Above, you’ll see the most recent sector statistics for which stocks appear to be overvalued versus undervalued using the Average High Yield Theory taught in our Dividend Growth Investing classes at Market Scholars. There are about 667 stocks (each with a minimum of 5 consecutive years of dividend increases) currently covered under this analysis. Some sectors have relatively few stocks covered (ie: Communications, Energy, etc.) and some sectors have a lot of stocks covered (ie: Financials, Industrials, etc.), which is why I prefer to use percentages in the analysis rather than absolute numbers.
Premium Market Scholars will be able to associate the blue color of the graphic to the “blue zone” of the Dividend Stairstep chart (Chart 2a), where we typically want to begin our search for quality long term investments. Whereas, the orange color represents the “orange zone” area of the Dividend Stairstep chart, where the stock is more likely to be overvalued (compared to its historical dividend yield ranges). As always, use this for educational purposes only (rather than advice/recommendation). Keep in mind that as is the case for most valuation techniques, assets that currently appear to be undervalued today do not necessarily represent a buy signal because there is no way to determine how long they’ll stay undervalued. In some cases, undervalued assets may immediately rise to correct that undervaluation. But in many other cases, undervalued assets could stay undervalued for months/years (especially if general market conditions are bearish).
This is something I hope to track monthly going forward. If you’d like me to continue posting about it, the best way to support the analysis is by liking/retweeting on Twitter (you can click the heart in the Twitter widget below for that specific tweet). Hope it helps!
NEVER STOP LEARNING,
📊 Just published the Dividend Stairstep Sector Statistics, now that we’ve officially wrapped up the month of August. Due to selling in interest-rate sensitive stocks, the percentage of attractively-priced(according to Dividend Yield Theory) stocks grew from 37% to 43%. Still an… pic.twitter.com/ClKOpOkMin— Brandon Van Zee (@BrandonVanZee) September 1, 2023