The eurozone debt crisisstill is in focus, investors remain jittery and the stock market has given up nearly all of its gains made this year.
That
all adds up to a “risk-off” environment where many investors are
turning to stable stocks with big brands, bulletproof balance sheets and
reliable income generation via quarterly dividends. This is especially
true for retirement investors who are equally concerned with capital
preservation as they are with tapping into a rally — if and when one
ever transpires.
When you are thinking in terms of retirement
decades down the road, dividends can add up in a hurry. Consider this:
If you buy a stock with a 4% dividend, you will double your money in
about 18 years even if the stock goes
nowhere. That’s peace of mind that many long-term investors thirst for right now.
So
if you’re looking for the biggest brands with the biggest-yielding
stocks, here’s a list of the top 10 dividend stocks in the Dow Jones
Industrial Average to help you out:
Top 10 Dow Dividend Stocks to Invest in 2012 #10: DuPont
Current Dividend Yield: 3.5%
Performance So Far in 2012: +8%
E.I. du Pont de Nemours & Company (NYSE:DD),
or simply DuPont, is a chemicals giant made famous by products
including Tyvek house wrap, Teflon non-stick coatings and stretchy Lycra
synthetic fabric.
DuPont isn’t quite as sexy as a Silicon Valley
tech shop but clearly is an innovator with a long history of great
product creation. DD stock lagged the market in 2011 with an 8% decline,
but has topped the Dow’s 3.5% gains considerably with its 8% returns so
far in 2012.
Revenue is up year-over-year for the 10th
consecutive quarter after strong earnings in April, and DuPont’s EPS
have gone from $1.92 for fiscal 2009 to an impressive $3.68 in fiscal
2011 — almost double — and are forecast to jump another 15% in fiscal
2012.
Dividend investors in it for the long term know the staying
power of DuPont. The company has paid dividends for more than 100 years
and is a stable industrial giant that isn’t going anywhere. At the end
of April after DuPont’s earnings, it added another 2 cents to its
quarterly payday, too, proving this industrial company is not just
preserving dividends — but improving them.
Top 10 Dow Dividend Stocks to Invest in 2012 #9: General Electric
Current Dividend Yield: 3.5%
Performance So Far in 2012: +10%
General Electric (NYSE:GE)
might forever be tarnished in the minds of some dividend investors
after slashing its payout by two-thirds during the financial crisis.
While the quarterly dividend remains about half of what it was — at just
17 cents vs. 31 before the market meltdown — the recent history is
worth noting.
Consider that in April 2011, GE paid 14 cents each
quarter. By the summer it was paying 15 cents, and by January 2012 it
was up to 17 cents a quarter. Now we just received news that General
Electric’s finance arm received the green light to share some of its
wealth with shareholders, too. Specifically, regulators signed off on a special dividend from GE Capital along with permission for the group to resume paying regular dividends later this year.
GE admittedly has its troubles. We saw rather lackluster General Electric earnings in February, but a stronger showing in April as GE reported its fiscal first-quarter earnings.
With 40% of its revenue coming from GE Aviation, it’s hard for the
company to break out without big airplane orders or defense contracts.
But
dividend investors should be encouraged by the GE Capital dividend
news. With a current 3.5% yield, this stock is steadily climbing back
into the ranks of Wall Street’s best income stocks. A nice
market-beating gain since Jan. 1 also is a plus.
Top 10 Dow Dividend Stocks to Invest in 2012
#8: JPMorgan Chase
Current Dividend Yield: 3.5%
Performance So Far in 2012: +4%
JPMorgan Chase (NYSE:JPM) has been making a lot of headlines lately, and for all the wrong reasons. May’s disastrous $2 billion JPM trading loss
has resulted in golden-child banker Jamie Dimon receiving a summons to
Capitol Hill to take a whipping from Congress and supporters of the
Volcker Rule.
But the stock still is hanging tough, boasts a great yield and is the largest American bank by assets.
