Are Dividend Stocks Really Overvalued?

As interest rates hover near record lows, income investors faced with a lack of options have increasingly turned to dividend-paying stocks for yield. The search for yield in equities has become so pervasive that even superlatives like "dividend bubble" are being thrown around, warning investors that dividend stocks are insanely overvalued. In fact, earlier this year fellow Fool Morgan Housel explained why S&P 500 constituents Altria and Consolidated Edison were prime examples of overextended dividend stocks.

While it's true that there is no shortage of dangerous dividend payers out there, from a high level there is another factor -- earnings growth -- that's made dividend stocks look very pricey relative to non-dividend-paying peers. In the following video, Brenton goes through some interesting statistics on the topic.

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At the time thisarticle was published Brenton Flynn has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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