6 Oversold Dividend Stocks With Great Yields -- and Charts to Match

Editors' pick: Originally published March 3.

As the markets snap back from January's lows, income investors are on the lookout for stocks with solid dividend yields that have strong fundamentals and are oversold due to the year's volatility. Looking at the stocks' technical charts can help determine whether the fundamentals can be further supported. 

Not surprisingly, this year's market volatility has wreaked havoc on many strong dividend stocks. Oppenheimer recently compiled a list of 18 stocks -- some covered by its equity analysts and some not -- that they considered "babies thrown out with the bath water."

Oppenheimer believes these dividend-paying stocks "look attractive from a valuation and potential total return perspective," according to a Feb. 29 note to clients. "This week we sought out and screened for stocks that appeared to us to be stocks off their 52-week high that offer attractive dividends and have prospects, in our view, for dividend growth and capital appreciation."

Real Money's in-house technical analyst Bruce Kamich puts his spin on the stocks Oppenheimer said investors should own if they are looking for income. Here are six stocks from Oppenheimer's list that Kamich sees technical reasons to be extra excited about.

 

 

 

1. Coach
1. Coach

Coach (COH) has a dividend yield of 3.5%. The accessories retailer's stock is down 10.7% from its 52-week-high of $43.56.

Investors can see how prices slowly turned around and began moving to the upside again. "This bottom pattern has a 'neckline' or horizontal trend line that cuts across $34," Kamich wrote. "Notice how COH broke out to the upside in January above $34 and then pulled back to the break out point and the rising 50-day moving average in February. Traders love to see a retest of a breakout level as it gives you another chance to buy."

He continued: "The math is positive on COH with a golden cross in February as the 50-day moving average crossed above the 200-day. The On-Balance-Volume (OBV) line has been moving up since early December telling us that buyers of COH have been more aggressive."

2. CA
2. CA

CA (CA) , formerly known as Computer Associates International, has a dividend yield of 3.4%. The stock is down 10.4% from its 52-week-high of $33.05.

CA made a base pattern. "Prices made a low in August near $25 and then revisited the level again in January. January and February seem to be pivot points for CA with a rally above the 50-day and 200-day moving average in February," Kamich wrote.

"The On-Balance-volume line turned up in January as buyers became more aggressive. Price strength in February also turned the resistance around $29 into support. Last, the MACD oscillator is in a bullish configuration -- rising and above the zero line," Kamich added.

3. Darden Restaurants
3. Darden Restaurants

Darden Restaurants (DRI - Get Report) has a dividend yield of 3.14%. The restaurant chain's stock is down 13.7% from its 52-week-high of $74.91.

The $65 share price level has capped rallies in Darden Restaurants, but "now we are likely to overcome this resistance," Kamich wrote. "In February there was a golden cross of the 50-day and 200-day moving averages. The slopes of these two averages are now positive. The OBV line is improving and the MACD oscillator is above the zero line."

4. Lockheed Martin
4. Lockheed Martin

Lockheed Martin (LMT - Get Report) has a dividend yield of 3.04%. The stock is down 4.1% from its 52-week-high of $226.42.

"Lockheed Martin has been above the rising 200-day moving average since July," Kamich wrote. "Dips to this long-term moving average have been buying opportunities. The OBV line is has been inching up in February and the MACD oscillator is positive."

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5. Watsco
5. Watsco

Watsco (WSO - Get Report) has a dividend yield of 2.64%. Watsco's stock is down 2% from its 52-week-high of $131.89.

Watsco has a positive-looking chart, according to Kamich. "The $130+ area has been resistance for WSO and rallies to or over $130 have failed," he wrote. "The OBV line is moving up from a low in early January. The MACD oscillator is positive and we are above the 50-day and 200-day moving averages."

6. Automatic Data Processing  
6. Automatic Data Processing  

Automatic Data Processing (ADP - Get Report) has a dividend yield is at 2.47%. ADP's stock is down 5.4% from its 52-week-high of $90.53.

"ADP had a neutral looking chart for much of the past year as it crossed above and below the slow-moving 200-day average," Kamich wrote. "Recently prices have turned up above the 50-day and 200-day moving averages. The OBV line has turned up in December and the MACD oscillator is positive and above the zero line. A rally above the $90 mark will make the chart even more constructive."

 

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