5 Dividend Stocks To Buy And Hold Forever

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Includes: BP, BTI, COP, CVX, EXC, JNJ, KMB, KO, PG, PM, PPL
by: Insider Monkey

Long-term Treasury bond yields are ridiculously low. It just doesn't make sense for an investor to invest in 30 year bonds and get a nominal interest rate of 3% for 30 years. Federal Reserve is pursuing inflationary policies to lift the economy out of another potential recession and we don't think long-term bonds are really a safe place for long-term investor. Instead we prefer to be in high dividend yielding stocks that provide inflation protection and little growth.

In this article we analyzed 5 high dividend stocks that will survive this recession and provide superior returns over the next 30 years. We have two of these stocks in our portfolio and looking to buy others at attractive prices.

Philip Morris International Inc. (NYSE:PM): Philip Morris International Inc., through its subsidiaries, manufactures and sells cigarettes and other tobacco products. It has a market cap of $116.16 billion with a price to earnings ratio of 15.15. For the year, shares of BP have gone up by 17.92%. Its earnings per share is $4.37. Its price/earnings-to-growth ratio is 1.1. Quarterly earnings growth is 21.5%. The stock has traded in a 52-week range of between $55.85 and $72.74. The stock is currently trading in the middle of its trading range at $66.13.

The stock has a forward P/E of 12.91 and pays a 4.6% dividend. Other cigarette stocks trade higher than this. British American Tobacco Indus (NYSEMKT:BTI) trades at 17.25 times earnings and carries a dividend yield of 2.7%. PM has good track record in profitability and cash flow generation. Jim Simons’ Renaissance Technologies had more than $242 million invested in PM at the end of June.

The Coca-Cola Company (NYSE:KO): The Coca-Cola Company manufactures, distributes, and markets nonalcoholic beverages worldwide. It principally offers sparkling and still beverages. It has a market cap of $153.15 billion with a price to earnings ratio of 12.43. Its shares have gone up by 4.93% since the beginning of this year. The company has been paying quarterly dividends for decades and has increased its dividend every several years.

The stock is currently trading at $66.7. It also carries a dividend yield of 2.8%. Quarterly earnings growth is 18.1%. KO is a consistently profitable company. In 2010, the company increased its net income by 73%, from $6.8 billion in 2009 to $11.8 billion in 2010. KO has purchasing and pricing advantages that other beverage companies cannot match. Billionaire Warren Buffett’s Berkshire Hathaway had the largest stake in KO among the 300+ hedge funds we are tracking.

PPL Corporation (NYSE:PPL): PPL Corporation, an energy and utility holding company, generates and sells electricity; and delivers natural gas to approximately 5.3 million utility customers primarily in the northeastern and northwestern U.S. It has a market cap of $16.67 billion with a price to earnings ratio of 12.19. Its shares have gone up by 11.42% since the beginning of this year. The stock has traded in a 52-week range of between $24.10 and $29.61. The stock is currently trading at $28.86 towards the top of its 52-week range.

The stock is currently trading at 11.66 times next year’s earnings and 1.54 times book value. This is significantly lower than other similar stocks in the industry. It also carries a dividend yield of 4.9%. Meanwhile, Exelon Corp. (NYSE:EXC) is valued at 10.69 times earnings and has a dividend yield of 4.9%. Given their leadership in the industry, it would be no surprise that earnings will be higher in the future.

ConocoPhillips (NYSE:COP): ConocoPhillips operates as an integrated energy company worldwide. The company’s Exploration and Production (E&P) segment explores for, produces, transports, and markets crude oil, bitumen, natural gas, liquefied natural gas, and natural gas liquids. It has a market cap of $95.03 billion with a price to earnings ratio of 8.73. For the year, shares of COP have gone up by 3.88%. It directly competes with other integrated global oil companies like BP plc (NYSE:BP) and Chevron Corp (NYSE:CVX). The underperformance is in line with other global oil companies. Most of these stocks track the performance of oil prices. Investors are concerned that oil prices will go for a free fall on fears of a global recession.

At the current price of $69.2, COP is trading at 8.34 times next year’s earnings. It is selling at the very bottom of its five-year valuation range. It also carries a dividend yield of 3.8%. In contrast, CVX trades at 7.53 times earnings and has a 3.10% dividend yield. The main attraction of investing COP is that it is aggressively pursuing growth. The current valuations give investors free options on growth.

The Procter & Gamble Company (NYSE:PG): The Procter & Gamble Company provides consumer packaged goods in the United States and internationally. It has a market cap of $178.91 billion and its shares have gone up by 1.6% since the beginning of this year.

The stock has traded in a 52-week range of between $57.56 and $67.72. The stock is currently trading at $65.11 towards the top of its 52-week range. The stock is trading at 14.15 times next year’s earnings and carries a dividend yield of 3.2%. In contrast, JNJ trades at 15.41 times earnings and has a dividend yield of 3.5%. Meanwhile, KMB is valued at 16.94 times earnings and carries a dividend yield of 3.9%. Bill Miller’s Legg Mason Capital Management had $211 million invested in PG at the end of June.

Disclosure: I am long PM, COP.