5 Dividend Stocks I Get Hung Up On

Includes: AFL, EXC, HAS, JNJ, MSFT
by: Pey Shadzi

It's never a bad idea to bounce ideas off your faithful investing buddies, right? That's why often times I'll call one of them up to run a potential stock purchase by them, explaining the company's main business ventures, asset and debt ratios, dividend yields, payout ratios and earnings figures. Eventually, I'll pause for a second to hear their opinion about my newfound favorite dividend pick only to find they're nowhere to be found. How can you have a "bad" landline connection?

Thankfully having you, the faithful Seeking Alpha community, out there to listen to and comment on my incessant ramblings about dividend-paying stocks and potential value plays is a godsend. I'd rather hang out with you over my snooty college buddies anyway.

Here are five dividend plays I'm consistently hung up on:

1. Microsoft Corporation (NASDAQ:MSFT). Sure, there are always a good number of MSFT bears who come out of the woodwork every time a bullish article is written about the software giant. Yes, you'd be right to point out the share price hasn't "gone anywhere in over a decade." However with a P/E of about 9 -- down from a P/E of 20 in March of 2007 -- and $56 billion in cash on hand with only $13 billion in debt, MSFT is looking like a winner. A dividend yield of 2.8% and a modest payout ratio of 23% only make this sweeter for this undervalued investment.

2. Hasbro, Inc. (NASDAQ:HAS). When a company with more than 85 years of history finds itself trading near a 52 week low with a historically low P/E ratio, I certainly take notice. HAS' dividend yield of 3.8% and payout ratio of 39% look like a sustainable, rewarding opportunity for dividend investors and value seekers. In 2007, HAS dished out $0.60 per share in dividends and is projected to distribute $1.20 per share in 2012. That's some impressive growth. When a brand as strong as Hasbro trades at these types of valuations, it pays to take notice.

3. Johnson & Johnson (NYSE:JNJ). A company which doesn't need an introduction, JNJ also appears to be trading at very reasonable levels. With a forward P/E of about 12.5, a dividend yield of 3.5% and a moderate payout ratio of 54%, the stock looks reasonable. $31 billion of available cash on hand and $18 billion in debt with over $64 billion in annual revenues seems highly manageable for JNJ at its current valuation. Despite a string of recalls and failure of management to fix what seem to be relatively easy processing flaws, I think the stock's unfavorable aura and inevitable share dips present a buying opportunity.

4. Aflac Incorporated (NYSE:AFL). This dividend aristocrat is currently sporting a 3.1% dividend yield with an attractive 30% payout ratio. Aflac received lots of downward momentum over the past year after the Fukushima disaster in Japan and the looming European debt crisis, but it's my opinion that bearish sentiment regarding the stock is a bit overdone and I feel very comfortable with AFL and over the last year have been excited to pick it up in the $30s, making it one of my largest holdings.

5. Exelon Corporation (NYSE:EXC). I've written about EXC before and it probably won't be the last time. I feel everyone should have a consistent, trustworthy utility stalwart in their portfolio as an anchor. EXC's current 5.3% dividend and moderate payout ratio of 58% suggests it has enough cash to cover the dividend and hopefully even raise it in the future. $19 billion in annual revenues and six million regularly paying customers suggest this company has bright days ahead. Call me boring, but I'll likely always find a place in my portfolio for such a strong brand with significant earning potential.

Over the years I've learned dividend-paying stocks aren't necessarily for everyone. (Especially if you're one of my landline-loving buddies.) So maybe dividends aren't as "sexy" as talking about spring break in Cabo San Lucas. If you're lucky enough to be among the relatively select few young adults who contribute regularly to their dividend accounts, you may just find yourself vacationing in Cabo San Lucas one day on account of those "boring" dividend-paying stocks. Best of luck out there!

Disclosure: I am long MSFT, HAS, AFL, JNJ, EXC.