A Few Dividend Picks
After the last few posts on dividend paying stocks and their benefits. I thought I’d share a few of the dividend stocks which are on my radar. I’ve researched these these stocks to varying degrees so please don’t take this list as a buy list but more as a reference for your own stock research. Despite this disclaimer, I have high hopes for this list as a whole these stocks and I feel that, taken as an entire dividend-driven portfolio, it represents a pretty comfortable complement of industry diversification and a balance of down trodden and high flying stocks.
Bank of America (BAC)
Industry: Financials / Dividend: 5.12%
Oh no! A scary financial stock! Well, with a dividend better than most high-yield savings accounts and valuation so low you have to scratch your head, this one seems to me to be a no brainer. The stock was on a downtrend prior to the whole subprime/volatility/August mess and actually didn’t feel the recent trouble at all. It’s performed quite well since with a pullback this week that has brought the dividend back to the 5% range. Get in now, before its too late. Recent company performance and expanding margins seem to pointing this stock “northeast” on its chart. It’s only a matter of time before it starts to move (if you believe it hasn’t already).
Vector Group Ltd. (VGR)
Industry: Cigarettes / Dividend: 6.97%
Another one of my favorites which I’ve talked about recently. It’s also a Jim Cramer favorite (whom I hate but have to agree with him on this one). Vector Group sells premium cigarettes which hits on two of my favorite defensive targets. First, products which target a captive market. Second, premium products which target the high-end consumers likely the least impacted by a softening economy. Vector remains a small enough company that it won’t get bullied too much by the big tobacco manufacturers, but posts seriously impressive ROE, Operating Margins, and Revenue growth. All the while, it returns 7% to its shareholders, a rarity for such a growth story. That being said, its current payout ratio is over 90% and you have to wonder whether or not the dividend is sustainable. Free cash flow and liquidity ratios are very strong so odds are you’re looking at a winner. The stock is in the midst of a continued uptrend though it seems to have faltered of late. That being said, the trend line, to me, looks much like its 50-day MA and it has no been broken.
Autoliv (ALV)
Industry: Auto parts / Dividend: 2.74%
Technicals look rather good here and I am rather confident that the stock seems to have bottomed. Does that mean the current upswing won’t lose steam and pull back a bit? No. But, MACD and RSI show room some room for continued appreciation and the stock is only now beginning to cross its psychologically significant moving averages. The company itself is in the midst of a restructuring and consolidation plan which involves shifting production out of the United States to lower cost countries. Price ratios remain attractive and once cost saving measures hit the bottom line, this stock could see a serious bump. The company also has very good recent history of dividend friendly policies most recently increasing its payment for this year 5% in July.
Abbott Labs (ABT)
Industry: Drug Manufacturers / Dividend: 2.56%
Abbott Labs, as many of the major pharmaceuticals have, has been hit hard in recent months. It’s technicals don’t look great right now, but margins and revenue growth continue to look healthy and earnings growth is especially strong and its free cash flow is through the roof. This all leads to a rather high current P/E but a forward P/E which is not out of line for the industry. I admittedly have more to look into on the company and its prospects, but looking just at the numbers Abbott seems to be a good story. Watch for it to test the its support at a price around 50 as the downtrend does not seem to have bottomed just yet.
For an even sexier dividend in the same industry, Pfizer (PFE) is paying out a 4.73% yield on its stock and is arguably even more downtrodden with some really pretty price ratios. The issues that kept Pfizer off this list stem from questions about the company’s declining revenues, high-profile drugs coming off patent in coming years, and drug pipeline as big pharma seems to be losing ground to biotech as far as breakthrough treatments are concerned.
Masco Crop. (MAS)
Industry: Lumber, Wood Production / Dividend: 3.50%
The company has been hurt by declining home sales and poor housing starts. The good news is that Masco only makes 20% of its revenue through sales to big consumer distributors like Home Depot and it seems to have positioned itself well through acquisitions and international efforts and looks to be weathering the storm. The US housing market may face pressure for several years especially given the recent blow up in the mortgage markets. But, management at Masco has continued to maintain a dividend friendly policy as well as giving the green light to a 50 million share buyback two months ago. The stock is now trading at the bottom of its 52-week range, but the short float out on it is still 7% which could provide a secondary catalyst for appreciation after the stock bottoms and some buyers come out of the woodwork. It’s a difficult timing play as waiting for a breakout likely means missing the subsequent short squeeze, but jumping in too early with no obvious primary catalyst is something that most of us would choose to avoid. In this situation, the luxury of time afforded by a high dividend and a market where no news seems to be good news could benefit those willing to jump in and be patient.
So as to “put my money where my mouth is” and establish some accountability for my stock picks, I’ll create an hypothetical, equally weighted portfolio of $1000 invested in each of these stocks today and report it in the My Portfolios section of this website. We’ll call it the Curious Investments Equity Income Strategy.
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Comments
Altria group is always mentioned when it comes to “safe haven” stock investments. I guess because its so damn big and as its a Dow component. It’s not a bad pick, but within the tobacco segment I do like Vector Group a little better. More importantly, Altria is about to break itself up and I definitely have not followed the details of that deal close enough to be able to recommend it. It does seem like a terrific opportunity, though. And, I will likely be looking into it further.
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[...] (MAS, down 25%, 3.7% dividend at purchase) I discussed my investment thesis on Masco when I first proposed CIEIS and it hasn’t changed. The stock is being punished due to the current slow down, but the [...]
Hello my friend,
thanks for mentioning dividend picks.I think it is up to date in this time period when markets are going up and down. Good dividend companies are good for this.What do you think about Altria Group?
Vlada
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