[Chart] AbbVie & CONSOL Coal Resources Offer Historic Buying Opportunities
In relation to low dividend stocks, high dividend stocks now trade at their lowest valuations in 40 years.
This is a table-pounding buy signal for companies with really, really big dividend yields.
I love it!
We have the perfect reason to go out and treat ourselves to some seriously juicy yields.
So today, let’s do just that.
History Suggests This Chance to Buy Won’t Last Long
I can tell you about the valuation gap between high and low dividend yield stocks until I’m blue in the face.
I can direct your attention to the chart below which makes the case for high yielding stocks abundantly clear.
I want to make two points from this chart.
First: On a price-to-earnings basis, high dividend stocks historically trade at roughly 0.8x the valuation that low dividend stocks do. (i.e. they’re usually just a tad bit cheaper.)
Today, high dividend stocks trade at just 0.5x the valuation of low dividend stocks.
That means that to get back to the historic valuation norm of 0.8x, the high dividend group’s valuation needs to increase by 60%.
Second: As mentioned, the chart above shows clearly that high dividend stocks have only traded at this 0.5x valuation twice before and never lower.
This is key, as it tells me there is very little downside from the current valuation.
Better still, the two times that high dividend stocks traded at this relative valuation, they did so only briefly and quickly bounced back with a vengeance.
That means that our buying window might be rather small and that a major bounce is soon coming for high dividend stocks.
That’s why I want to recommend two stocks that you can buy TODAY to take advantage of this rare occurrence.
Here Are Two Giant Dividend Yields to Lock in Today
AbbVie Inc. (ABBV) is a high quality drug developer trading at a rock-bottom valuation.
At the current share price, AbbVie trades at just 7.5 times earnings and offers a dividend yield of 6.5%.
The company recently announced a $63 billion takeover of Botox maker Allergan. I think this is going to be a really great deal for AbbVie as it will further diversify its cash flow across additional products. Right now, AbbVie is heavily reliant on its blockbuster drug Humira.
There is also a significant opportunity to wring efficiencies out of this merger and drive up profit margins.
You would be hard-pressed to find a more compelling investment opportunity in the large-cap pharmaceutical space than AbbVie.
The stock price has major upside and the 6.5% dividend will add to those returns.
Now onto some seriously high yield…
CONSOL Coal Resources (CCR) now sports a massive 15.8% dividend.
CONSOL’s share price has been pushed down in recent weeks for three reasons:
- A recent drop in coal prices
- Concerns over the trade war with China
- The potential for a near-term recession
As CONSOL’s share price has gone down, its dividend yield has gone up.
But the market is missing something here.
CONSOL has already secured fixed price contracts for the majority of its coal production next year.
That means the drop in coal prices won’t have much of an impact.
Further, even if coal prices don’t rebound, the current dividend is secure.
Coal prices are now trading at the same level that they were for all of 2016 and 2017 during which the company had no problem maintaining the current dividend.
As one of the lowest-cost producers of high-quality product on the planet, CONSOL is the rare coal producer that I’d be happy to own.
There is 50% upside in these shares just to get back to where they were trading 3 months ago.
And with that 15.8% yield, we don’t even need the share price to go up to get a big return here but I believe it will.
History has shown that now is the time to go after big dividends. AbbVie and CONSOL are two great ways to do exactly that.
Here’s to looking through the windshield,
Financial Analyst, The Daily Edge