Why Should We Not Consider These Stocks?
Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
With Bernanke & Co. continuing its repeatedly stated intention of holding down ultra-low interest rates for the foreseeable future, causing checking accounts and most other fixed income investments to yield right near 0%, investors are hard pressed to find any meaningful rate of return to stay ahead of inflation. High-quality, dividend paying stocks seem at this time to be the best option, as two year treasury bonds yield near nothing, while an average S&P 500 stock yields approximately 2.0%. Below are a few well-run, dividend paying companies that investors may want to put on their radar to protect their investment capital and possibly stay ahead of inflation. Again, these are just investment ideas and should only be looked at as a start in your extensive investment research.
Telecommunications giants Verizon (NYSE: VZ) and AT&T (NYSE: T) are both very well-known and high quality companies that benefit from some compelling competitive advantages. Having well over $110 billion in annual revenue allows both of these firms to enjoy economies of scale, while each benefit from having a very strong brand name and over 100 million wireless subscribers.
Perhaps most importantly, management has been very kind in rewarding shareholders through billions in share buybacks and current dividend yields at approximately 5%, well ahead of the average Fortune 500 company. Moreover, the much anticipated Nokia Lumia 920 smartphone debut on Nov. 9 should both bring in more customers while improving margins for both companies, as these have less costly subsidies than the more expensive Apple iPhone. Both of these companies have fallen roughly 10% from their recent highs, while their fundamentals have only improved, so I think these are two solid dividend companies for the long-term income investor to consider adding to their portfolio.
Pharmaceutical giant and Dow component Pfizer (NYSE: PFE) is a juggernaut, with over $62 billion in annual revenue and just under $10 billion in net income this past year. The company has a number of blockbuster drugs (defined as a drug that has at least $1 billion in annual sales), including Celebrex, Lipitor, and Viagra, while branching out to other well-known over the counter products, such as Advil and Centrum dietary supplements to help diversify its revenue base.
The company currently has an enticing 3.6% dividend yield, and has beaten analyst estimates in three of the past four quarters, which is always encouraging. Add in the fact that the company trades at a forward P/E under 11x, while sporting strong operating margins near 30%, and I think Pfizer can continue to serve investors well.
If looking to wisely diversify your investments within pharmaceuticals, fellow healthcare behemoth Eli Lilly (NYSE: LLY) is worth considering. The company sports a very nice 4% dividend yield, while also trading at a reasonable 13x forward P/E. The company also has a diversified revenue base and shareholder-friendly management team committed to rewarding shareholders through share buybacks and dividend increases as well.
Both Pfizer and Eli Lilly should serve long-term income investors well, as these industry-leading companies continue to invest heavily in research and development in order to find the next blockbuster drug, while yielding a great amount to investors as they wait.
I’d like to also say I appreciate you reading my thoughts and reiterate that these are just the views of the blogger and should not serve as a substitute for any professional financial advice or counsel in general. Respectful comments and questions are always welcome below on the comment board.
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