Almost every day this month, the financial headlines have read: “S&P 500 Rallies to New Highs.” If you’re looking to put new money into the market, it might make you think you’ve missed the boat. But look carefully, and you’ll see that the best dividend stocks available are much cheaper than the broader market.
Just how expensive is the market?
Right now, the S&P 500 is trading for 18.5 times earnings and offering an average dividend yield of 2.1%. Over the past 50 years, that’s expensive, but not ridiculously so. The median P/E for the S&P 500 since 1964 hovers around 17.7, with an average payout of 3%.
In other words, today’s S&P 500 is 4.5% more expensive than normal. But the average dividend yield is a full 30% lower than what long-term investors are used to receiving.
To find the best dividend stocks today, I went looking for three companies that are trading for less, and offering a better yield than the market — while having future prospects brighter than the market is acknowledging.
Apple Inc. (NASDAQ:AAPL)
- Current P/E: 10.9, a 41% discount to the S&P 500 P/E
- Current dividend yield: 2.6%, a 24% premium to the average S&P 500 yield
It’s no secret that investors are worried that the days of growth and blockbuster products at The changes you made will be lost if you navigate away from this page. Are you sure you want to leave this page? are over. You can count me among those who have these concerns — especially because without a new product launch, it becomes increasingly probable that Steve Jobs was what made the difference between Apple Inc. (NASDAQ:AAPL) and the competition.
But there are three undeniable facts that make Apple Inc. (NASDAQ:AAPL) worth considering at today’s prices. First, the stock is dirt cheap. Second, the company is giving back billions of dollars to shareholders through its dividend and share repurchase program.
But most importantly, the Apple Inc. (NASDAQ:AAPL) ecosystem is still valuable. As people buy one Apple Inc. (NASDAQ:AAPL) product, they’re more likely to buy others, as they want their devices to talk to and sync with one another. If you’ve made purchases on iTunes or stored information on the iCloud, the switching costs become pretty high, making you an Apple Inc. (NASDAQ:AAPL) user for the foreseeable future.