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Bargain Dividend Stock to Buy in a Bloated Market

February 04, 2011 – by Richard Band

In this overextended market, the biggest challenge for investors is finding real bargain stocks to buy. Sure, there are plenty of cheap stocks out there, but I’m talking about real bargains — quality companies selling at low enough prices to deliver a double-digit return in the year ahead.

I could list any number of stocks that should beat a money market account over the balance of 2011. But I’m not looking for a 3% or 4% payback on my investment, and you shouldn’t be content with that either. If we’re going to shoulder the inherent risks of investing in common stocks, we want a reasonable prospect of earning at least 10% in the next 12 months, and preferably a good deal more.

Fact is, Wall Street’s rocket ride since last summer has drastically shrunk the universe of stocks that bid fair to meet our profit goals. A broad market pullback in here would be welcome, because it would give us more merchandise to choose from.

Meanwhile, we don’t have to twiddle our thumbs. Even without a significant marketwide dip in recent weeks, some stocks have already undergone their own private “corrections.” If you’ve got spare cash jingling in your pocket, I encourage you to channel a little of it into these outfits.

A prime example from last week’s trading: Unilever (NYSE: UL). This morning, the Anglo-Dutch maker of consumer staples (shampoo, deodorant, mayonnaise, soups, etc.) posted excellent growth in unit sales of 5.1% during Q4 and 5.8% for the year. Emerging markets grew by double digits in both periods.

In short, UL is executing beautifully on its business plan. The stock, on the other hand, has eased back a couple of percentage points from its November high. Some analysts fret that UL won’t be able to “pass through” rising commodity costs into the retail prices of its products. History shows, though, that in the end, clever consumer-goods operators like UL always manage to engineer the price increases they need.

Buy this bargain stock at $30 or less. To be eligible for the next quarterly dividend (approximately 28.6 cents per share), you’ll have to make your purchase no later than Feb. 8.