Are these the Perfect Dow Stocks to Buy Now?
Ali is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
As the market continues to struggle and find its footing, many investors are scratching their heads wondering what investment strategy to use. I don’t know about you, but I personally invest to find the right balance between income (dividend) and appreciation (a stock price higher than when I bought it). Granted, that’s much easier said than done, but after some extensive research and follow-up analysis, below are a couple stocks that I believe will outperform the market in the long-run.
Healthcare giant Johnson & Johnson (NYSE: JNJ) has continually shown its stability in an up, down, or sideways economy ever since its founding in 1886. This may be most evident this prior quarter when management raised its dividend for the 50th consecutive year and now sits at a very nice 3.6% yield -- considerably greater than the average yield of a S&P 500 stock at 2.0%. That means the company has annually raised its dividend since 1962 through recessions, wars, stock and real estate bubbles exploding, the current depression (at least in my view regardless if the general media euphemistically refers to it as “The Great Recession”) and changes in consumer desires.
With the company's diverse product line including well-known products Neutrogena, Neosporin, Tylenol, Sudafed, and many others, I feel relatively confident that JNJ will continue to perform well and rate it a buy. Add in the fact of the literally billions more potential consumers of JNJ products from the continuing growing middle-class of the BRIC (Brazil, Russia, India, and China) countries, reasonable 74% payout ratio, and one of only four companies left on the planet with the top rated AAA credit rating, and that just makes me all the more confident that JNJ will continue to reward shareholders well.
Consumer behemoth Procter & Gamble (NYSE: PG), like JNJ, is another longstanding company dating back to 1837 in Cincinnati. The company has paid uninterrupted dividends all the way back to 1890, which is simply incredible when one thinks about all that has changed in the world the last 122 years. Of course, history doesn’t guarantee future performance as many investors in former blue-chips Washington Mutual, Lehman Brothers, Bear Stearns, General Motors, etc. can attest to, but PG looks to be different in that management has proven its great ability to adapt to different economic cycles. Moreover, management just raised its dividend approximately 7% earlier in the year and now sits on a very nice 3.5% dividend yield.
With a plethora of products that continue to perform well, including Gilette, Head & Shoulders, Crest, Tide, and Duracell, look for PG to continue to outperform the general market. Moreover, with the same growth prospects that JNJ will enjoy as described above regarding the BRIC countries and a rather low 64% payout ratio, Procter gives me confidence that the company will continue its exemplary dividend track record.
As always, respectful comments and questions are always welcome in the comments section below and please know any viewpoints are simply just the opinion of the blogger. I always strongly recommend every investor to do follow-up research and due diligence for the sake of their financial health.
Prohomes owns shares of The Procter & Gamble Company and Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson. Motley Fool newsletter services recommend Johnson & Johnson 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. If you have questions about this post or the Fool’s blog network, click here for information.