In a previous article I discussed several compounding machines that are currently attractively priced. In this article, I will discuss a few world class dividend stocks which have wide moats, pricing power, and strong brands, that would likely keep growing for years to come. Unfortunately, investors have realized how awesome these companies are, which is why they are overvalued today.
I do not blindly purchase companies, just because I find them to have strong qualitative characteristics. I also want to purchase them at attractive valuations, which provide me with some margin of safety in case my investment thesis is incorrect, and growth does slow down. I am monitoring these companies closely, in order to be quick to capitalize on any significant weakness in stock prices. Companies do not grow in a straight line, and often face roadblocks on their way to greatness. Sometimes the declines are company specific, while other times the declines are based on the overall economic cycle.
While I might sometimes deviate from my entry rules and buy companies that have raised dividends for less than 10 years in a row or have current yields below 2.50%, I try to avoid paying more than 20 times earnings. This is in an effort to avoid overpaying for future growth, that might not materialize.
Therefore, the companies listed in the article will most likely be available below 20 times earnings only during the next bear market. The other hurdle that these firms have to clear is whether other companies are priced even better during the next bear market.
The dividend stocks I am waiting for declines in include: