Despite Tuesday’s rally to start 2012, I think investors should be very cautious in the first half of 2012, given all the unknowns in Europe. Steadily growing companies with reasonable valuations and solid dividend yields are a safe way to deploy new money into a volatile market. Here are two I like at current price levels.
Emerson Electric (EMR) – Emerson Electric Co. operates as a diversified technology company worldwide. It engages in designing and supplying products and technology, and delivering engineering services and solutions to industrial, commercial, and consumer markets. The company’s Process Management segment offers customers products and technology, and engineering and project management services for precision measurement, control, monitoring, and asset optimization of oil and gas reservoirs and power generating plants, as well as for food and beverage, pulp and paper, pharmaceutical, and municipal water supply industries”. (Business description from Yahoo Finance)
4 reasons that EMR is a solid buy at $47:
- Emerson has a 3.4% dividend yield and it has raised its dividend payout at a 7% annual clip over the last five years.
- Emerson shows consistent EPS growth. The company made $3.24 a share in FY2011, is projected to earn $3.55 in FY2012 and analysts expect it to make $4 a share in FY2013
- It has an A rated balance sheet and is selling in the bottom half of its five year valuation range based on P/E, P/S, P/B and P/CF.
- The consensus analysts’ price target on EMR is $54.50 and Credit Suisse has a “Outperform” rating on Emerson and a price target of $55 on the stock.
Novartis (NVS) – “Novartis AG, through its subsidiaries, engages in the research, development, manufacture, and marketing of healthcare products worldwide. Its Pharmaceuticals division offers prescription medicines in various therapeutic areas, including cardiovascular and metabolism; oncology; neuroscience and ophthalmics; respiratory; integrated hospital care; and other additional products”. (Business description from Yahoo Finance)
4 reasons Novartis is a buy at $58 a share :
- Emerson has a 3.5% dividend yield and it has raised its dividend payout at a 15% annual clip over the last half decade.
- Emerson shows steady EPS growth. The company earn $5.15 a share in FY2010, is expected to earn $5.55 in FY2011 and analysts project it to make $5.70 a share in FY2012.
- It has an AA- rated balance sheet and is selling near the bottom of its five year valuation range based on P/E, P/S, P/B and P/CF.
- The consensus analysts’ price target on Novartis is $67 and S&P has a “buy” rating on NVS and a price target of $66 on the stock.
Disclosure: I am long (NVS).