3 Fast-Growing, High-Yield Dividend Stocks That Are Outrageously Undervalued

3 Fast-Growing, High-Yield Dividend Stocks That Are Outrageously Undervalued

Posted On October 1, 2020 9:06 am

The current pullback has done little to alleviate the broader market’s overvaluation problem.

S&P 500 Valuation Profile

Year EPS Consensus YOY Growth Forward PE Blended PE Overvaluation (Forward PE) Overvaluation (Blended PE)
2020 $130.14 -20% 25.8 24.0 57% 41%
2021 $166.48 28% 20.2 23.0 23% 35%
2022 $189.64 14% 17.7 19.0 8% 12%
12-month forward EPS 12 Month Forward PE Historical Overvaluation PEG 20-Year Average PEG S&P 500 Dividend Yield 25-Year Average Dividend Yield
$146.27 23.0 40% 2.70 2.35 1.79% 2.06%

(Sources: Dividend Kings S&P 500 Valuation & Total Return Potential Tool, F.A.S.T. Graphs, FactSet Research, Brian Gilmartin, Reuters/Refinitiv/IBES/Lipper Financial, JPMorgan, Ed Yardeni, Multipl.com)

How big of a problem are stocks trading at 23X forward earnings and a 40% premium to historical fair value?

Moody’s has just updated its long-term baseline economic forecast and it points to a potential lost decade for stocks.

“Long-term interest rates will steadily increase from 2021 onward, with the 10-year rate reaching 4.1% by 2030. Unless there is significant compression of the equity risk premium, the fundamentals will then weigh on values over the decade.” – Moody’s (emphasis added)

Today 44% of US stocks are in a bear market, including high-quality, fast-growing, high-yield names which are outrageously undervalued,.

Discover three such names that yield a safe 5% to 7%, offer 27% to 36% CAGR long-term return potential, and are poised to benefit from the coming economic recovery and rising interest rates that Moody’s thinks will cause the S&P 500 to deliver negative returns over the next 10 years.

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About author

Dividend Sensei

I'm an Army veteran and former energy dividend writer for The Motley Fool. I'm a proud co-founder of Wide Moat Research, Dividend Kings, and the Intelligent Dividend Investor. My work can be found on Seeking Alpha, Dividend Kings, iREIT, and the Intelligent Dividend Investor. My goal is to help all people learn how to harness the awesome power of dividend growth investing to achieve their financial dreams and enrich their lives. With 24 years of investing experience, I've learned what works and more importantly, what doesn't, when it comes to building long-term wealth and income streams and achieving long-term financial goals.

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