This is a guest contribution from Ben Reynolds. Ben runs Sure Dividend, which is dedicated to finding high quality dividend growth stocks suitable for long-term investing using The 8 Rules of Dividend Investing.
The historical average price-to-earnings ratio for the S&P 500 is 15.6. The S&P 500’s current price-to-earnings ratio is 24.2. From a historical perspective, the market is very clearly overvalued.
It’s important to remember that the stock market is made up of individual stocks. Not every member of the S&P 500 has a price-to-earnings ratio of 24.2. Some are much higher, others much lower.
It is still possible to find great businesses trading at fair or better prices in today’s market. This article takes a look at several different tools and lists to do just that.
Dividend Idea Generator #1: Other Dividend Investors Portfolios
Many dividend bloggers share their own portfolios for others to view. You can see Sabeel’s portfolio here (of Roadmap 2 Retire). Sabeel’s portfolio is loaded with both high yield and high quality dividend growth stocks.
An example is Archer-Daniels-Midland (ADM). Archer-Daniels-Midland currently has a dividend yield of 2.9% and price-to-earnings ratio of 16.1. The company’s forward price-to-earnings ratio is even lower at 14.3.
Archer-Daniels-Midland is a has paid increasing dividends for 41 consecutive. The company is also the largest farm procucts company in North America by a wide margin with its $24.8 billion market cap. For comparison, its next largest competitor Bunge (BG) has a market cap of $8.2 billion.
You can read more about Sabeel’s purchase of Archer-Daniels-Midland here.