Contrarian investors should use times like these to differentiate between stocks that are dropping for fundamentally sound reasons and those that are simply being dragged down because of general market concerns. Sure, there's plenty to worry about -- gigantic federal deficits, sovereign-debt problems in Europe, an economic slowdown in China -- but let's not forget that in the midst of all of this volatility lies the prospect to grab some great companies at dirt cheap prices.
In particular, I'm a huge fan of dividend stocks. Renowned professor Jeremy Siegel has illustrated that from 1957 to 2003, when reinvesting dividends, the S&P's 100 highest-yielding stocks outperformed the market by an average of 3 percentage points. Over a long period of time, 3 percentage points can really add up. So if you can find dividend stocks trading cheaply and can separate the good from the bad, you may have found yourself a real winner.
In this regular series, I run a screen for dividend stocks that have gotten crushed in the past four weeks, in addition to companies that are trading at low P/Es. Following are the top seven dividend-paying technology stocks with yields above 2.5% that have gotten beaten down the most, in order of their share share depreciation. Also included are ratings from our own 180,000-strong CAPS community.
4-Week Price Change
|Cellcom Israel (NYSE: CEL )||9.6%||(21.1%)||5.4||*****|
|Communication Systems (NYSE: JCS )||4.4%||(15.1%)||9.4||*****|
|Partner Communications (Nasdaq: PTNR )||3.6%||(14.9%)||5.5||*****|
|Applied Materials (Nasdaq: AMAT )||3%||(12.8%)||7.5||*****|
|STMicroelectronics NV (NYSE: STM )||5.4%||(12.7%)||6.5||*****|
|NTELOS Holdings (Nasdaq: NTLS )||8%||(9.3%)||9.7||*****|
|Tele Norte Leste (NYSE: TNE )||5.3%||(9.2%)||13.6||*****|
Source: Motley Fool CAPS. Data current as of Dec. 5.
Israeli phone companies Cellcom Israel and Partner Communications have both taken a nosedive as of late, as Partner relayed a disappointing third quarter to investors. Among other things, revenue growth slowed and customer turnover increased. Similarly, Cellcom Israel has seen increased competition erode prices, which has had a direct effect on its revenue stream.
As of late, some chip companies have fared better than others. Applied Materials, for instance, saw a 3% drop in net income this quarter and has forecasted lower results than analysts originally expected. STMicroelectronics witnessed a decrease in demand for its products as market uncertainty plagued the company's third-quarter results.
A Foolish final thought
Over the past four weeks, the S&P 500 has basically been flat, so the companies I've mentioned here have gotten crushed pretty badly, either for good reason or not. It's up to you to decide whether these decreases represent a buying opportunity or just a reversion to the appropriate price considering each company's specific business conditions.
If you think one of these companies has gotten unfairly hammered, now could be a great time to pick up some heavy dividend payers at a great price. With the stock market acting as volatile as it has, and with investors looking for different ways to generate income, dividend-paying stocks such as these could have the potential to give you exactly what you're looking for.
But if none of these companies seems to pique your interest, we've just generated a brand-new free report, "Secure Your Future With 11 Rock-Solid Dividend Stocks." Included are some of the best-known companies in the world, and some you've probably never even considered before. Get your free copy!