5 Great Dividend Aristocrats For Your 2012 Retirement Portfolio

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Includes: ABT, COST, JNJ, MCD, MRK, NVS, PG, WMT, YUM
by: Dividend Kings

As the current outlook of our economy, along with the debt crisis in Europe, looms over investors, most are seeking safe investments for their money. One attractive option for investors would be Dividend Aristocrats. These are companies that have increased their dividends for 25 consecutive years. Below are 5 stocks from that list that look to be an attractive buy for investors in 2012. Investors should consider them for further research.

Johnson & Johnson (NYSE:JNJ) – The healthcare giant is first on the list of dividend aristocrats. Currently the stock is trading between its 52-week low and high in the mid $60s. With a low beta of 0.55, the stock is roughly half as volatile as the market. The annual dividend is currently $2.28, or a yield of 3.60%. With reported earnings per share of $4.10, Johnson & Johnson has a price-to-earnings ratio of 15.5. This is slightly lower than the industry ratio of 16.7 and the S&P 500 (NYSEARCA:SPY) ratio of 24.1. A comparable competitor of the industry to Johnson & Johnson is Novartis AG (NYSE:NVS). In regard to net income, Johnson & Johnson reports a net income of $11.40 billion compared with that of Novartis at $10.11 billion. Also, Novartis has a slightly lower price-to-earnings ratio at 13.25. Novartis has a similar dividend yield; however the amount is slightly lower at $2.00 annually. Analysts also view the stock as one on the rise. With a mean target price of $72.64, this would be about a 12% increase, not including the dividend.

Abbott Laboratories (NYSE:ABT) – With the lowest beta on the list at 0.32, Abbott Laboratories is the least volatile stock on the list. Currently, the company has an annual dividend of $1.92; a yield of 3.50%. With earnings per share at $2.89, the stock has a price-to-earnings ratio of 18.7, which is slightly higher than the industry ratio of 16.7. To note a comparison, Abbott Laboratories is in the same industry as Johnson & Johnson of major drug manufacturers. While the company’s price-to-book value is slightly high at 3.44, which is near the S&P 500 average of 3.93, it is a bit lower than the industry ratio of 4.66. When comparing Abbott Laboratories to competitor Merck & Co. Inc. (NYSE:MRK), the numbers are very similar. The net income of Abbott is $4.55 billion, which is slightly higher than Merck’s net income of $4.22 billion. Although this amount is extremely similar, it should be noted that Abbott’s 5-year expected price-to-earnings grown is much lower at 1.26 compared with Merck’s ratio of 2.12. Another interesting aspect of Abbott Laboratories is the company plans to spin off its branded drug business and separate into two companies making this stock an attractive opportunity for investors.

McDonald’s Corp. (NYSE:MCD) – America’s favorite fast food restaurant is also an extremely popular stock amongst investors. With a beta of 0.36, McDonald’s is a very stable investment with low volatility. Currently the company has a dividend yield of 2.90%, or $2.80 annually. The earnings per share of McDonald’s is $5.11, giving the stock a price-to-earnings ratio of 19.1. This is noticeably lower than the Restaurant Industry ratio of 26.2, giving the impression that even though the stock is just under the $100 per share mark, it is still undervalued. When looking at competitor, Yum! Brands, Inc. (NYSE:YUM), McDonald’s has the better numbers with a higher net income of $5.37 billion against Yum!’s $1.24 billion. Also, Yum! Has a higher price-to-earnings ratio of 22.88. Although analysts have this stock only rising about 4 to 5% as a mean target price, the low volatility, earnings ratios compared with the industry, and consistent dividend could make McDonald’s a safe investment for investors in a less than safe economy.

Wal-Mart Stores Inc. (NYSE:WMT) – Trading near its 52-week high around $60 per share, Wal-Mart is another stock that has continually increased its dividend for investors. Currently, the company issues an annual dividend of $1.46. This comes out to a dividend yield of 2.50%. With a beta of 0.46, it is also one that has low volatility. The world’s largest retailer currently has earnings per share of $4.70. This number gives the stock a price-to-earnings ratio of 13.0, which is slightly lower than the industry ratio of 15.2. Based on price to book value, Wal-Mart is in line with the industry average of 3.09 with the company’s ratio of 2.96. Although there are a few competitors going after Wal-Mart’s business, none has the earning power of the company with a net income of over $15 billion. With the possibility that unemployment may continue to drop companies like Wal-Mart and Costco (NASDAQ:COST) stand to benefit from growth in U.S. jobs.

The Proctor & Gamble Company (PG) – The last stock on the list is a leader in consumer goods. Even though the company has one of the higher betas on this list at 0.50, the stock is still half as volatile as the market. As with the other companies on the list, Proctor & Gamble has a dividend yield of about 3%, issuing $2.10 annually. With earnings per share of $3.94, the stock has a price-to-earnings ratio of 16.5, slightly lower than the industry at 18.0. The company boasts similar numbers to Johnson & Johnson in regard to net income with $11.50 billion compared with $11.40 billion respectively. One area of concern for the company is that it recently announced it would put a freeze on hiring any new full-time employees for 2012. Although the company is responding to slower-than-expected growth, overall the stock could still be a safe bet for investors looking for a solid company with a consistently increasing dividend.

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