Dow Jones Industrial Average Reaches New High, But These Two Stocks Are Trading at Bargain Prices
The Dow Jones Industrial Average has officially entered a bull market, reaching a new all-time high in late December. Not all of its components have seen the same success. Two stocks in particular are trading at what appears to be bargain prices.
Verizon and American Express, both stocks in the Dow Jones Industrial Average, are currently trading at attractive valuations. Verizon, one of the most richly valued stocks in the index, is currently trading at just 11.6 times trailing free cash flow. A decline in revenue last fall, Verizon saw a rise in its stock price after reporting better-than-expected third-quarter results. The company also announced its 17th consecutive annual dividend increase. Verizon’s large debt load may be a cause for concern, as it used 80% of its free cash flow to meet its dividend commitment last year. Retired investors may want to wait until the company’s debt load appears more manageable before considering an investment.
American Express, on the other hand, saw a slowdown in consumer spending in October, causing its stock to hit a low point. A successful Black Friday helped the stock quickly bounce back and finish the year 26.8% higher. Offering a low dividend yield of 1.3%, American Express has a history of sharing profits with investors through share buybacks and dividend increases. Its current valuation of just 7.5 times trailing free cash flow suggests that it may never grow again, making it a bargain for investors. While the credit card business is cyclical, American Express has a long history of raising its dividend and is likely to continue its share repurchases.
The Dow Jones Industrial Average may be at a new high, but there are still opportunities for investors to find bargain stocks.
