Dividend stocks are turning out to be the best place to ride out this tough market. Even better is investing in a company that is in a stable and relatively recession-proof industry like pharmaceuticals, and utilities. Combining dividends with a defensive sector is likely to be a winning strategy for the rest of the year. One more way to boost this strategically is to buy dividend stocks when there are pullbacks in the price for either company specific reasons or just because of a general market decline. One stock that currently fits the criteria of defensive investing, dividends and buying on dips is Duke Energy Corporation (DUK). Here are 3 reasons to consider this stock now:
1. Defensive investing: Duke Energy is a major utility offering electric and other power to businesses and consumers in states like North Carolina, South Carolina, Ohio, Indiana, and Kentucky. The utility sector is one of the most stable and highest-yielding sectors in the stock market. Because energy is a basic need even in tough times, utilities can continue to generate stable revenues and that makes Duke a defensive stock.
2. Dividends: Duke has been raising the dividend slowly, but surely for the past few years. What's even more impressive is that it has been paying a dividend for nearly 90 years. Furthermore, the payout ratio is at reasonable levels, so the company can continue with annual increases. Plus, analysts expect earnings to grow from $4.28 this year, to $4.45 in 2013, and earnings growth often leads to dividend growth.
3. Buying on dips: Duke shares were hitting new 52-week highs at over $70 per share just about a week ago, but the stock dipped over concerns of a CEO change. This company recently closed a deal to buy Progress Energy and the CEO of that company, Bill Johnson was expected to become the CEO of the combined companies. However, the current CEO of Duke will now remain. This sudden and unexpected change created an issue for many investors and the stock plunged to about $66 per share. This issue is just a short-term speed-bump and that is what has created a buy the dip opportunity for longer-term investors. CNBC's Jim Cramer is disappointed by the CEO switch, but he thinks it is just a buying opportunity as well. Weeks and months from now, investors will probably be focused on the stability and dividend this stock offers, and that should lead to a resumption of the uptrend.
Key Data Points For The Duke Energy Company From Yahoo Finance:
Current Share Price: $66.64
52-Week Range: $50.61 to $71.13
Dividend: $3.06 per share which yields 4.6%
2012 Earnings Estimate: $4.28 per share
2013 Earnings Estimate: $4.45 per share
P/E Ratio: about 15 times earnings
Data is sourced from Yahoo Finance. No guarantees or representations are made. Please consult a financial advisor before making investments.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.