5 Large Cap Dividend Monsters For Your Buy List

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 |  Includes: COP, KMB, KO, PFE, T
by: Investment Underground

By Darnell Brown

This article will examine five large cap dividend stocks to determine if they should be part of your portfolio. These monsters all have moderate payout ratios and long-term competitive advantages, which should protect their high dividend payments.

Pfizer Inc. (NYSE:PFE) has a market cap of $142.62 billion, with a price-to-earnings ratio of 17.07. The stock has traded in a 52-week range of $16.25 to $21.45. The current stock price is $18.28. On August 2, the company reported second-quarter revenues of $17 billion, compared to revenues of $17.3 billion in the second quarter of 2010. Second-quarter net income was $2.61 billion, compared to net income of $2.48 billion in the second quarter of 2010.

One of Pfizer’s competitors is Merck & Company Inc. (NYSE:MRK). Merck is currently trading at $31.84 with a market cap of $98.09 billion and a price-to-earnings ratio of $34.31. Merck pays a dividend which yields 4.60%, versus Pfizer, whose dividend yields 4.30%.

Pfizer's three-year earnings-per-share growth rate is -2%. The company has paid quarterly dividends for many years but has decreased its dividend by 60% over the last three years. The stock price has also performed poorly, and has decreased by 61% over the last three years. The company has not provided investors with any information to suggest that it is about to reverse this downward trend. I rate Pfizer Inc. as a hold.

Conoco Phillips (NYSE:COP) Conoco has a market cap of $88.19 billion, with a price-to-earnings ratio of 8.10. The stock has traded in a 52-week range of $54.68 to $81.80 with a current stock price of $64.23. On July 27, the company reported second-quarter revenues of $67 billion, compared to revenues of $50.1 billion in the second quarter of 2010. Second-quarter net income was $3.4 billion, compared to net income of $4.16 billion in the second quarter of 2010. Year-over-year net income increased to $11.4 billion in 2010 from $4.86 billion in 2009.

Conoco Phillips' biggest competitor is Exxon Mobil Corporation (NYSE:XOM). Exxon Mobil is currently trading at $71.01 with a market cap of $345.26 billion and a price-to-earnings ratio of 9.36. Exxon Mobil pays a dividend which yields 2.6%, versus Conoco Phillips, whose dividend yields 4.0%.

Conoco Phillips is a well established company that has a history of profitability. As a result of high gasoline prices, the company has been particularly profitable in recent quarters. In 2010 the company’s net income increased by 174% to $11.4 billion from $ 4.86 billion in 2009. In the last quarter, the company’s earnings per share increased by 48%. Conoco Phillips has also been an excellent dividend-paying company. The company has paid quarterly dividends for many years, and over the last five years the dividend has increased by 83%. While Conoco Phillips will not provide terrific growth or the highest dividend yield, it is a stock that is worth owning. I rate Conoco Phillips a buy.

Kimberly Clark Corporation (NYSE:KMB) has a market cap of $26.34 billion, with a price-to-earnings ratio of 15.86. The stock has traded in a 52-week range of $61.00 to $69.63. The current stock price is $67.23. On July 25, the company reported revenues of $5.26 billion, compared to revenues of $4.86 billion in the second quarter of 2010. Second-quarter net income was $408 million, compared to net income of $498 million in the second quarter of 2010.

One of Kimberly Clark’s primary competitors is Procter & Gamble Company (NYSE:PG). Procter & Gamble currently trades at $61.84 with a market cap of $169.92 billion and a price-to-earnings ratio of $15.74. Procter & Gamble pays a dividend that yields 3.4% versus Kimberly Clark's yield of 4.1%.

Kimberly Clark has consistently increased revenues from quarter to quarter. However, earnings have been negatively affected because high oil prices have increased the production cost of many of their oil-based products. On August 4, CNBC stock analyst Jim Cramer recommended Kimberly Clark, and believes that the recent drop in oil prices will help the company’s bottom line. I agree with Jim Cramer, and I rate Kimberly Clark as a buy.

Coca-Cola Company (NYSE:KO) has a market cap of $159.28 billion, with a price-to-earnings ratio of 12.92. The stock has been trading in a 52-week range of $57.22 to $71.77. The current stock price is $69.37, which is near the top of its 52-week range. On July 19, the company reported revenues of $12.7 billion, compared to revenues of $8.67 billion in the second quarter of 2010. Second-quarter net income was $2.8 billion, compared to net income of $2.37 billion in the second quarter 2010.

Coca-Cola’s primary competitor is PepsiCo Inc. (NYSE:PEP). PepsiCo is currently trading at $59.99 with a market cap of $94.94 billion and a price-to-earnings ratio of 15.26. PepsiCo pays a dividend that yields 3.4%, versus Coca-Cola's yield of 2.60%.

In recent quarters, Coca-Cola has delivered strong earnings growth. Year-over-year, its net income increased by 73%, from $6.82 billion in 2009 to $11.8 billion in 2010. Second-quarter net income increased by 18% to 2.8 billion, from $1.9 billion in the first quarter. The stock price has responded to the strong earnings and has increased by 19.54% over the last 52 weeks. Over the last three years, the stock price has increased by 44.7%. The company is also an excellent dividend-paying company. The company has paid quarterly dividends for decades, and over the last five years it has increased the dividend by 51.6%. Coca-Cola is a company that offers stock appreciation and steady dividend income. I rate the Coca-Cola Company as a buy.

AT& T Inc. (NYSE:T) has a market cap of $163.2 billion, with a price-to-earnings ratio of 8.02. The stock has traded in a 52-week range of $27.20 to $31.94. The current stock price is $27.54. On July 21, the company reported revenues of $31.49 billion, compared to revenues of $30.80 billion in the second quarter of 2010. Second-quarter net income was $3.59 billion, compared to net income of $4.01 billion in the second quarter of 2010.

One of AT&T’s competitors is Verizon Communications Inc. (NYSE:VZ). Verizon is currently trading at $35.24, with a market cap of $99.75 billion and a price-to-earnings ratio of 15.81. Verizon pays a dividend that yields 5.7%, versus AT&T, whose dividend yields 6.2%.

On August 31, the Department of Justice filed suit to block AT&T’s acquisition of T-Mobile from Deutsche Telekom (OTCQX:DTEGF). It is too early to know how this lawsuit will end, but AT&T will be a strong company regardless of what happens. The company increased year-over-year net income by 63%, from $12.13 billion in 2009 to $19.86 billion in 2010. AT&T has also been a strong dividend-paying company. It has paid quarterly dividends for decades and has increased its dividend by 30% over the last five years. AT&T is a low-maintenance stock that provides a very respectable dividend yield. I rate AT&T Inc. as a buy.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.