With world markets in turmoil over Europe's failure to control the debt crisis and investors getting paid nearly nothing to sit on cash in money market accounts, it makes sense to consider dividend stocks that are defensive in nature. Companies that sell or provide basic needs or services are likely to weather this storm much better than perhaps any other asset class. Plus, the dividends offered by many of these companies are significantly higher than what many other investments will pay, including some bonds. Here is a closer look at three stocks that are among Jim Cramer's top dividend picks:
1. Duke Energy Corporation (DUK) shares are riding out the storm with strength. In fact, the stock trades just about 30 cents below the 52-week high, which is $22.12 per share. Duke Energy is a defensive play for investors because it offers electricity and other forms of energy to customers in North Carolina, South Carolina, Ohio, Indiana, and Kentucky. Utilities like Duke can be a safe haven because power is a basic need and the dividend offered is much higher than average at nearly 5%. Cramer thinks Duke Energy is poised for growth and that could mean higher earnings and more dividend increases. Duke has paid a dividend for 86 years in a row, and it has been raising the dividend annually for the past few years. This is the kind of stability investors seek, and that is why it makes sense to buy this stock on any dips.
Here are some key points for Duke Energy:
- Current share price: $21.85
- 52-week range: $16.87 to $22.12
- Earnings estimates for 2012: $1.43 per share
- Earnings estimates for 2013: $1.49 per share
- Annual dividend: $1 per share, which yields 4.6%
2. ConocoPhillips (COP) is a top pick for many oil and dividend investors. This stock could also protect investors from inflation in the future since it is a leading oil company that is focused on exploration, production and transportation of oil, natural gas and other fuels. Hard assets like oil tend to do well in times of inflation and with the amount of money printing needed globally, inflation might pose a future risk. Cramer sees potential as the company has completed a recent spin-off of its Phillips 66 (PSX) refining division. This spin-off and restructuring gives the company more flexibility to continue with stock buybacks and pay down debt. ConocoPhillips has a history of paying dividends, and thanks to annual increases the payout has more than doubled from the 31 cents it paid each quarter in 2005. Now it pays a quarterly dividend of 66 cents per share. Since the payout ratio is below 50%, dividends are poised to keep rising in future.
Here are some key points for ConocoPhillips:
- Current share price: $52.04
- 52-week range: $50.66 to $80.13
- Earnings estimates for 2012: $6.43 per share
- Earnings estimates for 2013: $6.69 per share
- Annual dividend: $2.64 per share, which yields 5.1%
3. General Mills (GIS) shares have been relatively strong for the past couple of months and that trend could continue as investors flock into companies like this one. Cramer says General Mills is "as recession-resistant as it gets," and in tough times foodmakers are likely to outperform. While many investors think of cereals like Cheerios and Wheaties, this company makes many other products and owns popular brands like Green Giant, Gold Medal (flour), Yoplait, Pillsbury, Betty Crocker, and more. General Mills offers stability, but it also has growth potential as it expands into emerging markets like Brazil. With about 30% of sales coming from outside the United States, the company has opportunities to make this a much bigger percentage of revenues in the future. The company has paid a dividend for 113 years, and it has been raising the dividend for many years. For example, the quarterly dividend was 13.8 cents in 2004, but it is now up to 30.5 cents per quarter. This means the payout has more than doubled in the past eight years, and it has room to rise since the payout ratio is around 50%.
Here are some key points for General Mills:
- Current share price: $38.52
- 52-week range: $34.64 to $41.06
- Earnings estimates for 2012: $2.54 per share
- Earnings estimates for 2013: $2.76 per share
- Annual dividend: $1.22 per share, which yields 3.1%
Data is sourced from Yahoo Finance.
Disclaimer: No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
