Seeking Alpha
Value, dividend growth investing, large-cap
Profile| Send Message|
( followers)  

This week's list of quality dividend paying stocks contains companies that are concentrated in the drug, household goods and food sector of the economy. The complete list of 10 companies we're tracking for possible purchases can be found here.

Eight of the 10 companies on the list have market caps of over $8 billion. Topping this list is a popular household name, Clorox (CLX). ConAgra (CAG) is one of our favorite names right now and we're reiterating that anyone interested in the stock to revisit our write up on it. Our latest Investment Observation was on Eli Lilly (LLY), a major pharmaceutical company. LLY is the 7th company on our list this week.

Symbol Name Price % Yr Low P/E EPS Dividend Yield Payout Ratio
CLX Clorox Co. 62.54 6.07% 13.42 4.66 2.20 3.52% 47%
TCB TCF Financial Corp. 13.77 6.74% 13.77 1.00 0.20 1.45% 20%
CAG ConAgra Foods, Inc. 22.49 6.99% 14.32 1.57 0.92 4.09% 59%
KMB Kimberly-Clark Corp. 62.74 7.71% 14.19 4.42 2.64 4.21% 60%
ABT Abbott Laboratories 48.40 8.54% 15.97 3.03 1.76 3.64% 58%

Top Five Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from December 18, 2009 and have checked their performance one year later. The top five companies on that list can be seen in the table below.

Name Symbol 2009 Price 2010 Price % change
SUPERVALU INC SVU 12.48 8.76 -29.81%
CALIFORNIA WATER CWT 36.66 38.38 4.69%
EXXON MOBIL CP XOM 68.21 72.17 5.81%
AQUA AMERICA INC WTR 17.29 22.21 28.46%
UMB Financial Corp. UMBF 37.94 41.43 9.20%
Average 3.67%
Dow Jones Industrial DJI 10,328.89 11,491.91 11.26%
S&P 500 SPX 1,102.47 1,243.91 12.83%

This week, our top five didn't come close to the Dow Jones Industrial Average and the S&P 500. While we can't defend the long-term viability of Supervalu (SVU) at this time, we can point to the fact that SVU rose almost 40% in just 3 months after being on the December 18, 2009 list. We also issued an Investment Observation on this stock on January 6, 2010 when SuperValu (NYSE:SVU) was trading just below $13. After holding the shares for 9 days, we issued a Sell Recommendation on January 15, 2010 which provided us with a 10% gain for an annualized return of nearly 400%.

It should be noted that three of the five stocks achieved 10% gains within 7 months after being on the list December 18, 2009 watch list. SuperValu (SVU) accomplished 10% on January 12th (125% annualized), UMB Financial (NASDAQ:UMBF) accomplished 10% on January 20th (nearly 96% annualized) and AquaAmerica (NYSE:WTR) achieved 10% on July 21st (nearly 15% annualized).

click to enlarge

As mentioned with every sell recommendation, our goal is to maximize the annual yield of each trade so if we can obtain a 10% gain in less than a year (the approximate historical annual market return) then we are satisfied. Those who wish to hold for the "long-term" may also benefit from our method of buying quality dividend paying stocks near a new low.

Disclaimer: On our current list, we excluded companies that have no earnings. Stocks that appear on our watch lists are not recommendations to buy. Instead, they are the starting point for doing your research and determining the best company to buy. Ideally, a stock that is purchased from this list is done after a considerable decline in the price and extensive due diligence. We suggest that readers use the March 2009 low (or the companies' most distressed level in the last 2 years) as te downside projection for investing. Our view is to embrace the worse case scenario prior to investing. A minimum of 50% decline or the November 2008 to March 2009 low, whichever is lower, would fit that description. It is important to place these companies on your own watch list so that when the opportunity arises, you can purchase them with a greater margin of safety. It is our expectation that, at the most, only 1/3 of the companies that are part of our list will outperform the market over a one-year period.

Source: Top 5 Dividend Stocks for Consideration in Your Portfolio