With this wild market, it makes sense for investors to focus on dividend paying stocks because they offer solid yields and generally remain far more stable than stocks that don't offer dividends. The near-zero interest rate policy from the Federal Reserve is making it nearly impossible for investors to find any reasonable returns in traditional savings accounts, certificates of deposits and money market accounts. With rates likely to stay low for many years due to a weak economy, it makes sense to invest in stable companies that have solid balance sheets and higher-than-average dividends. This approach is likely to give investors stability, better yields, and a chance at capital appreciation over time. For some solid dividend picks, let's take a closer look at a top performing mutual fund.
The JP Morgan Equity Income Fund has offered solid returns and is up about 12% in the past year. A recent Barrons.com article states that the manager "zeroes in on fundamentals, such as free cash flow and debt levels, looking for more of the former and less of the latter. Her dividend-yield requirement is 2%." Clearly, this fund manager is focused on very high quality companies and strong balance sheets. Here are some of the top picks from the portfolio:
ConocoPhillips (NYSE:COP) is one of the largest integrated oil and gas companies. This company is involved in exploration, production, processing and transportation of various energy products and fuels. This company has extensive oil and gas reserves, which will increase in value as energy prices rise. Chances are dividends will also grow with earnings and offer investors a hedge against inflation. This stock is one of the most attractive oil plays due to the solid dividend and the low price-to-earnings ratio.
Here are some key points for COP:
Current share price: $72.82
The 52-week range is $58.65 to $81.80
Earnings estimates for 2011: $8.58 per share
Earnings estimates for 2012: $8.34 per share
Annual dividend: $2.64 per share, which yields 3.6%
Johnson & Johnson (NYSE:JNJ) is a global maker of healthcare and medical products. This company owns many well known brands such as Listerine, Motrin, Band-aid, Reach, Splenda, Tylenol, Lubriderm, Sudafed and many more. These must-have types of products provide steady revenue, even in recessions. With a solid dividend and balance sheet, a stable product line, and earnings growth, this stock has everything needed for it to be considered a great investment.
Here are some key points for JNJ:
Current share price: $63.36
The 52-week range is $57.50 to $68.05
Earnings estimates for 2011: $4.97
Earnings estimates for 2012: $5.24
Annual dividend: $2.28 per share, which yields 3.6%
Verizon (NYSE:VZ) is a leading communications company and provides voice, Internet access, broadband data, long distance, etc. At the end of November this stock was trading around $35.50 but has since rebounded and is now trading at the upper levels of its recent range and very close to the 52-week high. I would sell now around $38 and buy back around $36.50 or less.
Here are some key points for VZ:
Current share price: $38.05
The 52-week range is $32.28 to $38.95
Earnings estimates for 2011: $2.20 per share
Earnings estimates for 2012: $2.55 per share
Annual dividend: $2 per share, which yields 5.3%
Exxon (NYSE:XOM) is a major integrated oil company, based in Texas, with operations worldwide that include refining, exploration and more. Exxon stock has been declining due to lower oil prices and stock market weakness over debt concerns in Europe. It dropped to about $70 recently, but has since rebounded. I would wait for dips before buying. Exxon is a must-own oil stock for many investors.
Here are some key points for XOM:
Current share price: $80.45
The 52-week range is $67.03 to $88.23
Earnings estimates for 2011: $8.55 per share
Earnings estimates for 2012: $8.42 per share
Annual dividend: about $1.88 per share, which yields about 2.4%
Chevron Corporation (NYSE:CVX) is one of the largest integrated oil and gas companies worldwide. Chevron is well diversified in the energy sector generating revenue from many sources, from oil, natural gas, refining, etc. Demand for oil will only rise with a worldwide population increase and even though oil demand may drop in a weak global economy, it is still a must-have product. Chevron stock offers a healthy dividend and most importantly a low price-to-earnings ratio at just about 8 times earnings. There is plenty of earnings power to fund future dividend increases.
Here are some key points for CVX:
Current share price: $102.82
The 52-week range is $85.63 to $110.01
Earnings estimates for 2011: $13.57 per share
Earnings estimates for 2012: $12.73 per share
Annual dividend: $3.42 per share, which yields 3.2%
Merck and Company, Inc. (NYSE:MRK) is a global pharmaceutical giant. Pharmaceutical products are in demand even when the economy is weak and this is why investors often seek drug companies as a safe harbor in tough times. This stock dropped to about $33.50 in late November, and those are the kind of buying opportunities patient investors should act on. I would consider buying Merck shares on any significant weakness.
Here are some key points for MRK:
Current share price: $35.26
The 52-week range is $29.47 to $37.65
Earnings estimates for 2011: $3.75 per share
Earnings estimates for 2012: $3.83 per share
Annual dividend: $1.68 per share, which yields 4.7%
Data sourced from Yahoo Finance. No guarantees or representations are made.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Disclaimer: Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.