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Microsoft & Walmart On Dow Jones Contrarian Index

Posted on | August 12, 2011 | Comments Off on Microsoft & Walmart On Dow Jones Contrarian Index

Two of our dividend stocks have been added to the Dow Jones Contrarian Index. This index is made up of market laggards that have underperformed peers but sport solid fundamentals.

Here’s more from Barron’s:

The two names join the Dow Jones U.S. Contrarian Opportunities Index, which is reviewed in January and July.  The latest review adds 64 names and deleted 62.  Here’s how Microsoft qualified: shares have lost 15% of their value over the past decade and are only up about 1% in the past 12 months. But the stock now pays a 2.5% yield and dividends have increased 11% over the past five years. Wal-Mart stock is off 11% in the past 10 years, pays a 2.9% yield and has raised the dividend by 14% in the past five years.

Both stocks look cheap. Walmart is trading at roughly 9.5x estimated earnings for 2011, and Wal-Mart at about 11.2x,  compared to 12.2x for the Standard & Poor’s 500 Index. And both names throw off a decent amount of free cash flow per share, although Microsoft’s expected earnings growth rate of 26% in 2011 is nearly three times that of Wal-Mart’s.

Both of these stocks are definitely in good buy range. I’ve picked up more WMT shares in recent weeks. I’ll add more MSFT if we go under $23.