Round out Your Portfolio with These Three Large-Cap Dividend Stocks
Damon is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Concerns about the fiscal cliff and a non-extension of the 15% top-rate for dividend taxes should not deter investors to a great degree. High-yielding stocks provide steady income and usually enhance the safety of one’s holdings. Now may be a good time to add one of the following equities to a diversified portfolio.
Abbott Laboratories (NYSE: ABT)
The health care giant yields over 3% and raises its payout significantly each year. Plus, earnings are likely on pace for continued growth. Restructuring initiatives set forth last year have helped to bolster gross margins through lower costs and an improved product mix. Management recently embarked on another plan to reduce its cost base and the impact ought to be evident in 2013 and beyond.
Abbott’s core Proprietary Pharmaceutical unit produces many well-known products for adults and pediatric patients. Revenues have been climbing modestly in that unit. The company also manufactures a line of Established Pharmaceutical Products, or branded generics, as well as Diagnostic offerings. As the maker of Similac baby formula and Ensure nutritional products, it differentiates itself from industry peers. Sales and profits are on the rise in the Nutritional segment, encompassing those items, as Abbott is capturing market share and building its presence internationally.
ABT shares have come down from previous levels, and the current entry point may represent a buying opportunity.
United Technologies (NYSE: UTX)
The Dow Jones Industrial Average component offers a yield just below 3%. It is another company constantly aiming to enhance operating margins. Although UTX has been up against sales slowdowns in its key industrial equipment units, it is benefiting from advances in several aerospace segments. Still, order levels are climbing, auguring well for a bounceback in 2013. The resiliency of its major businesses should be a driver of long-term profit growth, as well.
UTX’s largest subsidiary is Otis, primarily a producer of elevators. It also owns Carrier, the massive HVAC company within its Climate, Controls & Security segment. Its aerospace units consist of engine maker Pratt & Whitney, Hamilton Sundstrand and this year’s acquisition, Goodrich (both aviation system makers that are now part of the UTX Aerospace Systems unit), along with helicopter firm, Sikorsky. Earlier this year, it announced plans to divest certain non-core operations, primarily aerospace-related. The completion of these sales should result in improved profitability, as some of these businesses were incurring losses.
Shares of the conglomerate offer near- and long-term appreciation potential. The company’s long-term debt balance has risen substantially this year. Nevertheless, the company is a relatively safe investment.
Sysco Corp. (NYSE: SYY)
Shares of Sysco yield more than 3% annually and have been attaining new heights in terms of price. The foodservice industry supplier’s sales are slowly gaining ground. Notably, the company is undertaking a “Business Transformation” with the goal of picking up further market share. Project-specific costs, mostly for the roll-out of new software, will continue to rise during 2013. But, the outcome ought to be margin improvements and the subsiding of excess costs. Expected benefits of the plan amount to about $600 million by 2015, with one-quarter of this total realized in fiscal 2013 (ends in June).
Sysco distributes foods and supplies to hospitals, restaurants, schools, hotels, and caterers. Positively, it continues to invest in new and refurbished facilities, another measure that should allow it to outperform competitors. Factors affecting earnings results include economic conditions and product cost inflation. It has passed these costs on to customers effectively for the most part. Initiatives targeting improved productivity and the expansion of product offerings might well support profitability, too.
SYY stock is potentially a good choice for momentum-based accounts, given its recent price rise. Management’s strategy is largely to position the company to meet the demands of customers over an extended period. This is why I like the shares for their long-term potential, too.
Income stocks are primarily for those seeking regular income distributions over time and an above-average margin of safety. Along with capital appreciation, though, they offer decent total returns. These are just a few of the relevant stocks that are worthwhile to consider at this time.