8 Dividend Champs to Pick Up During Market Turmoil

Includes: DOV, JNJ, MCD, MO, PEP, PG, T, XOM
by: Jefferson Starship

They say that trying to call a bottom on a swing is like trying to catch a falling knife, in that it's nearly impossible not to get cut. The debt ceiling fiasco and all of the subsequent repercussions have left the market in free fall, to the tune of over 6 percent in two weeks.

All of the trouble with the economy could certainly turn investors off of stocks, but where could you turn? Treasuries have gotten rocked, commodities have not yet rebounded off the highs a few months ago, cash is no longer safe, and you cannot be 100% in gold. That is why it is a great opportunity to pick up large cap dividend stocks with a history of increasing annually.

It would be tough to find any stock that hasn’t taken a haircut over the last fortnight. This is so even though the market experienced a pretty moderate to good earnings season a few weeks ago, especially for the large caps. We’re talking about the types of companies that are so large that it would be silly for these stocks to drop any further based on these earnings. The bright side is that this allows you to stock up on these companies for cheap.

Of course, as a disclaimer, you should not do all of your buying at any given time. It is far more prudent to purchase in blocks in order to spread your risk and allow you to pick your shots. Technicals on large cap companies are surprisingly reliable and should be utilized before making any buys.

With that being said, here are 8 companies that you can rest assure are strong pickups in the long run and cover a majority of sectors:

  1. Pepsico (NYSE:PEP) – I personally think that Coca-Cola (NYSE:KO) is a better company for beverages, but Pepsi is as exposed to food as it is to drinks. Their fall began on a not so stellar earnings and dropped around 10%. This gives it a yield of 3.2% and have been increasing itsdividend for 37 years.
  2. Johnson & Johnson (NYSE:JNJ) – JNJ is sort of a controversial stock and has been fluttering around for the past few years. It has recently fallen 6.6% which has brought its yield up to 3.5%. The company covers most of the health industry: Consumer products, prescription drugs, and medical devices. It has been increasing its dividend annually for 47 years, so I still feel that this company allows one to sleep at night.
  3. AT&T (NYSE:T) – Once AT&T’s purchase of T-Mobile goes through it will become the largest wireless provider in the world; a world that is becoming more and more wireless every day. The recent downswing has hit it by 6%, so it is currently yielding 5.8%. That’s the highest on the Dow and its been increasing for 26 years.
  4. McDonald’s (NYSE:MCD) – McDonald’s is three times larger than any other restaurant stock out there. It is a staple of American history and likely, the world. It has been rewarding shareholders for 33 years and currently yields 2.8%. It had amazing earnings and any drop on McDonald’s is truly unwarranted, but it has gone down 3.3%.
  5. Dover Corp (NYSE:DOV) – Dover is probably the one company on this list you haven’t heard of, so you may click here for a more in depth look at what it does. Basically, it is a very large industrial conglomerate. It has fallen 15% because of the debt ceiling and is now yielding 1.8% with a P/E of 12.95. However, it has the third longest standing run of increasing dividends at 54 years.
  6. Altria (NYSE:MO) – Altria’s Philip Morris USA is one of the biggest cigarette producers in the country. Cigarettes are extremely price inelastic and people will buy them no matter the price, which is the beauty of having an addictive product that’s legal. It has recently fallen about 7% and yield 5.8%. This has been increasing for 42 years, making it a great time to buy some even if you don’t like what its selling.
  7. Exxon Mobile (NYSE:XOM) – The largest company in the world has dropped 8.8%, down to a P/E of 11! (And yes I think that Apple (NASDAQ:AAPL) will surpass it pretty soon.) It is yielding 2.4% and has been upping its dividend for 27 years, even while dealing with a massive oil spill 22 years ago. This company is clearly in it for the long run and worthy of an investment.
  8. Procter & Gamble (NYSE:PG) – Procter and Gamble have dropped by nearly 9% since June making its dividend yield ultra-attractive at 3.4%. However, its P/E, at 16, is still a bit high and there may be some room for this to fall further. it had dropped below the $60 mark very briefly in March. But, the 53 years of increasing dividends is nothing to be ashamed of.

Again, any purchases should be made prudently, spread out over a few days, weeks, even months. Also one should not be deterred from adding to a position already held; sometimes there are no better decisions than the ones you’ve already made.

Disclosure: I am long JNJ, PEP, MCD, DOV.