Three Golden Opportunity Dividend Yielders
Earlier this week I wrote about the Golden Cross pattern currently forming on the S&P 500 Index (Click here to read A Golden Opportunity for the S&P 500 on the Horizon). This bullish pattern, when completed, has some impressive bullish implications for the market, but aside from investing in an index-based exchange traded fund (ETF), how can an investor take advantage of these implied results?
While there are many groups of stocks that are high on my bullish radar screen right now it makes a good deal of sense to take this same research to the stock level to find potential opportunities in the current market. That in mind, today we’re taking a look at the stocks in the S&P 500 that have seen golden crosses in 2012.
Scanning the entire S&P 500 index, I found only 23 stocks that have formed a golden cross pattern in 2012, suggesting that they are likely to see a continuation of their bullish trends. While the technicals make for an attractive trade, I wanted to whittle the group down even further.
Given the popularity of dividend yielding stocks, the search concentrated on stocks with healthy dividend yields, knocking 23 stocks down to about 13. Finally, I added my unique research approach of evaluating sentiment on each stock to narrow our search down to stocks that are under-loved by Wall Street, despite their strong performance. The reason for this is that these stocks have a higher chance of seeing upgrades as analysts and short sellers start to buy into the already-formed positive trend.
The following three stocks are among the eight stocks that have yields that are better than the current S&P 500 yield of 1.91%, though that is likely to be only a small portion of the gains that you may get from these stocks over the next six months if their charts are any indication of where these stocks may go.
People’s United Financial (PBCT): Regional bank stocks have been one of my favorite areas of the market as investors are starting to realize that being too big to fail may not be as good as it sounds. Regional banks have been able to spend their time focusing on their businesses instead of potential legislation that could be coming in 2012.
Currently, 74% of the analysts covering the stock rate it a “hold”, despite the fact that this stock has outperformed the market and that the company has been able to meet or beat earnings expectations every quarter over the last year. PBCT announces earnings on Thursday, January 19. Another successful earnings report will get the analyst community off of the sidelines on the stock, resulting in upgrades.
Finally, this regional bank currently pays a 4.6% dividend on top of the stock’s performance. All of these factors make PBCT an attractive intermediate-term play on the financials.
Paychex (PAYX): Investors are starting to take note of the improvements to the employment market, which is one of the reasons that PAYX has been outperforming the market lately. The stock formed a Golden Cross last week, making it a candidate for strong performance moving forward.
The current dividend of $1.28 means that the stock’s dividend yield is an attractive 4.1%, about double the S&P 500’s dividend yield.
Like PBCT, PAYX has been more-or-less ignored by the analyst community as 70% of the current recommendations on the stock are in the “hold” category. I love the potential for this stock as the analysts will likely upgrade their outlook on the stock as the fundamental and technical picture for PAYX continues to improve.
Nucor Corp. (NUE): Basic material companies spent the second-half of 2011 getting beaten-up as expectations for global growth continued to slide. While there hasn’t been an improvement in the economic outlook, the basic material stocks have clearly put in a technical bottom and are now in some strong bullish trends.
NUE is moving to new 52-week highs helping the stock form its golden cross pattern last week. The last golden cross for NUE occurred in January, 2011, just before a nine percent jump in its price in just over a month.
The stock will announce its quarterly earnings results in a week, providing a potential catalyst for a move higher. Looking back, the last four quarter’s results have been better than analyst expectations. A positive quarter of earnings is likely to provide investors with a catalyst to buy this trend-setting stock.
