7 Strong Dividend Champ Buys To Ride Out The Market

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 |  Includes: BMY, D, DUK, EXC, KMB, LLY, SO
by: David Alton Clark

Many analysts are predicting a recession going forward. I don’t see it happening. How soon we forget: Just a few months ago you heard the odds of a double-dip recession were minimal, and now it is virtually assured, according to the crowd. In my experience, the crowd is usually wrong. There may be more volatility in front of us, even with the more than 10% drop in the market recently and the inevitable restructuring of Greek sovereign debt; nevertheless, this may be a good point to start a position in these dividend-paying buying opportunities.

As Warren Buffett says, “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” After the precipitous drop in the market in 2008, the high-dividend-payers were the first to recover. Why not take advantage of the value created by the current turmoil, start a position in the following stocks and collect a substantial yield as the market sorts out the global debt issue and rebounds? After the economic storm clouds clear, you will most likely have a substantial capital gain as well.

My dividend investing approach is based on constructing a portfolio of highly-rated blue chip stocks with exceptional dividend yields that generate money throughout the year. Characteristically, dividend investing is popular among retirees and those who wish to live on their savings once they are no longer working. One reason to invest in dividend-paying stocks now is because they will be the investment of choice to fund the retirement of many baby boomers, which will create enormous demand for these stocks.

Dividend-paying stocks have the potential for both capital gain and income production. Boomers will be looking for stocks that have a track record of increasing dividends, giving them yet another hedge against inflation. This combination will be necessary to fund the lengthening retirements that come with a greater life expectancy. Combining these factors with the Fed’s recent announcement that rates will remain at ultra-low levels for at least the next two years, we can see that fixed-income instruments such as bonds and CDs provide little protection against inflation. Factor this in with the fact that historically dividend-paying stocks have outperformed non-dividend-paying stocks, and you have a recipe for outstanding returns.

The following are seven highly rated large cap or better S&P 500 stocks with great stories, positive catalysts for future growth, and pay a hefty dividend. Each of the following picks has a dividend yield of 4.0% or greater: Bristol-Myers Squibb Company (NYSE:BMY), Eli Lilly & Co. (NYSE:LLY), Exelon Corp. (NYSE:EXC), Dominion Resources, Inc. (NYSE:D), Kimberly-Clark Corporation (NYSE:KMB) and Duke Energy Corporation (NYSE:DUK).

Below are two tables with detailed statistics regarding each company’s current summary information, earnings per share and dividend information, followed by a brief review of each company, detailed current analysts' estimates and up/downgrade activity, and a chart of the company's key statistics. I would scale in to any position a quarter or a tenth at a time. Please use this as a starting point for your own due diligence.

Summary Statistics (Click to enlarge)

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EPS and Dividend Detailed Statistics (Click to enlarge)

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Company Reviews:

Bristol-Myers Squibb Company, a global biopharmaceutical company, discovers, develops, and delivers innovative medicines that help patients prevail over serious diseases. The company is trading on par with analysts' estimates. Bristol-Myers Squibb has a median price target of $31.50 by 17 brokers and a high target of $39. The last up/downgrade activity was on Mar 31, 2011, when Jefferies downgraded the company from Buy to Hold.

Eli Lilly and Co. develops, manufactures and sells pharmaceutical products worldwide. The company is trading on par with analysts' estimates. Eli Lilly has a median price target of $35 by 13 brokers and a high target of $43. The last up/downgrade activity was on Aug. 10, when Argus upgraded the company from Hold to Buy.

Southern Company (NYSE:SO), through its subsidiaries, operates as a utility company that provides electric service in the southeastern United States. The company is trading on par with analysts' estimates. Southern Company has a median price target of $42 by 17 brokers and a high target of $45. The last up/downgrade activity was on Aug 2, 2011, when Hilliard Lyons upgraded the company from Neutral to Buy.

Exelon Corporation operates as a utility services holding company in the United States. The company primarily engages in the generation of electricity. The company is trading below analysts' estimates. Exelon has a median price target of $47 by 13 brokers and a high target of $56. The last up/downgrade activity was on Jun 24, 2011, when RBC Capital Markets initiated coverage on the company with an Outperform rating.

Dominion Resources, Inc., together with its subsidiaries, engages in producing and transporting energy in the United States. It operates in three segments: DVP, Dominion Generation, and Dominion Energy. The company primarily engages in the generation of electricity. The company is trading on par with analysts' estimates. Dominion has a median price target of $49.75 by 14 brokers and a high target of $54. The last up/downgrade activity was on Jun 24, 2011, when RBC Capital Markets initiated coverage on the company with a Sector Perform rating.

Kimberly-Clark Corporation, together with its subsidiaries, engages in the manufacture and marketing of health care products worldwide. The company is trading on par with analysts' estimates. Kimberly-Clark has a median price target of $71 by 13 brokers and a high target of $82. The last up/downgrade activity was on Nov 16, 2010, when Jefferies initiated coverage on the company with a Hold rating.

Duke Energy Corporation operates as an energy company in the Americas. It operates through three segments: U.S. franchised electric and gas, commercial power, and international energy. The company is trading on par with analysts' estimates. Duke Energy has a median price target of $19 by 13 brokers and a high target of $20. The last up/downgrade activity was on June 24, when RBC Capital Markets initiated coverage on the company with an Underperform rating.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in BMY, LLY, SO, EXC, D, KMB, DUK over the next 72 hours.