Investing in the stock market is always going to be a risky business if the investor lacks a certain degree of experience and expertise. A sound knowledge of the dynamics of the stock market and a keen eye that sees beyond financial triggers is a necessary prerequisite that a few gifted investors possess. Without these skills, what may seem like a lucrative investment venture may turn out to be an absolute disaster. Therefore, with the recent volatility in the stock market, prudent investors have been cautious to scrutinize which stocks will give them the highest dividends. According to my expert analysis, here are the top five most profitable stock investments of 2012:
Bank of America (BAC)
Bank of America is inarguably one of the largest financial institutions of the world, offering a wide range of banking, asset management, investing and risk management services and products to individual consumers, small businesses and large corporations. Market statistics suggest that Bank of America has made a strong comeback after showing a predominantly downward spiral last year. It has started 2012 on the right footing, with shares rising nearly 28% to close at around $8. Bank of America reclaimed its position as the strongest stock among the Dow Jones Industrial average components.
Bank of America also impressed investors with the lack of mortgage-based surprises that were expected in the fourth quarter of 2011. Current share price of the stock is floating around $8 with a 52-week range of $5 to $15. Bank of America is one of the biggest players of the stock market with a market capitalization of nearly $80 billion. It enjoys an average trading volume of about $280 million. With a price to earnings ratio close to 170 and earnings per share of $0.1, Bank of America has shown a steady performance in the opening month of 2012. It also has a dividend yield just shy of 1% which it has been able to smartly manage in the midst of volatile market conditions. Given the current upward drive of Bank of America, I believe that the stock has the capacity to widen its competitive moat considerably. Therefore, in my view, the stock qualifies as one of the most lucrative investments this year.
Danaher is an international business with diversified manufacturing operations in medical, industrial, commercial and professional products and services. Although Danaher relies a little too heavily on acquisitions for growth, it has a comprehensive, well-defined process that identifies and subsequently integrates acquisition targets. The successful integration of various acquisitions over the years with rapid growth in organic and margin expansion has allowed Danaher to grow at an impressive rate of nearly 17% per annum.
The share price of Danaher is currently $52, having stayed virtually unchanged for the last 52 weeks. This has helped build investor trust. The company has an overall market capitalization of nearly $36 billion with an average volume exceeding $3 million. With a price to earnings ratio of around 19 and earnings per share close to $3, Danaher has maintained steady growth, thereby promising stability to investors. It has a good dividend ratio of 0.03 against a dividend yield of about 0.5%. I
n my opinion, the company is expected to show stronger resilience against stagnation in domestic consumer spending in the future. Furthermore, Danaher has recently struck an acquisitions deal with Beckman Coulter (BEC), which is the biggest acquisitions deal for the company to date. This new deal is expected to widen the company's competitive moat considerably. Amidst all these favorable developments, Danaher is expected to be an attractive investment venture in the current year.
Wal-Mart has dominated the global retail market for years and is the largest global retailer. The multinational corporation has employed the highest number of people in the world and is the largest public corporation in terms of revenue. It has enjoyed a long history of growth and an even longer list of loyal investors. Its share price has perpetually remained constant at around $62 for the last ten years or possibly more. The earnings per share of the company have grown at roughly 12% in the last 5 years and this has reflected well on investments.
Wal-Mart has a huge market capitalization of nearly $211 billion with an average volume of around $8.74 million. With operations spread across the globe, Wal-Mart has been able to maintain a steady price-to-earnings ratio of about 14 and earnings per share of around $5. The company has a long history of healthy dividend payouts and the dividend payout ratio currently floats around 0.5 against a dividend yield of nearly 3%. A lot of positive publicity and expansion of global operations in recent years have helped Wal-Mart widen its competitive moat considerably. In my view, the stock is definitely among the safer investments for the current year.
Goldman Sachs (GS)
Goldman Sachs provides an assortment of financial services to diverse clientele that includes financial institutions, corporations and even governments. The services it offers include investing and lending, investment banking, institutional client services and investment management. Ever since the financial crisis, investors have observed the company face more than its fair share of legal and financial trials. Although many investors have particularly criticized the company's traditionally heavy reliance on proprietary trading to meet its financial targets, the standing valuation of its stock has not done full justice in reflecting its performance over the last few quarters.
Given these facts, financial analysts and stock think tanks believe that Goldman Sachs has the capacity to generate higher returns on equity. It is also believed that the shares of Goldman Sachs are trading at an unreasonably low rate of 77% of total book value. The company currently has a strong share value of around $116 with a 52-week range of $84 to $170. It also has a market capitalization of nearly $57 billion with an average trading volume of around $8 million. The price-to-earnings ratio is maintained at around 25 with good earnings per share of about $5.
The dividend payout ratio is steady at about 0.5 with a dividend yield exceeding 1%. Goldman Sachs has already shown a good performance in the first month of 2012 and we expect that it is on a favorable run. It has traditionally had a flexible and dynamic business model, which along with high liquidity and capital levels have boosted growth. According to my assessment of the company's financial reports, Goldman Sachs will rank among the best stock performers of 2012.
Johnson & Johnson (JNJ)
Johnson & Johnson is a leading international healthcare company, with a huge sales volume supported by a diverse product line. The company deals in a range of products from Medical Devices/Diagnostics, Consumer health and Pharmaceuticals. Johnson & Johnson has operations spread across the globe and earns more than half of its income through international markets. The company has a long list of loyal investors who, very much like us, believe that it has one of the cleanest balance sheets.
Johnson & Johnson is eying substantial growth in the Pharmaceutical sector this year after expiry of various patents. Johnson & Johnson shares currently trade at around $65, with a 52-week range of $57 to $68. Global operations have helped the multinational company maintain an impressive market capitalization of around $178 billion and a healthy trading volume of $10 million. The price-to-earnings ratio is promising at around 19, with earnings per share of as much as $4. This has allowed Johnson & Johnson to maintain a healthy dividend yield of about 4%, with a dividend payout ratio of approximated to 0.5. According to my assessment of the company's recent performance statistics, Johnson & Johnson has shown a lot of promise and it is expected to cruise through the current quarter with the same upbeat spirit. This makes Johnson & Johnson a lucrative investment in 2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.