Here are 2 Dividend Stocks to Buy, One to Sell
Structure depends on strategy; strategy is determined according to events - Sun Tzu
NEW YORK (TheStreet) -- Long-time readers of my articles know I believe every buy-and-hold portfolio needs dividend stocks. The right dividend stocks for growth and to mitigate the ups and downs caused by daily headlines. The surest path I know to wealth creation is buying above-average yield companies that are likely to increase their dividends year after year.
Be careful, though -- simply buying the highest-paying stocks can cause your portfolio to step in what's known as a dividend trap. That's a stock that appears attractive at first but you quickly find out why when the company's management decides to reduce or eliminate its dividend payments.
I present my latest dividend stars that should appreciate and pay you while you wait within minimal concern that the dividend flow will dry up.
Big 5 Sporting Goods
Price To Book: 1.4
Payout Percentage: 40%
Dividend Amount: 10 cents
This company is the beneficiary (or current victim depending on your point of view) of last year's gun control scare. The shares took a considerable hit after reporting earnings on April 30th, and I think are poised to recover. In fact, Big 5 is now a small 9 future earnings multiple. Moreover, the dividend yield tops 3.3%. For my exact entry and profit target's, I wrote a Real Money Pro post that you can use as a guide.
Fears of nationwide gun control regulation resulted in a significant spike in firearm and related sales. Since the changing of the tide, the year-ago quarterly comparable sales may at first glance give the inattentive an impression that the company is on hard times.
That's a problem with one-off sales spikes. Once revenue normalizes, new investors are hard to find because either stock scanners filter them out or potential shareholders shy away because of declining year-over-year expectations. Investors willing to dig deeper will quickly realize this company is a long-term buy that will pay you to leave it in your portfolio.
Large inventory levels at Big 5, Cabela's
In the meantime, enjoy the dividend while you wait.