Dividend Stocks Could Take a Hit

While it seems reasonable that the fiscal cliff is probably priced into the market, though we can’t say how much, one area where anxiety about the fiscal cliff is likely to appear again is in the dividend bearing stocks, names like Bristol-Myers Squibb (NYSE:BMY), H.J. Heinz (NYSE:HNZ), Conoco Phillips (NYSE:COP), Waste Management (NYSE:WM), Harris Corp. (NYSE:HRS) and Aflac (NYSE:AFL).

That presents some very interesting opportunities for traders but don’t make the mistake of shorting the strongest of these names.

Video Transcript

Philip Morris International (NYSE:PM) is a favorite of mine to the upside, but it’s kind of a good example, from a technical perspective, of exactly what I’m talking about. The stock gapped down in October. It’s back up to the bottom side of that gap, that’s going to act as resistance, which is has.

All of the selling in PM right after the election was  fear of the fiscal cliff changing the tax rule around dividends. If you’re not aware, Philip Morris is a very productive dividend payer, the same as its cousin, Altria (NYSE:MO), so PM saw really fast selling. It got a little oversold.

Traders bid the market back up and especially dividend buyers were back to that same resistance level in a lot of these stocks that are like this. But there are a lot of these dividend stocks that fall into a category. Philip Morris is fundamentally quite compelling. It’s a very interesting firm. Its performance is really, really strong, so it may not be the most interesting dividend stock to buy puts on, but there are a lot of others that could be, for a short-term play, a bit more interesting. For example, some energy companies and utilities.

I’ll take a closer look at one of those names that is a potential short-side candidate in our next video.

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