4 stocks that are getting cheaper

Great businesses with solid dividends, what’s going wrong?

a woman

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With interest rates so low, it’s no wonder why stocks with high dividend yield, like those below, would be losing value. However, for the savvy investor, price fluctuations or ‘noise’ can produce a great buying opportunity. One of these stocks has even dropped far enough for me to add it to my portfolio… for a second time.

Perhaps we could blame Syria, the US Federal reserve tapering or Chinese data for Telstra (ASX: TLS) dropping 6.2% since August. Regardless, the company remains a solid Australian business that will be around for years to come. Of course it has risks (increased competition, phasing out of its copper network, etc.), but what stock doesn’t? If there was a company that had no risk and paid a 6% dividend fully franked, I would invest all my money into it. But there isn’t such a stock and of all ASX-listed companies it would definitely be at the top of my list of ‘safe’ stocks.

The most recent addition to my portfolio is NIB Holdings (ASX: NHF). NIB has had a stellar couple of years but in the past six months has drifted sideways around $2.20. However after yesterday’s drop it’s sitting (irresistibly) around $2.08. Australia remains under-insured and NIB remains undervalued. NIB could give your portfolio a health kick in the right direction.

If there ever was a stock you could buy today and hold for 20 years, it is Challenger (ASX: CGF). Challenger has two key business units, annuities for retirees and funds management. Since the GFC, Challenger has posted strong gains across the business and, like many fund managers, will do well when the broader market performs. If you combine four times the amount of superannuation entering retirement (boosting annuity sales) — thanks to the ‘Baby Boomers’ — and another 20 years of share market prosperity what do you get? I got Challenger shares.

My experience in investing, as foolish as its been, has taught me to look twice at stocks before not giving them the time of day. Mining services stocks have been my favourite for 2013 (and most profitable). However I believe this stock is still severely undervalued. Leighton Holdings (ASX: LEI) is paying down debt, has over $40 billion of work in the pipeline worldwide and is constantly signing new contracts. Since I chose it as my top stock pick for September it has won an additional $574 million in contracts and the stock has risen 8%!

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Source: Google Finance

Foolish takeaway

These stocks aren’t without their risks but I can sleep easy knowing many of them are in my portfolio. They’ve each got strong dividends and room for capital gains, what more could a Fool ask for?

Every Aussie investor knows Telstra, but only the smart money is on the move now… Discover whether you should buy, sell or hold Telstra shares in our brand-new report, written by a top Motley Fool analyst. It’s free, click here for your instant download!

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Motley Fool contributor Owen Raszkiewicz owns shares in NIB Holdings, Challenger and Leighton Holdings.

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