Dividend Stocks Remain Cheap

High-yield dividend stocks were one of the top performers in 2011 as concerned investors flocked to companies that promised a reliable source of income. The high demand helped dividend stocks increase in value to levels we still see in today’s market. But is there more room for growth? Some think so. Richard Shaw, the managing principal of QVM Group LLC, explains that “some individual dividend stocks may have risen sufficiently in price to be considered overvalued, but overall the category still appears to be reasonably priced relative to its own recent history, and in comparison to non-dividend stocks.”

So how to tell if a dividend stock is currently undervalued? He devised a method of comparing the median values and simple averages of the 100 largest non-dividend stocks to the 100 largest dividend-paying stocks. Using the median value was found to be the best way to ignore the extremes in P/E that ranged from 2000 to the hundreds. He concluded from the findings that “the median values for dividend stocks are becoming more attractive, not less attractive” and “none of the dividend stock median values are in the “unreasonable” or expensive range.”

Source: Kapitall

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