4 Boring High Yield Stocks for the Long Run

Includes: INTC, NVS, PBCT, PEG
by: Bret Jensen
Although I am becoming more and more bearish on the overall market due to the coming end of QE2 as well as increasing inflation throughout the world, there are still some bargains left in equities. I think the best place to look is primarily among the boring large cap, blue chip stocks in sectors that have underperformed the market and have good dividend yields. I recently ran a screen and did a follow up analysis to look for blue chip stocks that have underperformed the overall market, seem to have good prospects and valuations as well as offer a dividend yield of at least 3%. Here are four that meet these criteria:
Intel (NASDAQ:INTC) – This continues to be a core holding for me. It has had an average EPS growth over the last five years of 7.5%. INTC is selling at less than 10 times this year’s earnings and 9 times next year’s consensus estimate. It yields 3.6% and has raised its dividend 150% over the last five years. It has consistently beat earnings estimate by a significant amount over the past four quarters.

Novartis (NYSE:NVS) – This is another core holding that I have in my portfolio. NVS is an international leader in pharmaceuticals, generic drugs as well as consumer and animal health products. It is selling at a little over 10 times this year’s earnings and little under 10 time earnings expected in 2012. It yields a solid 3.6% and the company has raised its dividend over 150% over the last five years It has had an average EPS growth over the last five years of 11%.
People’s United Financial (NASDAQ:PBCT) – PBCT is by far the most speculative stock of the group. People’s United Financial, Inc. operates as the bank holding company for People’s United Bank that provides commercial banking, retail and small business banking, and wealth management services to individual, corporate, and municipal customers. The company operates in three segments: Commercial Banking, Retail Banking and Small Business, and Wealth Management. Obviously the company is still recovering from financial crisis. It has taken advantage of the meltdown with acquisitions that will increase its market share in the Northeast. Balance sheet is solid with 3B in cash and 1.2B in debt. It yields 4.8% and sells at approximately 18 times this year’s earnings but only around 15 times next year’s consensus. It also should also have double digit gains in revenue growth for both 2011 and 2012.
Public Service Enterprise Group (NYSE:PEG) – Public Service Enterprise Group Incorporated, through its subsidiaries, operates in the energy industry primarily in the northeastern and mid Atlantic United States. It has had an average EPS growth over the last five years of 12%. PEG is selling at less than 12 times this year’s earnings and yields 4.4%. It gets approximately 60% of its generating capacity from Nuclear and I believe the current weakness in its shares offers an attractive entry point.
Given my negative outlook for stocks over the next six months, I believe all of these selections would be candidates to implement a buy/write strategy. Selling slightly out of the money calls for six months out could be a good way to lower volatility and collect additional premiums. Be careful out there.

Disclosure: I am long INTC, NVS.