Dividend stocks often fall off the radars of investors looking for total returns but dividend paying stocks greatly outperformed non-dividend paying stocks from the period from 1972 through 2013. The compound annual growth rate of dividend paying stocks and non-dividend stocks from 1972 through 2013:
• Dividend Paying Stocks: 9.3% per year
• Non-Dividend Stocks: 2.3% per year
Dividend paying stocks have been a better investment than non-dividend paying stocks over the past 40 years. Investing in dividend stocks is not the only strategy that has a long history of outperformance. Value investing has also significantly outperformed the market over long periods. Stocks with the lowest 10% of price-to-book ratios have outperformed stocks with the highest 10% of price-to-book ratios substantially from 1926 through 2013 (an 87-year study). The compound annual growth rate results:
• Lowest 10% price-to-book ratio stocks: 12.6% per year
• Highest 10% price-to-book ratio stocks: 8.6% per year
Combining dividend paying stocks with value investing will likely generate strong returns going forward. This article highlights 10 dividend paying stocks that appear to be undervalued at this time. Many of these stocks are facing headwinds at this time; this is why they are likely undervalued. Investing in stocks facing difficulties can be psychologically daunting. Using a rule based approach (like this one) can help take the uncertainty out of investing in high quality dividend stocks trading at fair or better prices.
Keep reading to find out the 10 of the top undervalued dividend stocks today.
Tupperware sells kitchen, storage, beauty, and personal care products through its network of 2.9 million independent sales agents spread throughout the world. The company is truly global; Tupperware generates more revenue in the Asia Pacific region than it does in the U.S.
Tupperware has a price-to-earnings ratio of 14.8 and a one-year-forward price-to-earnings ratio of just 11.8. The company has a healthy 4.3% dividend yield to go along with its low price-to-earnings ratios. From 2011 through 2013, Tupperware traded at a price-to-earnings ratio that was in line with the S&P 500. The company is currently trading at a 25% discount to the S&P 500's price-to-earnings ratio. The company looks even cheaper using its one-year-forward price-to-earnings ratio.
Tupperware's stock price is down due to weakness of its beauty products in North America, negative currency effects in Latin America and Asia, and significant declines in Germany in its flagship Tupperware brand. The company saw sales in Germany fall nearly 29% in the second quarter of 2014 versus the same quarter a year ago. Management took immediate action. By the third quarter of 2014, sales in Germany were down only 6% versus the same quarter a year ago. The company's management completely turned around its German operations in just three months. This is a very positive sign for potential Tupperware investors.
Tupperware's management has proven it can solve the operational problems the company is having. When the company returns to positive growth, its price-to-earnings ratio will likely jump. In the meantime, shareholders will benefit from the stocks 4.3% dividend yield.