A High Yielding Dividend Stock on Sale

We are nearly two-thirds of the way through 2010 and yet the stock market still has yet to establish a real direction. Over the last week, the Dow Jones index has fallen into negative territory for the year, but still is down less than 2% from its starting point. Whether the market will the market will rally back to a 52-week high like it did in April or frantically sell-off like we saw in May-June remains to be seen.


The roller-coaster market does present investors with some unique investment opportunities. The heightened levels of fear in the marketplace often cause stocks to fall dramatically even when there doesn’t seem to be any bad news related to the company. Of course, that is not always the case and often the markets move in anticipation of bad news rather than in reaction to it.


Savvy investors know when a stock has sold off too much and the risk-reward tradeoff is once again in their favor. Dividend investors can often scoop up accidental high yielding dividend stocks that have gone “on sale” due to market jitters.


One high yielding dividend stock that seems to be on sale right now is R.R. Donnelly [[RRD]]. RRD stock price has dropped 15% in the past two weeks even though there hasn’t been any bad news out about the company. In fact, prior to this slide RRD had reported strong second quarter earnings that were 30% higher than Wall Street was expecting.


R.R. Donnelly offers an impressive dividend yield of 6.7%. Although the printing firm has not raised their dividend in the past few years, they do have strong history of maintaining their dividend payments. That certainly counts for something when you consider that companies ranging from JP Morgan to BP have cut or suspended their dividends in the past two years.


R.R. Donnelly is also a well-established company that has been around for 145 years. The firm is committed to growing their business both organically and via acquisitions. This has led to a sizeable $3.4 billion in debt, but RRD has generates over $1.2 billion in free cash flow each year. These strong cash flows enables RRD to service their debt load as well as pay out $216 million in dividends each year.


With RRD now trading at a 52-week low and at only 8x consensus 2011 earnings estimates, that high yield is looking very attractive.

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