Dividend Companies That Cramer Likes Now
Karin is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
If you follow the markets at all, then it’s pretty much guaranteed that you have heard of Jim Cramer. He has several shows on CNBC, he’s written books, he’s all over the web, and people either love him or hate him.
But whether you love him or hate him, people pay attention to him. And people call in to his show constantly, asking his opinion on this or that stock.
People even pay a lot of money, nearly $350 a year, to get alerts from him when he is getting ready to make a trade for his charitable trust, a portfolio that he manages.
I decided to take a look at his portfolio myself, and examine the dividend stocks that he owns and that he thinks are a good buy at the current price.
Jim ranks companies using a 4-point system. The only two categories that I am interested in are the stocks that he ranks a 1, which means that he would buy them now at their current price, and a 2, which means that he would buy on a pullback in price. Any company ranked a 3 is intended for selling on strength, and anything ranked 4 means he wants to get rid of as soon as he can.
There are currently 6 companies in Jim’s portfolio, and that are in his “1 – Buy Now” category, which yield over 3%. I’m going to look at them from his perspective, to see what he likes about them, and then subject them to my own dividend-portfolio criteria.
The first on the list, in alphabetical order, is Abbott Labs (NYSE: ABT). I have already written about Abbott, and it’s the first company in my new dividend portfolio, so I agree with Jim whole-heartedly.
Abbott makes up 3% of the charitable trust portfolio. Jim says he is looking forward to the January 1 split of Abbott into two separate companies, because he feels that it will allow the market to price the two businesses properly.
Abbott is currently trading at $66 and yields 3.1%.
I found that Abbott was one of the highest-ranked stocks on my own dividend-company ranking system, which factors 7 criteria, including yield, years raising dividends, Dividend Growth Rate, Earnings Growth Rate, PE, payout ratio, and total twelve-month return.
The second company on Jim’s list is Bristol-Myers Squibb (NYSE: BMY), which is trading at $33 and yields 4.3%. It makes up 3.8% of Cramer’s charitable trust portfolio. Jim likes the strong pipeline of drugs in development, and believes that the company will receive FDA approval in March for its heart medication Eliquis.
Unfortunately for my dividend portfolio, Bristol-Myers Squibb has only a two-year history of raising dividends, as the company skipped several payments in the 2009-2010 time period. I require a 10 year minimum for the stocks in my portfolio.
Next is Chevron (NYSE: CVX), which is trading at $108 and yields 3.4%. Chevron makes up 1.7% of Jim’s portfolio. He feels this offers one of the best production growth platforms over the next ten years, and likes the 14% decline in price of late.
For my list, Chevron has a 25-year history of raising dividends, a 3.4% yield, a DGR of 15.0%, a PE of 8.7 and a payout ratio of 29.5%. Where it fails my test is in the estimated earnings growth for the next five years, which is negative.
Emerson Electric (NYSE: EMR) is trading at $51 and yields 3.2%. It makes up 2.8% of Jim’s portfolio, and he cites the diversification of the company, including a hefty 38% of revenue coming from process management. The company gets most of its revenues from the U.S. and Canada, but its Asian business is growing rapidly. Jim feels the company’s profitability will greatly improve once it sells off its network power division.
Emerson has a 56-year history of raising dividends, a good DGR and EGR, a good PE and payout ratio. Where Emerson fails for me is in its twelve-month return, which is only 3%.
General Electric (NYSE: GE) is trading at $21 and yields 3.2%. It makes up 3.7% of Cramer’s portfolio. He feels the company’s renewed focus on its industrial businesses has led to solid growth and looks for more in the future. He also says that GE Capital’s finances are in better condition, and the housing recovery will help there. He is looking for a positive analyst day next week, and is pleased with the dividend increase of 12% announced on Dec. 14, along with the news of the increased share-repurchase program.
GE hasn’t been on my list for my dividend portfolio because of the company’s cut in dividends back in 2009. It will be a number of years before they hit the ten-year mark again.
Procter & Gamble is the last one on Cramer’s “1” list that yields over 3.0%. It is currently trading at $70 and yields 3.2%. It makes up 1.3% of Jim’s charitable trust portfolio, and he added it recently after the company reported solid 3rd Quarter results and displayed continued price weakness.
For me, I like PG’s solid history (56 years), and its estimated 5-year earnings growth (8.3%). However, the Payout ratio is high (73%), the PE is high (22), and most importantly, the DGR is low (3.4%).
So I only agree with Jim Cramer on one of the companies in his portfolio, which is Abbott Labs. Keep in mind, however, that he is buying his companies for their growth prospects, and I am buying mine for their dividend-paying AND their growth prospects. Both are equally important to my portfolio.
I’ll be introducing all ten of the companies that I choose over the next two months.
khern0203 has no positions in the stocks mentioned above. The Motley Fool owns shares of General Electric Company. Motley Fool newsletter services recommend Chevron, Emerson Electric Co., and The Procter & Gamble Company. 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!