8 Potential Bargain Dividend Stocks Down 15%+ In The Last Year

Norfolk Southern Corp. (NYSE:NSC)

This is a case that is exceptionally similar to that of Union Pacific and even more so CSX as detailed above. The basic construct is in place: higher earnings were expected last year, and since that time the industry dynamics have soured. Norfolk Southern benefited greatly from its presence in the east and especially with carrying railcars full of coal. When you’re a coal producer trying to get your product from east to west, as an example, you don’t have many choices.

In good times, this makes for a booming railroad business. In lesser times, as seen by general declining demand and bankruptcies in the industry, this aspect can hurt the bottom line. Of course coal is the whole business for a coal producer, but only a portion of the business for Norfolk Southern Corp. (NYSE:NSC). Just to give you some context, coal made up about a fifth of Norfolk’s business last year, with intermodal shipments now making up a larger share.

At present shares trade with a dividend yield near 3%, a payout ratio under 50% and a valuation more or less in line with the security’s historical average.

Eaton Vance Corp (NYSE:EV)

Finally, we have Eaton Vance – an asset management firm with history dating back to 1924. The story here is quite similar to that of Franklin Resources.

The core offerings face long-term pressure, but in general ought to remain profitable for some time. For the company it’s about managing the possibility of lower profits in the long-term along with figuring out the next steps to keep adding value.

The discussion and awareness of fees continues to progress; good news for investors, not so good news for asset managers relying on fees.

The financial position isn’t quite as robust as that of Franklin Resources, but it shares many of the same characteristics. Namely, a solid dividend coupled with a robust share repurchase program. A lot of people fixate on Franklin Resources or T. Rowe Price Group Inc (NASDAQ:TROW) as the asset managers that have a long-standing dividend increase streak, but Eaton Vance Corp (NYSE:EV) has a similar length streak dating back to the 1980’s.

Final Thoughts

In short, the above names and details are not meant to be a comprehensive review.

It’s a starting point, not the end.

Whether or not the above names become solid investments depends on a great deal of factors, many of which are not yet known.

Each security currently has a “concern” or issue related to its business model – ranging from lower shipping volumes and lost customers to general longevity apprehensions and downbeat earnings.

These items should not be taken lightly, and you’d expect the respective managements to be addressing them appropriately (and hopefully vigorously).

Yet the lower prices that are caused by this sentiment can often provide an opportunity. I’m reminded of a Warren Buffett quote from his 1990 shareholder letter:

“The most common cause of low prices is pessimism – sometimes pervasive, sometimes specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices that it produces. It’s optimism that is the enemy of the rational buyer.”

All eight companies listed above have certainly seen their fair share of pessimism as of late. However, that doesn’t automatically make them a good investment, continuing from Buffett:

“None of this means, however, that a business or stock is an intelligent purchase simply because it is unpopular; a contrarian approach is just as foolish as a follow-the-crowd strategy. What’s required is thinking rather than polling. Unfortunately, Bertrand Russell’s observation about life in general applies with unusual force in the financial world: “Most men would rather die than think. Many do.”

The trick is considering whether or not the current concerns are long-term issues, or else small blips in what has been a storied and profitable history.

If it’s the latter, the lower short-term share prices could very well offer long-term appeal.

Disclosure: This article is originally published on Sure Dividend by Eli Inkrot.