With the market making new all-time highs, it’s getting harder every day to find quality bargain dividend stocks that also make decent-to-generous cash payouts — but they do exist.
Consider this: The S&P 500 is up 23% in 2013, helped by near-record corporate earnings per share and, of course, multiple expansion. The trailing price-to-earnings ratio of the S&P has risen to 18.7, which is well above its long-term average. Meanwhile, the forward P/E of 14.8 matches the long-term average — not expensive, but not cheap.
Other measures suggest stocks are even more overvalued.
Higher share prices also reduce the yield on dividends, which is not a good thing for income investors (with new money to spend) in this world of ultra-low interest rates. The dividend yield on the S&P is back below 2% after topping 2.1% a year ago. Yields in the Dow Jones Industrial Average have thinned even more, to 2.2% from 2.7% a year ago.
And yet … it is possible to find quality names sporting competitive to crazy dividends that still look like they’re on sale.
Here are three of the best dividend stocks you can buy for a song: