Unemployment continues to stay at an abnormally high 9%, the jobless U-6 rate is at a worrisome 16%, and real income continues to fall as inflation keeps on rising while pay stays stagnant. This past week, headlines tried to paint a rosy picture that unemployment dropped to 8.6% and 120,000 jobs were added. However, many of the headlines failed to mention that the labor participation rate dropped from 64.2% to 64.0%, representing another stunning 315,000 fewer job-seekers. So, the way I see it, the economy actually lost a net 195,000 jobs in the month of November.
So, one has to wonder where he/she should can put his money in these harsh economic times. These well-run companies in a variety of different industries, including retail, telecommunications, healthcare, food, and beverage below, that have weathered many of these economic cycles, pay a good dividend, and focus simply on providing the best possible price to their customers. They are a great place to invest. Moreover, during the last downturn of 2008, while the economy as a whole was contracting, all of these companies continued to grow, albeit at slower than their long-run average of mid single digits to low teens, and in this current turmoil in 2011, these companies are continuing to outperform the general market.
Kraft Foods (KFT), together with its subsidiaries, manufactures and markets packaged food products worldwide. This is a very well-run company I brought up recently here that is reasonably priced at 20x price/earnings, 1.2x price/sales, and has a very nice 3.2% dividend yield, with a safe payout under 70%. This happens to be a large holding of Berkshire (NYSE:BRK.A), which owns 5.6% of the shares outstanding as of June 30. I think this is a safe long-term buy at these levels. As of Sept. 30, a strong 74% of shares were owned by institutions.
American Capital Agency (AGNC) operates as a REIT. It invests in residential mortgage pass-through securities and predominately agency securities, meaning those backed by the US government securing AGNC's cash-flow. The company has a consistent 19.5% dividend yield it has been paying for over two years now and looks cheap at a trailing 5x P/E, 1x P/B, that fantastic 19.5% dividend yield, and relatively nice ROA and ROE of 2.4% and 23.9% respectively. This is a great holding for the long-term dividend investor.
Coca-Cola (KO) is widely known for having among the most valuable brand names globally. The stock looks compelling, trading at a 12x P/E, well over $7B in FCF this past year, and a very nice and growing 2.8% dividend yield. Moreover, its payout is under 35%, indicating a safe assumption that the dividend will continue to be raised.
This continues to be a very large holding of Berkshire Hathaway. It currently looks cheap and I think it's a great safe-haven with a respectable yield that the long-term dividend holder can keep in their portfolio. It's a nice buy here. As of Sept. 30, a respectable 56% of the shares were owned by institutions.
Semiconductor giant Intel (INTC) looks to have entered the value category, and has a sizable 3.4% dividend yield. It trades at just an 11x trailing P/E, 10x forward P/E, 5x EV/EBITDA, over $9B in net cash, and very healthy operating margins above 32% and a return on equity in excess of 27%. Moreover, their payout ratio is approximately 30%, indicating not only a safe dividend, but very likely to be raised again going forward. I think this is a good buy at these levels.
The TJX Companies (TJX) operates as an off-price apparel and home fashions retailer. TJX offers great value to customers by selling goods at far below retail price and sporting healthy margins in the process. Moreover, the company is trading at a reasonable 18x trailing P/E, 14x forward P/E, 1x P/S and EV/S, well over $1B in FCF this past year, and decent 1.2% dividend yield. TJX is a great holding in these tough economic times.
Wal-Mart Stores (WMT) operates retail stores in various formats worldwide and is the largest retailer in the world with over $430B in annual sales. This company focuses on providing the lowest costs to its customers and in these tough economic times, people of all income levels benefit. This stock which I mentioned favorably here, still is showing great value at a 12x trailing and forward P/E, .5x P/S and EV/S, a massive $11B in FCF this past year, and very nice 2.5% secure dividend. I think this is a great buy at this level.
Johnson & Johnson (JNJ) engages in the research and development, manufacture, and sale of various products in the healthcare field worldwide. The company had revenue approaching $65B this past year and currently is trading at just a trailing 15x P/E, 12x forward P/E, 8x EV/EBITDA, very nice return on assets and equity in excess of 9% and 19% respectively, and a 3.6% dividend yield. With a payout ratio near 50% and FCF of approximately $14B, it’s safe to assume that JNJ will raise its already sizable dividend higher in the coming quarters.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.