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Hao Jin, LinkedIn (1 click)
Portfolio strategy, ETF investing, long-term horizon
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Dr. Doom, Nouriel Roubini, warns that a "perfect storm" of economic disasters, which consists of the U.S. budget deficit, slowdown in China, European debt restructuring and Stagnation in Japan, may smash the global economy. However, investors could recession-proof their portfolios by investing in the high-quality dividend-paid stocks to hold up in looming bad economic conditions.
12 Dividend Stocks with Yields Over 3%
Below are 12 stocks I screened from Big Safe Dividends website (http://www.bigsafedividends.com/). These are stocks with dividend yields greater than 3% and highest BSD scores. The score is based on factors such as payout ratio, interest coverage, cash flow, relative strength and growth, etc.
Stock (Ticker)
P/E
P/E (Fwd 12 Mo)
Yield
BSD Score
INTEL CORP (INTC)
10
9
3.3%
91
CHEVRON CORP (CVX)
10
8
3.1%
87
TOWER GROUP INC (TWGP)
9
8
3.1%
83
FIDELITY NATIONAL FIN (FNF)
9
15
3.1%
83
BLOCK H & R INC (HRB)
11
11
3.8%
79
LILLY (ELI) & CO (LLY)
8
10
5.3%
70
OLIN CORP (OLN)
18
10
3.7%
69
CONOCOPHILLIPS (COP)
11
8
3.7%
66
JOHNSON & JOHNSON (JNJ)
14
14
3.4%
66
FOOT LOCKER INC (FL)
17
14
3.0%
63
DU PONT (DD)
14
13
3.3%
61
NORTHROP GRUMMAN (NOC)
9
9
3.2%
60
From these 12 promising high-yield, low-risk companies, I eliminate ones without growth. In other words, I am only interested in companies with positive EPS growth in both 1 year and 3-5 year periods. After I applied this criteria, there are only 4 companies left for further research: Intel, Chevron, Tower Group and Johnson & Johnson.
Intel was discussed in my previous article (http://seekingalpha.com/article/249334-intel-tops-the-dogs-of-the-dow). Tower Group (TWGP) provides a range of insurance products and services. However, its short ratio of 11.2% is too high. Short sellers know much more than retail investors do.
Chevron Corp
Energy stocks are seeing gains from the appreciation in commodity prices. The following chart from Yahoo Finance shows that Exxon Mobil (XOM) has much higher growth potential than Chevron (CVX):
Matrics
Chevron (CVX)
Exxon Mobil (XOM)
Industry
Gross Margin (ttm)
33%
32%
33%
Operating Margin
14%
13%
11%
P/E (ttm)
10
11
15
PEG (5 yr expected)
4.7
1.4
1.4
Johnson & Johnson
Companies that deliver steady payouts and have growth prospects would drive dividends higher over time. Johnson & Johnson (JNJ) has over $26.8 billion cash in hand, while total debt is $17.8 billion. Its EPS growth rate is expected to be 5.2% in the next 3-5 yrs. Following graph shows JNJ’s quarterly dividends growth over the last 41 years:
Conclusion
Unlike bank CDs, which offer only a guaranteed principal and yield that could be dented by inflation, dividend-paying stocks also offer the potential of growth to keep up with inflation, according to Charles Carlson, author of The Little Book of Big Dividends.
The markets are unsure about how the end of QE2 will affect portfolios. Right now I am comfortable putting money to work in high-dividend payers with solid balance sheet and growth potential. Even Pimco’s Bill Gross prefers dividend-paying stocks such as Johnson & Johnson (JNJ), Procter & Gamble (PG), Coca-Cola (KO) and Pepsi (PEP).
Just as old saying “I am not as concerned with the return on my money as I am about the return of my money.”
Note: Data is from Yahoo Finance and CNBC.com and is valid as of June 13, 2011.

Disclosure: I am long INTC, JNJ.
Source: 12 Big Safe Dividend Stocks