Back in 2010 I was invited to participate in a stock picking competition. The objective was to identify the best four stocks for 2011. You can read the reasons behind my four selections in this article. The four stocks I selected included:
The Procter & Gamble Company (PG) provides consumer packaged goods in the United States and internationally. This dividend aristocrat has raised distributions for 55 years in a row. Over the past decade, Procter & Gamble has managed to boost dividends by 10.90% per year. Analysts are expecting further increases in EPS over the next two years to $4.57/share, which represents a 16.30% expected growth. The stocks yields 3.20% and is attractively valued at the moment. Check my analysis of the stock.
Johnson & Johnson (JNJ) engages in the research and development, manufacture, and sale of various products in the health care field worldwide. The company operates in three segments: Consumer, Pharmaceutical, and Medical Devices and Diagnostics. This dividend aristocrat has raised distributions for 49 years in a row. There are only eleven companies in the world, which have managed to accomplish this task. Over the past decade, Johnson & Johnson has managed to boost dividends by 13% per year. Analysts are expecting further increases in EPS over the next two years to $5.24/share. The stocks yields 3.50% and is attractively valued at the moment. Check my analysis of the stock.
Philip Morris International Inc. (PM), through its subsidiaries, manufactures and sells cigarettes and other tobacco products. The company was spun off from Altria Group (MO) in 2008, and has continued its predecessor’s tradition of raising dividends every year ever since. I like the company’s strong presence outside the US, and the fact that it has the ability to grow through acquisitions as well as by capitalizing on the rising populations in the emerging markets. Analysts are expecting further increases in EPS over the next two years to $5.21/share.The stock yields 3.90%. Check my analysis of Phillip Morris International.
PepsiCo, Inc. (PEP) engages in the manufacture, marketing, and sale of foods, snacks, and carbonated and non-carbonated beverages worldwide. This dividend aristocrat has raised distributions for 39 years in a row. Over the past decade, PepsiCo has managed to boost dividends by 13% per year. Analysts are expecting further increases in EPS over the next two years to $4.66/share. The stocks yields 3.10% and is more attractively valued at the moment relative to arch rival Coca Cola (KO). Check my analysis of PepsiCo.
Overall the four picks delivered a total return of 15.40% in 2011. In comparison, the S&P 500 returned 1.90% in 2011, all of which was due to dividends.
I believe that the stocks I selected to be great long-term holdings for many decades to come. The companies identified above are riding multi-decade consumer trends, and have strong brands that customers are willing to pay a premium for. In addition, the products that these companies produce would likely still be purchased by consumers for several decades into the future. Rapid shifts in consumer preferences are unlikely. In other words, if you like drinking Pepsi, you would keep drinking Pepsi. As a result, I would consider these stocks to also be the best dividend stocks for 2012 as well.
The performance of the other bloggers in the competition in 2011 is listed below:
Dividend Growth Investor + 15.36%
Million Dollar Journey +3.12%
Intelligent Speculator -4.90%
Money Smarts Blog -9.55%
Where Does My Money Go -17.04%
My Traders Journal -19%
The Financial Blogger -21.73%
The Wild Investor -33.34%
Beat The Index -44.08%
Overall, I have performed very well in this competition, where I participated in 2009, 2010 and 2011. My total returns for 2009 were 26.48% and 26.08% for 2010. In comparison, S&P 500 delivered total returns of 26.35% in 2009 and 14.60% in 2010. In essence, the four picks I selected in each of the three years have outperformed the S&P 500. Whether the four picks outlined in this article outperform in 2012 is yet to be determined. Stay tuned for my next update in early April 2012.
Disclosure: Long PG, JNJ, PM, PEP