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Now, before you jump into the comments to explain to this whippersnapper that your first mortgage in 1981 had an 18% interest rate and that 6-7% mortgage rates are not that high, let me be quick to emphasize that it is the combination of mortgage rates and home prices that impacts affordability. Home prices in 1981 were far lower than today, even adjusted for inflation.
Today I’ll be following up on Paychex (PAYX), a stock I recommended holding on to in my Aug. 2023 rating, and which has gone up +27% since then. The company, which offers various payroll processing and HR solutions, according to its SA profile, also happens to be a dividend payer and will have its next earnings results towards the end of June. At the time of my last coverage, I was motivated by the firm’s net income growth but concerned it was too overvalued to buy at the time. The Paychex brand caught my attention also as a firm combining some traditional financial services like payroll with modern technology and the digital ecosystem. This time around, I applied a new approach, considering 6 different categories, and considering what factors could impact future upside/downside, to see if my sentiment changed.
The reason I’m writing some parts in all caps is that it is extremely important to distinguish between the two. Ever since I started working for professional investors, including being mentored by a German finance expert when I was 18, I have learned that ‘nobody’ cares about GDP growth. While GDP growth numbers are important for politicians and anyone interested in finding out how the economy performed in the past, it simply does not matter to investors and traders.
Dividend investors are often drawn to stocks that offer high yields because generally the primary goal of investing in dividend stocks is to build a passive income stream that can generate cash flow without having to ever sell shares, thereby live off investments without being subject to the whims of Mr. Market. Therefore, whenever a stock yields significantly more than can be generated from investing in broadly diversified ETFs like the Schwab U.S. Dividend Equity ETF’s (SCHD) roughly 4% yield, dividend investors are often tempted to jump on board. This is even more the case when these high-yield stocks also grow their dividends at a significant pace year after year and support their dividends with durable and defensive business models and strong balance sheets. In this article, I am going to share two of these picks that currently present a golden buying opportunity for dividend investors and have significant upside potential on top of that.
Technically speaking, Dutch inflation numbers are not important for the world. It’s a nation with roughly 17 million people that does not tend to influence global markets and geopolitics. However, I still had to bring it up, as the same developments are seen all over the world, as inflation is settling in the 3-4% range, after years of high-mid-digit inflation, which has created a massive cumulative price spike since 2021. Even worse, when looking closer, we see some very ugly developments, including the cost of essential items like food and beverages. The prices of Dutch daily groceries were 7% higher, similar to the price increase in April.
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