Are These 3 Stocks Worthy Of Your Portfolio?
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 to state their intention of keeping interest rates ultra-low 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 to be the best options, as two year treasury bonds yield right 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 stay ahead of inflation. Again, these are just investment ideas and should only be looked as a start in your extensive investment research.
Diversified healthcare giants and Dow Jones Industrial Average components Johnson & Johnson (NYSE: JNJ) and Pfizer (NYSE: PFE) are worth taking a look at for the more conservative, long-term dividend-loving investor. JNJ has a variety of well-known products, including its namesake brands, Neutrogena, and Neosporin, just to name a few. The company also has a revenue base exceeding $65 billion, allowing it to benefit from great economies of scale. Moreover, the company has been performing operationally well, exceeding consensus analysts’ estimates the past four quarters while continuing to generate over $10 billion in free cash flow. Add in the fact that the company has a stellar balance sheet, making it only one of four companies on Earth with the highly coveted Standard & Poors “AAA” credit rating, not to mention a consistently growing 3.5% dividend yield, and I think the stock should perform relatively well for investors in the future.
Pfizer is an absolute behemoth in the big pharmaceutical arena, with a variety of blockbuster drugs (in the medical world, this means a product that has in excess $1 billion of sales), including such well-known names as Viagra, Lipitor, and Celebrex. The company had over $62 billion in sales this past year, while generating a massive $18 billion in free-cash-flow. This allows the company to pay its very juicy and consistently growing 3.8% dividend, while the over $9 billion is spent on research and development which ensures that future products will be brought to the market soon, replacing the current revenue stream from drugs that will go off patent soon. Pfizer has also met or exceeded consensus analysts’ estimates the past four quarters, and when we add in the great dividend and balance sheet, I think Pfizer is worth putting on your radar.
Personal products giant and Dow component Procter & Gamble (NYSE: PG) is simply a juggernaut, with over $82 billion in revenue the past twelve months and approximately $10 billion in free-cash-flow. This company makes everything from Crest toothpaste to Duracell batteries to Tide laundry detergent, and is a big beneficiary of the global growing middle class predominately in the BRIC (Brazil, Russia, India, and China) countries. As these hundreds of millions of new consumers come onto the market, we can reasonably expect that Procter will be a beneficiary as the company has already exceeded consensus analysts’ estimates the past four quarters. Moreover, with a consistently growing 3.3% dividend yield at just a 61% payout ratio, we can continue to expect that to grow making PG a stock worth possibly owning for an income seeking investor.
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.
Wiseinvestors owns shares of The Procter & Gamble Company. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!