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The Best Dividend Stocks Now On Sale

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Want to find the best dividend stocks now on sale? Here’s how to make sure you’re safe when you’re combing through the dividend stock closeout racks. – PowerPoint PPT presentation

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Title: The Best Dividend Stocks Now On Sale


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(No Transcript)
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Welcome to Dividend Stocks Research Your premier
site for Rankings and Reviews of the best
dividends stocks around. For more info on
dividend stocks please visit our website
DividendStocksResearch.com
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  • Hi, My name is Aaron and Im with Dividend Stocks
    Research, today were reviewing our recently
    published article

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The Best Dividend Stocks Now On Sale
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Looking for a deal? Want to check out the best
dividend stocks on sale right now?
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I worked for a guy years ago who hammered home a
terrific piece of advice. Never pay retail.
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Pretty good advice boiled down to just 3 words.
And its especially good advice for a smart
dividend investor. It gets you thinking about
what youre actually paying for...how much you
should pay, and if theres a better deal
someplace else.
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In the world of dividend investing, theres no
need to pay retail. Just look at a couple of
numbers and you can find the top paying dividend
stocks. Heres how to know if the price tag you
see means youre picking up a bargain...
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Best Dividend Stocks Price Tag 1
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What is retail? Whats a normal, everyday price
for a stock? How do you know youre paying a
fair price? Heres one way of looking at it.
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The price of the stock is set by the market, and
only by the market. Apple AAPL CEO Tim Cook
doesnt wake up in the morning and say the stock
will open trading at 125.
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The market makes this decision. But heres
something that only a handful of people
understand. When it comes to setting prices, the
market is basically flakey. It is irrational,
even manic-depressive.
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This fact is tough to accept. We like to think
that when billions of dollars are at stake, stock
prices are based on something solid. Thats not
always the case.
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And the investor who was Warren Buffets 1
teacher knew this strange fact all too well. He
understood that stock prices are irrational.
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His name was Benjamin Graham. Heres something
Graham said that shows how obsessed he was about
buying stocks on sale...
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If you are shopping for common stocks, choose
them the way you would buy groceries, not the way
you would buy perfume.
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Graham said something else about stock prices.
He told us there is only one thing the ups and
downs really mean...
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Basically, price fluctuations have only one
significant meaning for the true investor. They
provide him with an opportunity to buy wisely
when prices fall sharply and to sell wisely when
they advance a great deal.
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This is why you can always find a good dividend
stock on sale. The moods of the market can take
a good stock and send its price plunging for no
good reason.
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Its like going to a clearance rack and seeing a
coat marked 20 off. Its the same coat that
cost 100 yesterday... today, you can get it for
80.
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Best Dividend Stocks Price Tag 2
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How do you find these On Sale pricetags? Start
off by knowing the real retail price. A good way
to measure this is with the Price- Earnings
Ratio. (P/E Ratio). Along with yield, its a
terrific way to see how dividend stocks are
performing.
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Its a simple number, and Warren Buffets
teacher, Benjamin Graham, drilled it into him as
a great way to size up the price of a stock. The
P/E ratio is how much you pay for a dollar of a
company's earnings.
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If the company earns 4 a share and the stock
sells for 40, the P/E ratio is 10, the 40
stock price dived by the 2 earnings.
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But dont worry about doing the math. When you
look at your favorite finance site and get a
detailed quote for a stock, youll see the P/E
ratio.
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Most of the time, the lower the P/E ratio, the
better the deal youre getting, because youre
paying less for earnings.
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After youve done some poking around, youll
discover that different kinds of stocks have
different P/E ratios.
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Heres an example. For instance, a stock in an
industry sector where not much growth is expected
will have a lower P/E than a stock in an industry
where there are prospects for strong growth.
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This moves in cycles. The market goes through a
stretch where everybody loves bank stocks. Then,
for whatever reason, banking falls out of favor.
Another industry that wasnt considered
attractive suddenly looks more attractive.
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It happens all the time. Yesterdays bum is
tomorrows hero. A good way to see how a certain
industry is priced is to check out the P/E ratio
for an ETF that tracks the sector. Then you can
drill into some of the stocks in the sector.
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The Technology Select Sector SPDR ETF XLK has a
P/E ratio of 18. Apple AAPL has a P/E ratio of
17.05. The Oracle ORCL P/E is 18.55. You pay
retail for each stock.
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You pay a premium for Google GOOG with a P/E at
26.69. But IBM IBM has a P/E of 13.69. Its
a tech dividend stock on sale.
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Best Dividend Stocks Price Tag 3
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Make sure the sector youre looking at isnt
priced too high compared to the overall
market. Weve seen from the ETF that the
technology sector P/E ratio is 18.
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That P/E mirrors the overall market. Check out
the SPDR SP 500 ETF SPYand youll see the P/E
ratio for the SP 500 is 19. Tech is a little
cheaper, but not by much.
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Consumer staples... a little more expensive. The
Vanguard Consumer Staples ETF VDC has a P/E
ratio of 20.
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More Ways To Use The P/E Ratio to Find The Best
Dividend Stocks
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Here are a couple of other things to keep in mind
about the P/E Ratio.
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Just because its climbing higher doesnt mean
youre taking on more risk. If your company
makes more money this quarter than it did last
quarter, and the number of shares available is
the same, the P/E will go up.
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Not a bad thing. We obviously want profits to
rise. But if theres a sharp and sudden spike in
profits, its good to know why. Also...
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If there is a stock buyback program, and the
number of shares available goes down, the P/E
ratio will go up.
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And theres a history lesson to keep in mind.
Dividend stocks usually have lower P/E ratios
than stocks that dont pay dividends.
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Knowing your history, and knowing how the P/E
ratios compare for different types of businesses,
can keep you out of trouble. Its a great way to
make sure you dont get caught in this tricky
dividend trap.
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Now You Know How to Shop For Dividend Stocks At
The Sale Rack
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Just like Warren Buffets mentor, Benjamin
Graham, you can blow off retail pricing. You can
use the P/E ratio to zero in on bargains, and
find the best stocks that pay dividends.
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Why take risks when you dont have to? And why
pay retail? Go check out the sale racks before
they get too crowded and prices go up.
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