12 Dividend Stocks Capable Of Weathering Storms For Decades

by: Jefferson Starship

The New York/New Jersey metropolitan area has been through a lot in the last couple weeks, and not just the severe market fluctuations. We’ve been hit with acts of mother-nature, the likes of which we’ve never seen. The city was thrown into mass hysteria last Tuesday when an earthquake attacked (albeit for less than a minute with few repercussions). And then we spent the next several days preparing for the hurricane apocalypse, which was disastrous in varying degrees depending on location. Stores pushed record amounts of water off the shelves and lines were backed up for what felt like days. (I spent 30 minutes on line at BJ’s Wholesale (NYSE:BJ) on Friday to buy Bagel Bites).

But we’ve weathered through it (pun intended) and the market has opened despite rumors of its temporary closure. This brings us to the climax of this analogy. When picking stocks, it is prudent to have a portion of your portfolio, or an entirely separate portfolio, devoted to companies that can triumph through market turmoil. Big companies with solid, annually-increasing dividends should form the backbone of a retirement portfolio. Don’t get me wrong, risk is certainly respected and necessary, but in appropriate doses. Basic portfolio management should dictate the amount of risk you are willing to take on. (The classic your age subtracted from a hundred and all that jazz.).

However, safety should not be shunned, especially in times like these when these large-cap stocks can be purchased at a discount. Imagine the current dividend yields of investors who loaded up in the first quarter of 2009 in big stable companies. That is why you should have a list of companies that you personally have faith in and can watch diligently for times to buy more. They should be large-cap stocks with large moats with a dividend history of increasing annually. Preferably they will be yielding over 3% and you will buy them on the low end of trends to pick up some capital appreciation when you can. You have the option of DRIP’ing them, based on the size of the dividend and how much time you have to look over your portfolio.

With this established, I have compiled a list of 12 stocks that will enable you to sleep at night. It covers a wide variety of sectors, except for banking; I would wait on that until the reform policies are fully understood. These stocks have strong histories and even stronger futures.

PPG Industries (NYSE:PPG) – PPG used to be a big Cramer favorite. It makes paints for basically everything and are good play on commercial manufacturing right now. Its dividend has been rising for 38 years and is currently yielding 3.20%, which is a huge steal. Not long ago, it was flirting with triple digits in price, but because of the market uncertainty it can be had for $75 at a P/E of 11.84.

Abbott Labs (NYSE:ABT) – There are a number of great pharmaceutical/health care companies out there, but I chose Abbott for its mix of prescription drugs and medical devices. It is similar to Johnson & Johnson (NYSE:JNJ) in this regard, but without the recalls. Abbott has only dropped by 6% since May and appear to have some support around the $48 mark. Its yield is at 3.8% and like PPG, it is on a 38 year streak.

Coca-Cola (NYSE:KO) – Coke seems to be impervious to national credit downgrades and natural disasters. I’m betting it sold crazy amounts of Dasani over the last five days, assuming the majority of retailers on the Eastern seaboard were not doing this. It is one of the best run companies in the world, and speaking of which, have a dominant international presence. It is yielding 2.7% and has been increasing its yield for 48 years. An obvious comparable bet would be PepsiCo (NYSE:PEP), but I opted for a separate food bet, as followed.

Kraft Foods (KFT) – A lot of investors like to make plays off of Warren Buffett and he is a 6% shareholder. It has recently announced that it will be splitting foods from snacks and I am not quite sure how that will affect yields, but right now it is giving 3.4%. If you choose to wait until after this happens, I would go with food over snacks because Macaroni & Cheese > Oreos (though there is more revenue for them in snacks).

Exxon Mobile (NYSE:XOM) – Every portfolio needs at least one energy play, so when thinking long term, you might as well go with the largest company in the world. It is 13% off recent highs of $85 and this gives it a yield of 2.6%. In the past I have considered ConocoPhillips (NYSE:COP) because of its yield (4%), but with Exxon’s market cap they aren’t going anywhere, and has been increasing its dividend for 27 years.

Kimberly-Clark (NYSE:KMB) – Kimberly-Clark is sitting near 52-week highs and is still yielding 4.1%. It manufactures a plethora of household goods including: tissues (Kleenex), toilet paper (Scott), and diapers (Pull-Ups, Depend); all of which are top names in their industry. Its dividend has been increasing for 38 years as well.

AT&T (NYSE:T) – Arguably the strongest name in communications and with a higher yield (5.9%), higher market cap ($173B), and half the P/E (8.52) than that of Verizon (NYSE:VZ). That pretty much sums it up, but you may want to make your entry before the iPhone 5 release.

Home Depot (NYSE:HD) – Home improvement also needs a spot in your portfolio. A very detailed review of the two biggest players can be found here. I am a little concerned of Home Depot’s weak dividend history, but it is yielding 2.9% right now and have a market cap of $53B.

Intel (NASDAQ:INTC) – I was hesitant to include a technology company on a list of this sort, but Intel has recently upped its dividend 16.7% to $0.21 and is yielding 4.2%. It has recently taken a drop from $24 to $20 with a P/E under 10. Intel is the number one manufacturer of microprocessors and shall remain as such for the foreseeable future.

Wal-Mart (NYSE:WMT) – The biggest name in retail has been recently renovating its stores to include a much larger grocery component. Its battle with Target (NYSE:TGT) is starting to look like Rock Em’ Sock Em’ Robots (red vs. blue) with each upping the ante in prices, products, store design, and service. But, Wal-Mart is much larger with a cap of $184B, and is yielding 2.8% with a better international presence.

Altria (NYSE:MO) – Altria has a yield equal to or better than Reynolds American (NYSE:RAI) and Lorillard (NYSE:LO) but with a better product line. Luckily for all of them it serves a product that’s addictive, that’s also very price inelastic so the sales will be there even as the number of smokers drop because those that remain will pay ridiculous amounts for a pack. Altria has been increasing its dividend for 42 years and is yielding 5.8%.

McDonald’s (NYSE:MCD) – Saving the best for last, we have the fast food industry. McDonald’s is trading at a 52-week and all-time high at just under $91. It is three times bigger than any other fast food restaurant chain and is also the most exposed to the rest of the world. It has dealt with battles in the price of food, various lawsuits, and other challenges and has come out on top every time. Like Wal-Mart, it has been going through some recent renovations to make itself ‘homier’ by adding nicer chairs, fireplaces, and such. Even at this price, McDonald’s is still a safe bet, yielding 2.7%.

These 12 companies represent a diversified collection of large-cap stocks with decent yields that you can expect to increase annually for years to come. They require less maintenance than the average equity and could help you create a very nice nest egg, if you choose your entry points wisely.

Disclosure: I am long MCD, PPG, MO.