Companies For The Conservative Investor
Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Investors, traders, and all others involved in the stock market are always searching in hopes of finding the next stock(s) that outperform the general indexes and history has shown that it is no easy task. In fact, many studies show that actively managed funds fail to outperform the S&P 500 80% of the time and that is largely due to excessive fees, transaction costs, and failing to deviate from the “herd” as they unfortunately gauge themselves on monthly or quarterly timeframes when us “Fools” have the nice advantage of only having to answer to ourselves. History has also shown that solid, dividend-paying stocks over the long-haul outperform the general market and common sense should show us that makes sense as a company that is strong enough to not only make nice profits, but able to pay its shareholders over the years has a great business model and management is confident it will continue to churn profits. These three stocks below look to combine both benefits of fantastic companies along with sizeable dividend yields that pay us investors as we sit and wait for their value to be realized by the general market.
Networking giant and information technology solutions provider Cisco Systems (NASDAQ: CSCO) has its tentacles everywhere with a revenue base the past twelve months exceeding $46 billion and net income exceeding $8 billion over the same timeframe. The company is definitely not the high-flyer that it was during the 1990s, but the company continues to operationally perform well beating consensus analysts’ estimates in each of the last four quarters. Moreover, analyst expect a healthy 8%+ growth rate per annum over the next five years and within a pristine balance sheet showing approximately $30 billion in net cash, Cisco has a lot of firepower in its arsenal. Perhaps most importantly, the company yields a very nice 2.7% and at just a paltry 23% payout ratio, expect that to continue being raised over the years as management did just two quarters ago an impressive 75%.
Merck (NYSE: MRK) is a giant in the pharmaceutical and medical field with over $47 billion in trailing twelve months revenue and $6.8 billion in net income over the same time period. The company has exceeded consensus analysts’ estimates over the last four quarters which is always beautiful and with the company dropping over 10% recently from its $48 52-week high it looks to have created a nice buying opportunity. Add in the fact that it yields a very nice 4.1% and at a 77% payout ratio and a long history of consistent dividends, including the company just raising it this past quarter, look for it not only to be safe, but possibly be raised and continue to serve as a nice income holding.
Mattel (NASDAQ: MAT) is a juggernaut in the toys and games space owning such well-known brands as Barbie, Hot Wheels (one of this “Fools” favorite toys growing up), and Fisher-Price brands. Churning over $6 billion in revenue this past year and almost $850 million in net income over the same timeframe is nothing to sneeze at. The company has performed well beating consensus analyst estimates in three of the past four quarters while still expected to grow a nice 9% per annum over the next five years. With a tempting 3.4% dividend yield and only 48% payout ratio, look for that to not only be secure, but continue to grow over the long-term as kids continue to enjoy their wonderful products.
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 has no position in any stocks mentioned. The Motley Fool recommends Cisco Systems and Mattel. The Motley Fool owns shares of Mattel. 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!