One of the big stories so far in 2012 is the way investors have abandoned many of the high-yielding, traditionally consumer defensive stocks that outperformed during the uncertain markets of 2011 (see my "No Market for Defense Stocks").
There are a number of ways to see this weakness. For our purposes, however, the fact that the highest rated exchange-traded fund in our database heading into trading on Monday is the First Trust Morningstar Dividend Leaders Index Fund ETF (NYSE: FDL) is testament enough. FDL is based on the Morningstar Dividend Leaders Index of high-yielding stocks with a track record of both growing and sustaining their dividends over time. Some of the biggest holdings in FDL include AT&T (NYSE: T), Johnson & Johnson (NYSE: JNJ) and ConocoPhillips (NYSE:COP).
As of Friday's close, however, some of the more interesting dividend leaders are the ones that have begun to pullback in bull market territory. With FDL itself earning a "consider buying" rating of 9 out of 10, the chances are good that traders and active investors will be able to find individual stocks with ratings and edges in the short-term that are comparable to the sector's ETF.
Among the ETF's top holdings, the highest rated stock by far is Verizon Communications (NYSE: VZ). Shares of VZ have sold off for eight days in a row, finishing in oversold territory for the last consecutive five days. The sell-off in VZ has earned the stock a "consider buying" rating of 8 out of 10 heading into Monday's trading, and a short-term, positive edge of nearly 1%.
Other stocks from this group that traders may want to keep an eye on include Abbott Laboratories (NYSE: ABT), which bounced modestly on Friday after dropping for three out of four days, and Bristol-Myers Squibb (NYSE: BMY). Shares of BMY have pulled back for six out of the past seven sessions, earning the stock a positive edge of more than half a percent in the short-term.
One more note on FDL: Shares of FDL have closed lower for three out of the last four sessions, finishing at new, short-term lows for the second time in a week. Friday also marked the third time this week that FDL has earned a "consider buying" rating of 8 out of time or more. The ETF is set to open on Monday with a positive edge of more than 1% in the short-term.
Want more stocks? Read our latest from 7 Stocks You Need to Know: Marvell Makes Good: Nearly 9% in Less Than a Week.
David Penn is Editor in Chief of TradingMarkets.com
