Whenever there are broad market downs, I like to pick out high quality stocks and initiate or add to my positions in them. The key things I look for are: consistent profitability, strong dividend yields, and reasonable price to earnings ratios. Essentially, these are stocks that you should ideally be able to buy, hold, and forget about for the next 20 years.
American Electric Power
American Electric Power (NYSE:AEP) is one of my favorite utility stocks and is perfect to buy on a dip and forget about. It paid 4.73% annualized yield at the last closing price of $39.73. The company has been steadily increasing its dividend since 2003 and has a low beta of 0.48, which is excellent for income investors. Further, the company has managed to grow EPS by 10.2% in the most recent quarter on a year-over-year basis, despite revenues contracting slightly by 2.8% in the same period.
It had a nice run into the $40s recently, and is still near that level, with the last closing price at $39.73. I would advise waiting for a pullback into the high $38s or low $39s to start scaling into the position. But even at this point, the yield alone makes it an excellent candidate for an income-focused portfolio.
Verizon Communications and AT&T
One of the safest and most steadily profitable ways to play the smartphone revolution is to invest in telecoms. Verizon Communications (NYSE:VZ) has been on fire, with its stock price seeing a healthy 20% appreciation over the past year. Further, the company pays a generous 4.57% yield at current prices, giving further incentive to own this stock.
With smartphones and tablets becoming more prevalent, and as cloud computing becomes a fact of computing life, the need to push around more data will only grow, and this sector in general will do well. In fact, both Verizon and AT&T (NYSE:T) are excellent choices for the telecom sector, and with a 5% yield, AT&T might actually be the better buy at these levels for pure income. However, Verizon's stock has seen better capital gains over the last year and in general, it seems customers are happier with Verizon's service than with AT&T's.
In either case, both are excellent companies with solid prospects going forward. I would not hesitate to buy either on a pullback.
Intel Corporation (NASDAQ:INTC) is the world's leading chip manufacturer. It has over 80% of the x86 PC market, supplies the vast majority of the chips to the server/cloud and high performance compute markets. To supply this insatiable demand for its chips, Intel also owns the most advanced chip manufacturing facilities in the world. While other companies such as Taiwan Semiconductor (NYSE:TSM), Samsung, and Global Foundries have barely just begun supplying processors built on the 32nm/28nm node (a process node specifies the size of a chip's building blocks known as "transistors"), Intel has been shipping 22nm chips in high volume for months.
The company's revenues and profits are hitting record or near-record highs, it does an exceptional job returning capital to shareholders in the form of both dividends and buybacks, and it's making acquisitions and organically developing the technology to become a major player in the mobile chip revolution. With a 3.20% yield as of the last closing price of $26.22 and a price to earnings ratio of merely 11.11, I think Intel is a screaming buy on any broad market pullback.
The fears here are that Intel is "too late" to the mobile party, but I fully believe that the party's just begun. With the company's stellar hardware design abilities coupled with a very skilled software division (that was more than happy to help Apple (NASDAQ:AAPL) port Mac OS to x86 and Google (NASDAQ:GOOG) to port Android to x86), the company has a very strong chance of taking share from ARM's (NASDAQ:ARMH) ecosystem.