Five Stocks You Must Consider for 2013

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Everyone is acutely aware of the uncertainties surrounding 2013, regarding the fiscal cliff and taxes on capital gains and dividends. However, it is hard to go wrong with an investment that returns large capital to shareholders, and that trades with solid margins. Therefore, I am looking at five of these investments that you must consider for 2013, and beyond.

With a potential 35% capital gains and dividend tax, and excessive volatility that could occur with the fiscal cliff, I am looking for fairly or undervalued companies that pay high yields. As a result, I am looking at five companies in particular, identifying both their yield and P/E ratio for 2013 based on current price, along with my other reasons for each stock being a potential “buy.”

<table> <tbody> <tr> <td> <p>Company</p> </td> <td> <p>Ticker</p> </td> <td> <p>2013 Yield</p> </td> <td> <p>2013 P/E Ratio *</p> </td> </tr> <tr> <td> <p><strong>Freeport-McMoRan </strong></p> </td> <td> <p><strong><span class="ticker" data-id="203558">(NYSE: <a href="">FCX</a>)</span></strong></p> </td> <td> <p>3.73%</p> </td> <td> <p>7.17</p> </td> </tr> <tr> <td> <p><strong>Tesoro Logistics</strong></p> </td> <td> <p><strong><span class="ticker" data-id="225215">(NYSE: <a href="">TLLP</a>)</span></strong></p> </td> <td> <p>4.21%</p> </td> <td> <p>17.70</p> </td> </tr> <tr> <td> <p><strong>Seagate Technology</strong></p> </td> <td> <p><strong><span class="ticker" data-id="220462">(NASDAQ: <a href="">STX</a>)</span></strong></p> </td> <td> <p>6.00%</p> </td> <td> <p>5.49</p> </td> </tr> <tr> <td> <p><strong>Century Link</strong></p> </td> <td> <p><strong><span class="ticker" data-id="203234">(NYSE: <a href="">CTL</a>)</span></strong></p> </td> <td> <p>7.48%             </p> </td> <td> <p>14.50</p> </td> </tr> <tr> <td> <p><strong>Buckeye Partners</strong></p> </td> <td> <p><strong><span class="ticker" data-id="206889">(NYSE: <a href="">BPL</a>)</span></strong></p> </td> <td> <p>9.22%</p> </td> <td> <p>13.64</p> </td> </tr> </tbody> </table>

*Based on expected earnings

Freeport-McMoRan is in a transitional period after two massive acquisitions that allows the company to enter the oil business. Most of Wall Street has frowned upon the move, however oil is a high margin and stable business. The company recently secured a $12.5 billion loan package to back the two deals and I believe the company will be able to leverage its new businesses to produce greater growth and return higher profits. The company now has a great presence in the Gulf of Mexico and because of its valuation I believe it’s a great play with a solid yield.

Tesoro Logistics is a high growth, high margin, business that is also shareholder friendly. The company recently agreed to acquire Chevron’s Northwest Products pipeline system for $400 million. The pipeline system receives product from five different refineries, one pipeline, and is the primary transportation option to several northwest U.S. areas. Therefore, I think the acquisition secures its continued growth, and makes Tesoro a safe investment that should bode nicely for investors.

Seagate Technology is one of the most shareholder friendly companies in the market; in both dividend and buybacks. The company is expected to see a 30% decline in earnings during 2013 yet still trades with a forward P/E ratio of only 5.50. I think the stock is priced for disaster and that it will become a pleasant surprise in 2013 as investors seek safe, undervalued, high-yield stocks.

CenturyLink not only pays a strong dividend, but also has strong bottom line growth and incredible free cash flow. The company has great credit, and is balanced throughout its operations. Furthermore, its stock is consistent, and is trading near the bottom of its range, therefore making it attractive as a “buy.”

Buckeye Partners is a bit under-the-radar, but is one of the more attractive investments that exist because of its yield. However, it is trading with a one-year loss of nearly 30% due to declines in natural gas storage rates and pipeline tariffs disputes. But, a strong distribution payout rate, distribution increases, and strong earnings make the company very attractive at its current price.

These companies are all priced attractive based on both 2013 growth prospects, valuation, and dividend yield. This upcoming year could very well get off to a rocky start because of the tough political decisions that must occur. However, this temporary weakness could present a grand opportunity for those who take advantage, and load up on attractive stocks such as the five companies above.

BrianNichols is long STX. The Motley Fool owns shares of Freeport-McMoRan Copper & Gold. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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