By Richard Shaw (QVM Group): How can you tell if a dividend stock is overvalued? We think comparing the current level of key data to the historical record for the same factors is one way to get at the question.
There are external relativities too, but when culling alternatives, seeing how a company today compares to how it looked on average in the past is useful. That invokes mean reversion, which is a powerful force.
As many commentators have noted, dividend stocks are quite popular for a variety of reasons, including interest rate suppression by the Fed and the search for portfolio income by a growing population of retirees.
That creates the risk that at some point too much money will have shifted to dividend stocks, creating a bubble of sorts that is destined to produce price declines.
The nature of dividend stocks and dividend investors will not allow dividend stocks to reach the extremes
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