It’s a question that a lot of investors are asking themselves. And the answer only partly matters because as always proper valuation does not mean proper performance. What that means is that many stocks continue to go higher after they reach full value because stock prices are made by many market factors.
We can also say that even though dividend stocks and the entire stock market for that matter has been on such a run over the last four years that we should start taking profits off the table. As soon as you say that someone will raise their hand and point out that this market is being driven by the Fed’s relentless pumping. The Fed is not going to stop pushing anytime soon and everyone knows you cannot fight the fed.
So are dividend stocks too high? Asia does not think so. Japanese investors are finding safety in our dividend stocks because they don’t like the Yen and they do like not just the dollar but our American dividend yield.
Another factor that is helping prop up the market is the private investor that has missed the rally. We are seeing private money come back into the market. Really its just helping balance out those that are taking small profits but nonetheless its there.
I personally feel that its time to start taking a few profits and park a bit of my portfolio in cash until after earnings season. I don’t expect any blowout quarters in Q1 2013 and the colder weather will have a negative impact on spending. It might be a bit too soon but when it comes to protecting capital I’d rather miss out on part of the rally than get snapped off as the market declines. If the sky is clear and the future looks bright I’ll be ready to redeploy my capital this May.