Blue Chip Dividend Stocks: Five I'm Watching

Blue chip dividend stocks usually carry a premium, and often this premium is in excess of what I am willing to pay. With Monday's market slide followed by Tuesday and Wednesday's subsequent recovery, it appears that good stocks can fall into an after-Thanksgiving markdown sale at anytime.

Here are five stocks that I am watching closely, with their Risk Quality (RQ) rating and other information as of December 1, 2008:

I. Procter & Gamble Co. (PG)

• RQ: A1
• Yield: 2.49%
• Buy Below: $59.70
• 12/1/2008 Close: $60.49
• % Change since 12/31/2007: -17.6% ($73.42)

II. Wells Fargo & Company (WFC)

• RQ: A2
• Yield: 4.71%
• Buy Below: $26.44
• 12/1/2008 Close: $23.41
• % Change since 12/31/2007: -22.5% ($30.19)

III. Kimberly-Clark Corporation (KMB)

• RQ: A2
• Yield: 4.02%
• Buy Below: $52.87
• 12/1/2008 Close: $55.02
• % Change since 12/31/2007: -20.7% ($69.34)

IV. Progress Energy, Inc. (PGN)

• RQ: A5
• Yield: 6.20%
• Buy Below: $36.95
• 12/1/2008 Close: $37.73
• % Change since 12/31/2007: -22.1% ($48.43)

V. The Coca-Cola Company (KO)

• RQ: A2
• Yield: 3.24%
• Buy Below: $45.35
• 12/1/2008 Close: $44.33
• % Change since 12/31/2007: -27.8% ($61.37)

When the market is in a free-fall, it is important to concentrate on quality. Each of the above stocks has a RQ rating of A5 or better. Their share price has declined significantly less that the 44.1% decrease of S&P 500 as measured by Vanguard 500 Index Fund [VFINX] ($135.15 down to $75.54). I suspect Monday was not the last after-Thanksgiving sale of 2008.

As always, you should perform your own research and reach your own conclusion before buying or selling an investment security.

Full Disclosure: As of this writing, I was long in VFINX, PG, PGN and KO.

Comments

[herbert hoover:]

You assume that these dividends will be still be there next year at the same yield. Ask the FCX holders where they intend to spend their dividend checks

2008 Dec 04 09:31 AM

[mikemichaelson:]

WFC? Please. They need to raise on the order of $50 Billion in common equity to stay in the game.

2008 Dec 04 09:33 AM

[k45:]

The risk in following S&P ratings is that they were one of the rating agencies that got us into this mess. It's interesting to look at what the market thinks on the bond ratings. Short term AAA GE bonds are trading at 200+ basis points higher than AA Walmart bonds. Why not just ask the companies to rate themselves? Oh, that's right, that's pretty much what Moody's and S&P did!

2008 Dec 04 10:43 AM

[tshk1221:]

Of course, it is important to measure the percentage drop of their face stock values since the crisis to check affordability of these great companies. But, due to their steep increase in their market values for the last 10 years, P/Es of, for example, KO and PG are not yet in the range of good buy. KO's net cap rate is still at around 5.6%, and that of PG is 5.9%. With this market volatility in mind, some investors might feel safer and better off with sitting with a bank CD offering 3.5% - 4%. And there are not a lot of strong growth potential for the next 5 years or so in their market values. In addition, buying defensive stocks at this "defensive" period will result in higher, double-jammed buying costs. There are other blue chip companies such as AA, DD, GE and CVX that reached net cap rates ranging from 13% to 22%. These blue chip companies got a lot cheaper than KO and PG and are very likely to show strong rebound and growth in their market values after 5 years or. Dividend-wise, AA, GE and DD excel KO and PG. Which ones to choose? It is up to investors.

2008 Dec 04 02:27 PM

[Old Trader:]

tshk,

3.5-4% on CDs? Only if you like tying up your funds for 3-5 years, from what I've seen on current CD rates.

2008 Dec 06 12:30 AM

[CharlestonI...:]

The Wells Fargo pick is insane. These bloggers on this site really have their heads in the sand. I read this site for amusement only. The bloggers are either short or long the picks they write about, even if it is not disclosed. There is no other way to explain these blogs.

2008 Dec 07 09:40 PM