Eli Lilly makes an excellent example of stocks that appear poised to continue higher, but we don't want to chase it. In the following examples, you can see companies that are much closer to pulling the trigger with.
Johnson & Johnson (JNJ)
Background: J&J is engaged in the manufacture and sale of a broad range of products in the health care field in many countries of the world.J&J pays homage to investors with a dividend yield over 3.6%, increasing an average of 9% a year in the past five years. If that doesn't say it all for J&J, little else will. Of course, if the dividend is at risk of decline, we could end up as a bag holder, so let's take a look at the payout ratio. J&J's 3.6% yield is based on a yearly dividend of $2.44 per share out of profits that are estimated to arrive at over $5 per share this year. With a payout ratio under 50%, a dividend hike is more likely than a decline. For me, the most worrisome issue is the current proportion sold short. J&J's float has a 6.8% short interest. That's a little high for a big dividend payer. Even though short sellers are smart money, they don't always get it right, and I believe this is one of those cases. I was watching Tuesday for an entry signal. As I write this article J&J is trading higher. By Wednesday, we may have a buying opportunity, or another one to keep on the radar for now. AAPL data by YCharts
Apple (AAPL) I write often about Apple and its investment attractiveness. Everyone loves Apple, with good reason (well, maybe not the unfortunate ones who sold before $400). I believe Apple is one of the most undervalued large-cap companies. It may be a bold statement given the price and a stock chart that could easily be mistaken for an Evel Knievel motorcycle ramp in front of the Grand Canyon. The fact remains that Apple continues to perform quarter after quarter, as you can see in my last Apple article Six Buys Near 52-Week Highs.
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