3 Dividend Stocks at Value Prices

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Many investors get excited when the market is going up. After all, that's when you make money, right?

While that may be true, I tend to get a little despondent as the market climbs because I know that bargains are steadily disappearing. And -- if you ask me, at least -- investing success comes from finding and buying stocks at prices below what they're actually worth. When I'm able to do that right, everything else usually takes care of itself.

Well, we've got a serious rally on our hands right now. Not only have we seen huge gains from the 2009 bottom, but the S&P 500 has tacked on more than 20% over just the past few months. The 10-year average price-to-earnings multiple that professor Robert Shiller tracks has now climbed above 23, which, no matter how you cut it, is not cheap.

But there are still stocks out there worth buying right now. Here are three favorites of mine that are not only still value-priced, but they all pay you to own them.

Intel (Nasdaq: INTC  )
Those who keep score may know that I've been beating the drum on this one for a while. Intel's stock wasn't the best stock for 2010. It wasn't even close. Actually, short-term investors might say that it was a pretty lousy stock to own in 2010.

But Intel the company was a pretty different story. In 2009, the company delivered $8.6 billion in operating income on $35 billion in revenue. In 2010, it churned out $16 billion in operating income on $44 billion in revenue. In 2009, investors were paid $0.56 per share in dividends, while in 2010 they were handed 12.5% more (or $0.63 per share).

The stock currently trades at just over 10 times trailing earnings, and you'll have to go all the way back to 1994 to find the last time it traded at such a low multiple. It spent the entire past decade working off an absurd valuation from the dot-com bubble, but after that 10 years of treading water, it's now at a very buyable price.

Abbott Labs (NYSE: ABT  )
This is another stock that I've been bullish on for a while and has done exceedingly little for its investors. Frankly, Abbott's case is a bit of a head-scratcher. Of the 23 analysts who have ratings out on the stock, 15 rate it either "buy" or "outperform." Nobody has the stock at less than a "hold." Members of the Motley Fool's CAPS community have been similarly positive, giving the stock a perfect five-star rating.

So what gives? My take is that the stock is being held back by its industry and investor laziness. Many of the companies Abbott might be stacked against -- for instance, Pfizer (NYSE: PFE  ) , Merck (NYSE: MRK  ) , and Eli Lilly (NYSE: LLY  ) -- are pure-play pharma companies that are facing, at best, much slower growth due to major patent expirations. Abbott has a much more diversified business than these pharma competitors and faces much less patent expiration risk.

To the extent that investors simply lump Abbott with the rest of big pharma, the stock may not get quickly revalued to a price closer to what it's likely worth. I think many investors are so laser-focused on the macro-picture that they're too busy flipping ETFs back and forth to worry about bottom-up analysis and finding individual bargain stocks. I think that's an opportunity for investors who pick up Abbott while it's trading at just over 10 times forward estimates and yielding close to 4%.

DPL is the owner of DP&L, a supplier of electricity to more than 500,000 retail customers in west central Ohio. The reasoning behind looking at utilities is very simple -- in his rush to push up stock prices, Mr. Market completely overlooked this sector. As a result, investors can currently buy DPL for less than 11 times forward earnings and collect a 4.6% dividend.

In making this pick I debated between DPL and Exelon (NYSE: EXC  ) . I went with DPL because I like the company's stability. DPL's revenue is primarily steady retail business, while Exelon derives more than half of its revenue from its generation and wholesale business. However, it's still a bit of a toss-up; Exelon's stock is slightly cheaper and has a slightly higher dividend yield, and the company owns a significant amount of nuclear power generation. DPL relies primarily on coal-fired plants.

Be a watcher
If any of the pitches above have whetted your appetite, I encourage you to dig in further to figure out whether these stocks could boost your portfolio. While you get jiggy with your research, be sure stay up to date on what's going on with these stocks. You can add Intel, Abbott Labs, DPL, and (why not?) Exelon to your Foolish watchlist.

If dividends are your bag, then you don't want to miss my fellow Fools' top 13 high-yield stock picks. You can download the free report here.

Exelon, Intel, and Pfizer are Motley Fool Inside Value choices. The Fool owns shares of and has bought calls on Intel. Motley Fool Options has recommended writing covered calls on Exelon. Motley Fool Options has recommended buying calls on Intel. Motley Fool Alpha owns shares of Abbott Laboratories. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Matt Koppenheffer owns shares of Abbott Labs, Intel, and Eli Lilly, but does not own shares of any of the other companies mentioned. You can check out what Matt is keeping an eye on by visiting his Motley Fool CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or on his RSS feed. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.

Read/Post Comments (6) | Recommend This Article (42)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 20, 2011, at 4:12 PM, name7865 wrote:

    The problem with Abbott is that it is on a spending spree, with the stockholders' money. Like anyone who's spending someone else's money, it cares little about how much it pays. $3.7 Billion for an Indian company that makes generic drugs: way over the top.

  • Report this Comment On January 20, 2011, at 4:54 PM, Fundament wrote:

    Well, ABT is a real growth stock with one of the best debt situation within the drug industry and good dividend payments with strong upside potential. ABT grew 9.52 percent in revenues and 19.59 percent in earnings. Here are 13 additional growth stocks that generated high growth for investors:

    In average, ABT and the 13 additional dividend stocks grew with 12.76 percent yearly over the past ten years and 14.64 percent in earnings per share. The minimum dividend yield is 3.0 percent and ends up by 7.0 percent.

  • Report this Comment On January 20, 2011, at 9:10 PM, hbofbyu wrote:

    Intel's stock is going to get worse before it gets better. But when they reinvent themselves, watch out. I'll be buying.

  • Report this Comment On January 20, 2011, at 10:07 PM, 1caflash wrote:

    Merck is Fine. Nobody seems to care about Its Growth Opportunities, including Medications for Farm Animals Around the World. Speaking of such, if the ETF MOO Folks Throw An Outside Rock Concert, What Could They Call It? ----------------------------------------------------------------------------------------------LIVESTOCK.

  • Report this Comment On January 21, 2011, at 4:16 PM, cmmtgnmn wrote:


  • Report this Comment On January 21, 2011, at 5:15 PM, TMFKopp wrote:


    Well played!


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