6 Dividend Paying Stocks To Add To Your Portfolio Now

by: Richard Saintvilus

In a recent article, I talked about the commitment that I was making not only toward becoming more diversified in my portfolio, but also I was going to focus on some dividend players on the market. The issue of dividends has proven to be a very sensitive topic of late as there continues to be a huge separation between those that favor growth over income - or vice-versa. It seems that we can't all agree and I appreciate that, because we are not all the same and therefore don't have equal objectives in mind.

However, the unifying quality is that we are all investors and by virtue, risk takers. But another thing that we can agree on is that companies that pay dividends do tend to be less risky, and the payouts are a great way to re-invest and mitigate risk and losses. So to that end, (as promised) here are the dividend stocks that I have recently added.


Dividend Yield

Market Cap (Billions)

Microsoft (NASDAQ:MSFT)



Verizon (NYSE:VZ)



AT&T, Inc. (NYSE:T)



Merck (NYSE:MRK)






Pfizer (NYSE:PFE)



Click to enlarge


Microsoft continues to intrigue me right here. Not only does it pay a decent dividend, but I continue to feel that the stock is exceptionally cheap at current levels. In 2011, I was too concerned with growth - a strategy that did not bode particularly well in depressed bear markets. Although I already own a decent portion of the company, I failed to capitalize on what I felt were opportunities to add on several of its dips. For quite some time now, the stock has traded at a significant discount to a conservative cash flow model.

The mistake that I've made over the past couple of years is ignoring this important fact. Growth has always been my primary investment motivation and something that Microsoft has failed to produce over the past several years. But regardless of how one feels about the company and its prospect of competing with Apple and Google (NASDAQ:GOOG), the fact remains that Microsoft still has a business with very good returns on capital and excellent cash flow.

Microsoft will most likely never grow again in a way that resembles the mid to late 90s but that does not mean it does not have life. It has been considered the sleeping giant and remains only one good idea away from being awakened, and when it does, $32 will be a realistic destination. But at least there is a decent dividend to pay investors to wait.

Verizon and AT&T

Perhaps the best reason to own either Verizon or AT&T is for their strong dividend yields which currently are 5.3% and 5.8%, respectively. These two have been considered safe havens of sorts because the dividends get bigger as the stock falls. Among the telecoms, only CenturyLink offers a better dividend at an 8.6% yield. However, where both companies might fall short on the yield, they more than make up for it in growth prospects - Verizon in particular.

The company not only features one of the better 3G and 4G networks, but also has a wide selection of wireless products highlighted by Apple's iPhone and devices on Google's Android platform. The company is in great position to add to its customer base. In fact, subscriber growth increased faster last quarter (1.3 million new wireless customers) than the previous two and a half years, thanks primarily to the iPhone. Consolidated revenues grew a solid 6.3% year-over-year to $27.5 billion during the quarter.

As the competition sorts itself out, Verizon's management is doing an excellent job of focusing on adding shareholder value. The iPhone deal has proven to be the game-changer that it needed to propel the stock going forward. That hefty dividend also makes it an appealing stock to hold regardless of what might be ailing the market.

Merck and Pfizer

Merck and Pfizer are interesting considerations here because aside from the fact that they pay a respectable dividend, both stocks are sitting at 52-week highs. To me this has always been a sign to wait for the pullback. But with this being a new year and all, well I've gotten a new perspective and as I've said previously, I'm putting behind some old myths.

Having said that, it remains hard to assess where either company is and where they might be going. Despite the positives in the stock, there are some concerns of both companies that are legitimate. Some of which has had to do with limited R&D pipelines. But despite all of that, I continue to believe that over the long-term there will be some value in both stocks.

As big-cap drugs have been laggards for several years, investors have plenty of choice in the space. Much of what can be said about Merck can also apply to Pfizer and vice versa. However, Merck in particular offers a solid dividend payout and a relatively stable, even if not exciting, business outlook. While drug companies for the most part have spent many years trying to regain investor trust, it may be time to reevaluate them and appreciate them for the cash flow they do still offer.


When I look at Cisco, I see a $30 stock just waiting to happen. While this sentiment has a lot to do with the sudden resurgence in the technology sector overall, the true source of the feeling has to do with how Cisco has positioned itself well to capitalize on what is now seen as increasing technology expenditures. This is in stark contrast from its previous status of last year when it allowed firms such as Juniper (NYSE:JNPR), F5 (NASDAQ:FFIV) and Hewlett Packard (NYSE:HPQ) to encroach on its market share because it was so out of focus. However, focus is one thing the company is now demonstrating to have by its last earnings announcement.

In its Q1 fiscal 2012 earnings report, excluding some costs, profit climbed to 43 cents a share in the quarter ending October 29. Analysts on average had predicted 39 cents, according to Bloomberg data. Cisco also topped projections with its second quarter forecast. First quarter net income fell to $1.78 billion, or 33 cents a share, from $1.93 billion, or 34 cents, a year earlier. Sales rose 4.7% to $11.3 billion in the period, compared with an estimate of $11 billion. Cisco's gross margin narrowed to 62.4% last quarter, excluding some costs that beat the average estimate of 61.3%.


Managing risk and avoiding losses are the surest way to stay in the green even in the toughest bear markets. Sometimes, watching paper losses are still too tough to bear for even the most seasoned investors. One of the ways to avoid some sleepless nights is to understand that dividends do in fact matter. A dividend check can often be the difference between an investor holding through some tough economic times or opting to cut losses and moving on. In 2012, I will be looking for such companies. Though growth will always come at a premium, dividend issuing companies make waiting for growth a tad easier.

Disclosure: I am long CSCO, MSFT, T, VZ, PFE, MRK.