With the rise of the S&P/ASX 200 (ASX: XJO) (^AXJO), many of the market's 'blue chip' stocks are fully or even overvalued. Big name dividend payers like the banks or retailers don't come cheap.
Looking further down the index there's still plenty of reputable companies with strong dividends and room for growth that are reasonably priced. Of course, a number of risks exist but what worthwhile investment doesn't have any?
Coca-Cola Amatil (ASX: CCL) is one company that has not made it into many investors' portfolios because of its reduced profit guidance of 5% to 7% for the full year. Long-term, however, Coca-Cola Amatil's growth businesses overseas are exciting. Paying a trailing dividend of 4.8% and relatively stable earnings outlook, now could be a great time to add it to your portfolio.
Another stock that has taken a beating from reduced profit guidance is Cochlear (ASX: COH). Cochlear has outperformed any competitor in the market but the announcement of a new low-cost Chinese manufacturer has spooked investors. With the Aussie dollar dropping and sales rising, now could be a great time to add this one to your watch list.
If you want a good dividend yield and growing profits, Leighton Holdings (ASX: LEI) is a stock I believe is trading cheap. Leighton has a history of growing earnings and dividends yet the stock trades at just 9.8 times profit. Morningstar are predicting earnings to grow from 133 cents per share to 159 cents per share. It currently trades on a forecast dividend yield of 6.1%.
Despite the market reaching saturation point, mobile phone usage is on the rise. Today not only do we make phone calls or text our friends, we surf the net, take pictures, run businesses and purchase products online right from the palm of our hands. Telstra (ASX: TLS) is the number one beneficiary of increased data usage and our dependency on mobile technology. It pays a great dividend and has a bright future ahead.
Foolish takeaway
As seasoned and value investors know, we need to pick the stocks which the market has got wrong. It's our job to realise their potential before the rest of the market. Whilst some of these stocks have had a rocky year so far, the future is what's important.
