Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday December 21.
Dividend Plays: AT&T (NYSE:T), General Mills (NYSE:GIS), Pfizer (NYSE:PFE), Blackrock Dividend Achievers Trust (NYSE:BDV)
Investors are increasingly worried about market instability, and Cramer is concerned about the flight to bonds and CDs, because he thinks stocks are safer and better in the long-term; "You invest for the future, and the assets that have the best future are stocks with high dividends... or stocks of companies that are serial dividend raisers."
Cramer thinks investors who trade their stocks for CDs and bonds are being "reckless." CDs return only 1.5% and returns on Treasurys are at an historic low of 3.54%. However, the Blackrock Dividend Achievers Trust (BDV) which is a portfolio of high yielders, returns 7.6%, and the yield is taxed at a mere 15% compared to the 35% tax rate for returns on bonds and CDs. High yielding stocks carry other advantages; short sellers avoid dividend stocks because they are responsible for paying yields of stocks they are shorting. Compound interest can create huge returns and allow investors to double or triple their money in a few years, even if the stock price doesn't move. Even if the price of the stock falls, dividend rates increase as a stock declines.
General Mills is a household name for its popular brands, and the company has recently raised its dividend from 47 cents a share to 49 cents after upping its yield this summer. Cramer thinks this double-barreled hike is an "incredible sign of strength; When a company raises its dividend, that's management saying: we have the cash, we have the growth and we believe that things are getting better." While 2.8% doesn't sound like a staggeringly high dividend yield, Cramer says the growth potential still beats bonds, and General Mills is "as safe as they come."
Cramer has disliked Pfizer for a long time, but this changed with its Wyeth acquisition which will save the company $4 billion and allow Pfizer to expand its portfolio. The company raised its dividend to 3.8%, and Cramer expects more dividend hikes on the horizon as Pfizer now has enough cash to increase its yield and pay off its debt. With healthcare reform stalled in Congress, Cramer thinks Pfizer is more safe than it seemed a few months ago. The date investors must own the stock to benefit from the dividend increase is February 2nd.
AT&T is Cramer's favorite dividend stock, and it yields a generous 6.1%. AT&T is a solid conservative player in the mobile internet tsunami. While there are some complaints with AT&T's technical issues, Cramer thinks the company has these glitches under control. He reminded viewers the must-own date for AT&T's current dividend is January 7th.
Treehouse (THS), along with Bucyrus (BUCY) avoided a typical difficulty that plagues companies announcing an acquisition; their stock prices didn't fall on the announcement. Taking over another company usually involves raising funds through an equity offering. However, both Bucyrus' and Treehouse's share prices rose on news of their takeover plans. When the stock price rises in such a situation, Cramer says this is a sign of a winning company.
Treehouse Foods has risen 44% since March, and Cramer calls CEO Sam Reed a "money maker." Sam Reed says Treehouse's acquisition of private company Strum is mutually beneficial; Strum can contribute brand innovation and Treehouse can add scale and depth to Strum's offerings. Reed says Treehouse is improving after a rough start to the year and is focusing on offering quality at a low cost. Reed thinks retailers will continue to create their own house brands. Cramer would wait to buy the secondary offering; "I want you in it."
Cramer is still in search for the next XTO Energy (XTO), the natural gas company that was recently bought by Exxon Mobil (XOM). No one is as big a proponent of natural gas as Cramer, and he suggested being on the lookout for the next attractive natural gas takeover target. Range Resources has huge reserves and is a strong performer. John Pinkerton says Exxon Mobil's acquisition of XTO is a "game changer" and believes Washington will start to support natural gas as a low carbon domestic alternative to foreign oil. New technology makes extracting natural gas easier, cheaper and more efficient. Pinkerton said Range Resources is adding 98,000 jobs next year and the creation of natural gas-related jobs could help remedy the country's unemployment problem. In spite of rumors to the contrary, Pinkerton said there was no evidence supporting the claim that natural gas drilling can damage water supplies.
Cramer thinks Range is a buy, even without a takeover.
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