Are These 3 Dow Stocks Still Ready To Head Higher?
Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Investors have been left frustrated in these unstable times trying to find the best balance possible of security and growth. Obviously, bonds, savings accounts, and/or certificates of deposits don’t look like a nice options when we see that they give us a negative real rate of return. Commodities continue to be excessively volatile as well. However, investing in diversified companies, such as these three below, should provide returns that outperform the market in the long-run.
Is Procter & Gamble (NYSE: PG) a buy?
Consumer products giant Procter & Gamble has been around since 1837. Since that time it has grown into one of the world’s largest corporations, with annual revenues well in excess of $83 billion and a market capitalization over $200 billion. The company is sitting at a new high, but still looks like a fair price to pick up some shares, as I describe below.
The company has done really well operationally, exceeding consensus analysts’ estimates in each of the last four quarters. Moreover, those analysts expect a healthy 8% per annum growth over the next five years. When we factor in their great return on equity in excess of 17.5% and operating margins at approximately 20%, Procter looks enticing. Add in its consistently growing 3% dividend yield and world-class brand name, and that for me makes it a buy even at these levels.
Is there any juice left in Johnson & Johnson (NYSE: JNJ)?
Healthcare giant Johnson & Johnson is a well-respected company with very well-known products such as Listerine, Band-Aids, Neosporin, and of course its name-sake products. The company is simply a juggernaut, with over $62 billion in annual revenue and a market capitalization exceeding $210 billion. In addition, the company is sitting at a new high. That leads us to ask if J&J is still worthy of a buy?
I believe this rock solid company is a good buy for a long-term, income oriented investor. This Dow component has exceeded consensus analysts’ estimates in each of the last four quarters. Moreover, the company trades at a relatively cheap 13.5x forward P/E. Having returns on equity over 17% and operating margins at 26% are definitely tempting. Add in perhaps most importantly its consistently growing 3.2% dividend, and that makes me a buyer.
Are there gains still to be made with General Electric (NYSE: GE)?
Massive conglomerate General Electric has its presence in everything from making water generators to financing products to building medical diagnostic equipment. The stock is sitting at a new 52-week high, and despite that run it still looks cheap.
Trading at a 12.5x forward P/E is definitely a reasonable price. Moreover, exceeding consensus estimates in three of the last four quarters is always encouraging. The company has a massive amount of free-cash-flow exceeding $20 billion annually, and that has allowed the company to wisely reward shareholders with buybacks and dividends. In fact, the company has raised its dividend five times in just three and a half years and now yields a very nice 3.3%. I think GE is still a buy for the long-term income investor.
The Foolish Conclusion:
As intelligent “Fools” we are always on the hunt for companies that offer great value. I believe these three companies listed above offer that, while also paying us a nice dividend as the companies continue to thrive.
Wiseinvestors owns shares of Procter & Gamble. The Motley Fool recommends Johnson & Johnson and Procter & Gamble. The Motley Fool owns shares of General Electric Company and Johnson & Johnson. 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!