The selloff has brought new names onto our radar screen, including Genuine Parts (GPC:NYSE).

While many names in the model portfolio were hit, we believe that dividend-paying stocks continue to be the best bet in a volatile market environment. The cushion of the payout softens the blow during as stock prices decline, especially when the yields compare favorably to U.S. Treasuries.

Earnings Review

Stage Stores (SSI:NYSE) fell 35% over the past two weeks and recently changed hands at around $10.80, after management posted lower-than-expected quarterly results on Aug. 20. The retailer reported earnings per share of $0.22 in its fiscal second quarter (ended July), as revenue grew fractionally from the previous year, to $380.9 million. Same-store sales growth in the period was 0.8%.

Looking forward, the company cut its fiscal year 2016 (ending January) EPS guidance 11%, to $1.05 to $1.15. Stage Stores is also closing 90 underperforming and money-losing locations in the coming years, which represent about 4% of total revenue.

Management increased promotions toward the end of the quarter, which helped keep inventory at a reasonable level. We added to our position twice since the earnings report, as we believe the dividend (with a recent 5.6% yield) remains secure. As the company gets back on the right track in the coming quarters, we believe that the shares can move back up toward the low-teens.

Earnings Preview

Campbell Soup (CPB:NYSE) is set to announce quarterly results on the morning of Sept. 3. The company is expected to earn $0.42 per share in the fiscal fourth quarter (ended July), down from $0.49 a year earlier, on $1.69 billion of revenue. Management has met or exceeded the consensus analyst profit estimate for six straight quarters.

Campbell will host a conference call at 8:30 a.m. EDT that investors can access at 703-639-1316, using the passcode 1660929. A replay will also be available for two weeks at 888-266-2081, using the same passcode. Both the live call and a replay can be accessed at the company’s website: www.investor. campbellsoupcompany.com. On the call, we'll be listening to how inventory levels are shaping up, ahead of the fall season.

The shares lost 5% over the past two weeks and recently traded at about $47.75. We maintain that Campbell is attractive to hold for the 2.6% dividend yield.

Company Updates

ConocoPhillips (COP:NYSE) fell 10% over the past two weeks -- along with the underlying price of oil -- and recently changed hands at around $45.90. That said, management is cutting costs and remains committed to the dividend, which recently yielded 6.55%. We maintain the stock is attractively valued.

Ford Motor (F:NYSE) declined 8% over the past two weeks and is now trading at roughly $13.50. Even so, we believe new products will continue to drive growth and that the stock remains attractive to purchase for the 4.5% dividend yield.

General Electric (GE:NYSE) moved 5% lower over the past two weeks and recently changed hands at around $24.70. That said, we like the company's attractive 3.8% dividend yield.

Helmerich & Payne (HP:NYSE) dropped 11% over the past two weeks -- along with the energy sector -- and recently traded at about $54.10. That said, the company received two analyst upgrades on Aug. 26, from Edward Jones and J.P. Morgan. Management is prudently cutting costs and we believe the shares remain attractive for the 5.1% dividend yield.

KLA-Tencor (KLAC:Nasdaq) moved 5% lower over the past two weeks and is now trading at around $49.30. We maintain our view that the stock is appealing for the 4.3% dividend yield.

Pfizer (PFE:NYSE) declined 6% over the past two weeks and recently changed hands at around $33.20. That said, we continue to believe the shares are attractive to purchase for the 3.4% dividend yield.

Southern Co. (SO:NYSE) fell 5% over the past two weeks and recently traded at around $44.00. On Aug. 24, management said that it was buying fellow Atlanta-based utility, AGL Resources (AGL:NYSE), for $8 billion of cash. The purchase adds natural gas to the company’s portfolio and is expected to close in the first half of 2016.

Southern expects the purchase will add to earnings in the first year and boosted its long-term, annual earnings growth rate to 4% to 5%. We believe that higher earnings will lead to higher future dividend increases. In the meantime, the stock is attractive to purchase for the 5% dividend yield.

Dividend Reminders

Altria (MO:NYSE) increased its quarterly dividend on Aug. 21, to $0.565 per share (4.2% yield). Investors at the close of trading on Sept. 10 will qualify for the payment on Oct. 10. Management has increased the payout 49 times in the past 46 years.

Lockheed Martin (LMT:NYSE) investors at the close of trading on Aug. 27 will qualify for the next quarterly dividend of $1.50 per share (2.95% yield), to be paid on Sept. 25.

Stage Stores investors at the close of trading on Aug. 27 will qualify for the quarterly dividend of $0.15 per share (5.6% yield), to be paid on Sept. 16.

Waste Management (WM:NYSE) announced its latest quarterly dividend of $0.385 per share (3.1% yield) on Aug. 20. Investors at the close of trading on Sept. 9 will qualify for the payment on Sept. 24.

Regards,

David S. Peltier

Southern's AGL Resources Deal Makes Sense
Stocks in Focus: SO, AGL

The purchase will create the second largest U.S. gas and electric utility.

08/24/15 - 12:01 PM EDT
Three Stocks That Are Attractive Now
Stocks in Focus: LMT, SSI, WM

These are good stocks if you don't own them already.

08/24/15 - 10:29 AM EDT

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