Looking for Yield? Check out These Three Companies
Johan is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Everyone is looking for yield. The reduced yield of safe investments such as treasuries and saving accounts can't even compensate for the current low inflation. Avoiding risk is not an option and investors should start to allocate to high-yield stocks.
Many investors carefully waited out the market uncertainty of recent years, investing primarily in "safe haven" assets that are known more for characteristics related to capital preservation than for capital growth.
Many great companies pay an attractive dividend, so why stay in treasuries or other low-yield assets? High-quality companies with a high yield have historically outperformed the broader stock market in periods of slow growth and low interest rates.
Below you will find three companies that will enhance your portfolio with quality dividends.
PepsiCo (NYSE: PEP) is a leading global food, snack and beverage company, with brands such as Quaker Oats, Tropicana, Gatorade, Frito-Lay and Pepsi.
The company continues to see very good growth in developing and emerging markets, with organic revenue growth of 9% in the fourth quarter and for the full year 2012. Over the past five years, PepsiCo invested heavily in emerging markets to reap the fruits of doing good in the long run.
The datagraphic from Euromonitor shows clearly where the growth could fuel the years to come. The BRIC countries could easily double or triple their market size which would be beneficial for PepsiCo.
PepsiCo's global footprint is well-balanced with great positions in basically every market worldwide. The company has an interesting growth profile in developing markets, because of their investments in these countries. With a dividend of more than 3%, I think the stock is a good choice for a defensive stock portfolio.
Royal Dutch Shell
Royal Dutch Shell (NYSE: RDS-A) (NYSE: RDS-B) is a fully integrated oil & gas company that produces, transports, and refines oil, gas, and petroleum products. There are two shares in issues: "A" and "B" shares. The "A" shares belong to the former Royal Dutch company and trade on the Amsterdam exchange, while the "B" shares are trading as the former Shell Transport and Trading Company Plc in the United Kingdom. The main difference between both shares relates to the taxation of dividends, with the Dutch "A" shares being subject to withholding tax restrictions. For US investors it could be better to buy the B shares, or you will pay a foreign tax on the dividend. If you reinvest dividends via the Scrip Dividend Programme there is no withholding on the A shares, making them the better choice.
CCS earnings in 2012 were $27 billion, and cash flow from operations was $46 billion. Royal Dutch Shell distributed some $11 billion in dividends in 2012, which is the largest dividend in the energy sector, and the dividend is expected to rise again in 2013. Cash flow from operations over the past 4 years, 2009 to 2012, was $143 billion at a $91 average oil price. A year ago the company targeted cash flow from operations to be 30% to 50% higher over the 2012-2015 4-year period in aggregate, and in absolute terms that's $175 billion to $200 billion of cash generation in an $80 or $100 oil price scenario.
The project flow over the last few years was excellent. The company started up 18 new projects since the end of 2009 which delivered $6 billion in cash flow in 2012. The largest new projects, including Pearl Gas-to-Liquids, Qatargas 4, LNG and AOSP, and oil sands in Canada produced over 400,000 barrels per day in the fourth quarter 2012, and Pearl completed its ramp-up, with both GTL trains actually reaching over a 90% utilization rate at the end of the quarter. These projects will ramp up the years to come.
Royal Dutch Shell is a must-have stock with promising projects, and it offers a healthy dividend yield of more than 5%. In my opinion the shares belong to any quality dividend portfolio.
Pfizer (NYSE: PFE) is the largest and richest pharmaceutical enterprise in the world. Pfizer develops and produces medicines and vaccines for a wide range of conditions, including in the areas of immunology and inflammation, oncology, cardiovascular and metabolic diseases, neuroscience and pain. Pfizer's products include Lipitor (used to lower LDL blood cholesterol); Lyrica (for neuropathic pain/fibromyalgia); Diflucan (an oral antifungal medication); Zithromax (an antibiotic); Viagra (erectile dysfunction); and Celebrex/Celebra (an anti-inflammatory drug).
The latest spin off, the public offering of animal health unit Zoetis, has raised roughly $2.2 billion for Pfizer. Pfizer sold a roughly 17% stake in Zoetis. Pfizer indicated that it will use the proceeds of the divestment for future share buybacks.
More spin offs definitely rake in more cash, which in the end will be beneficial for shareholders. With a dividend yield of 3.5% this company isn't Foolish; it just belongs in a quality dividend portfolio.
Don't be afraid to invest in quality stocks that offer you a healthy dividend. Just sit down and relax!
WakeUpInvestor has no direct position in any stocks mentioned. The Motley Fool recommends PepsiCo. The Motley Fool owns shares of PepsiCo. 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!