Tags: No | bubble | dividend | stocks

Money Manager Sizemore: There’s ‘No Bubble in Dividend Stocks’

Friday, 27 Jul 2012 07:15 AM

By Dan Weil

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Dividend stocks may have soared during the past three years, but that does not mean they are all overvalued, said Charles Sizemore, founder of Sizemore Capital Management.

“No, Virginia, there is no bubble in dividend-paying stocks,” he wrote on MarketWatch.

“This is not to say that defensive sectors of the market are not overpriced compared to more cyclical sectors, or that some investors aren't chasing yields where they can find them . . . ”

Editor's Note: This Wasn’t an Accident — Experts Testify on Financial Meltdown

Many utility stocks, for example, are near record highs.

“But suggesting that there is a bubble in dividend investing — as you often hear today — implies that shares are drastically overpriced or that investors have wild, unrealistic expectations of future profit,” Sizemore said. “That's not true.”

His favorites include Coca-Cola (KO), Johnson & Johnson (JNJ), Wal-Mart (WMT), and Procter & Gamble (PG). All four companies have a history of regularly raising their dividends.

And the price-to-earnings ratios of these companies are not far out of whack with the Standard & Poor’s 500 Index, Sizemore said. “Again, that hardly suggests nosebleed valuations.”

Others remain bullish on dividend stocks too.

“We have seen outperformance of specific high-yielding sectors,” Barbara Marcin, manager of the Gabelli Dividend Growth Fund, told CNBC.

“But we look company by company. And the ones we look at — that have very reasonable multiples and high dividend yields — don’t seem to have been bid up just for the yield.”

Editor's Note: This Wasn’t an Accident — Experts Testify on Financial Meltdown



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