Contrarian investors should utilize times like this to differentiate between stocks that are dropping for fundamentally sound reasons -- and those stocks that are simply being dragged down because of general market concerns. Sure, there's plenty to worry about -- gigantic federal deficits, sovereign debt problems in Europe, an economic slowdown in China. But let's not forget that in the midst of all of this volatility lies the prospect to grab some great companies at dirt cheap prices.
In particular, I'm a huge fan of dividend stocks. Renowned professor Jeremy Siegel has illustrated that from 1957 to 2003, when reinvesting dividends, the S&P's 100 highest-yielding stocks outperformed the market by an average of 3 percentage points. Over a long period of time, 3 percentage points can really add up. So if you can find dividend stocks trading cheaply and can separate the good from the bad, you may have found yourself a real winner.
In this regular series, I run a screen for dividend stocks that have gotten crushed in the past four weeks, in addition to companies that are trading at low P/Es. Below are the top seven dividend-paying consumer good stocks (yielding above 2.5%) that have gotten beaten down the most, in order of their share depreciation, additionally rated by our own 180,000-strong CAPS community.
4-Week Price Change
Ennis (NYS: EBF)
Thor Industries (NYS: THO)
Whirlpool (NYS: WHR)
Cherokee (NAS: CHKE)
Fibria Celulose (NYS: FBR)
Miller Industries (NYS: MLR)
Cooper Tire & Rubber (NYS: CTB)
Source: Motley Fool CAPS. Data current as of Dec. 9.
Office supply companies like Ennis face stiff competition from regular competitors like Staples, but because of its apparel business Ennis also has to fend off other retail brands. In its most recent quarter, Ennis saw revenue growth slow dramatically, while inventory shot up -- never a good sign.
Cherokee, an apparel company, also saw a pretty dismal quarter. Revenues decreased and SG&A expenses rose, the opposite of what you want as an investor. The dividend has also decreased greatly in the last five years, going from about $0.75 per share in 2007 to about $0.20 per share today, which isn't a great sign for dividend-seeking investors. The company is in a bit of transition right now, so look to the future to see if new management has the ability to turn things around.
Cooper Tire & Rubber currently has more problems than it cares possibly to admit. While revenues have increased, profits have shrunk by 56% through the first nine months of 2011. Furthermore, the company last week locked out union employees who rejected a new contract dealing with wage, health care, and retirement issues.
A Foolish final thought
Over the last four months, the S&P 500 has basically been flat -- so the companies mentioned above have gotten crushed pretty bad, either for good reason or not. It's up to you to decide whether or not these decreases represent a buying opportunity or just a reversion to the appropriate price considering each company's specific business conditions.
If you think a company above has gotten unfairly hammered, now could be a great time to pick up some heavy dividend payers at a great price. With the stock market acting as volatile as it has, and with investors looking for different ways to generate income, dividend-paying stocks such as these could have the potential to give you exactly what you're looking for.
If none of the companies above seem to peak your interest, we've actually just generated a brand new free report, "Secure Your Future With 11 Rock-Solid Dividend Stocks." Included are some of the best known companies in the world, and some you have probably never even considered before. Click here now to read your free copy!
At the time thisarticle was published Jordan DiPietroowns no shares mentioned above.Motley Fool newsletter serviceshave recommended buying shares of Staples. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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