On the dividend side, JPM was granted Federal Reserve permission to raise its dividend in March, even as competitors like
Citigroup (NYSE:C) and
Bank of America (NYSE:BAC)
have failed to improve their payouts beyond a nominal penny per quarter
in dividends. You can bet that Ben Bernanke and others at the Fed
wouldn’t have allowed JPM to boost its payout if it wasn’t sustainable.
And on the profits side, JPM still is tracking earnings growth of over
20% this fiscal year even after the trading loss.
If you’re a long-term investor, you might want to take advantage of the recent turmoil in JPMorgan Chase to get into a nice dividend stock at a decent price.
Top 10 Dow Dividend Stocks to Invest in 2012
#7: Procter & Gamble
Current Dividend Yield: 3.6%
Performance So Far in 2012: -5%
Procter & Gamble (NYSE:PG)
hasn’t been very pleasing to shareholders so far in 2012. Yes, the
yield is nice — but the stock has been slumping, and at the end of
April, P&G earnings showed a disappointing outlook for the rest of the year.
But Procter & Gamble CEO Bob McDonald
is looking overseas to prop up the balance sheet amid rising commodity
costs, frugal U.S. consumers and performance that lags rivals like
Colgate-Palmolive (NYSE:CL).
And let’s face it: Even though the consumer products giant is slightly
down, it is hardly out. P&G is going nowhere thanks to brands like
Gillette, Pampers and Duracell that provide reliable revenue across
rough economic times — and thus reliable dividend payments, too.
Yes,
PG stock hasn’t seen much growth, and that is a concern. But you can’t
get more defensive than consumer staples, so dividend investors wary of a
summer downturn might want to turn to Procter & Gamble if they are
planning on staying fully invested in the stock market right now.
Top 10 Dow Dividend Stocks to Invest in 2012
#6 Chevron
Current Dividend Yield: 3.6%
Performance So Far in 2012: -4%
Worried
about expensive gas? Don’t be. Crude oil has rolled back slightly from
its 2012 high of around $111 a barrel — into the low $80s as of this
writing — and is challenging lows not seen since October of last year.
So it’s no surprise that amid weaker prices and pretty flat demand,
Chevron (NYSE:CVX) hasn’t done well lately. CVX stock actually is in the red in 2012 vs. gains for the broader market. Recent oil stock earnings show that refining continues to be a bit of a drag in the short term for Chevron and other oil majors.
But
on the income side, Chevron has strength that is difficult to overlook.
The company has paid dividends since 1912. It has increased its payouts
twice in the last year, from 72 cents quarterly in March 2011 to 78
cents in June, then up again to 81 cents as of December 2011.
And
while crude oil prices have rolled back, let’s not pretend we’re going
to get back to $50 per barrel anytime soon, with geopolitical unrest in
the Middle East and hungry emerging markets like China and Brazil
increasing energy demand at an impressive clip despite risks of a
broader economic slowdown. If you’re a dividend investor looking for a
low-risk stock with a reliable revenue stream that ensures juicy
payouts, Chevron certainly is worth looking into.
Top 10 Dow Dividend Stocks to Invest in 2012
#5: Johnson & Johnson
Current Dividend Yield: 3.7%
Performance So Far in 2012: Flat
Johnson & Johnson (NYSE:JNJ)
has hit some headwinds in recent years over quality control, calling
into question how well-run the company really is. But with a new Johnson & Johnson CEO at the helm,
some are hoping that change is in the wind at JNJ. Product recalls have
weighed heavily on the company, and consumers and investors alike need
confidence for this health care giant to once again win their support.
One
thing that never has been uncertain, however, is the dividend potential
of Johnson & Johnson. JNJ has raised dividends for 49 years in a
row. During the past decade, the company has managed to boost
distributions by more than 12% per year — all while delivering a
headline yield of about 3.7% right now.
And unlike some big pharma
stocks that pay nice yields, the biggest dividend driver isn’t
prescription drug offerings. While JNJ does offer some vaccines and
medical products, consumer health offerings like Band-Aid and Tylenol
provide its steadiest revenue stream.
Revenue admittedly has been a
bit stagnant at J&J during the past few years; hence, the stock has
seen some underperformance. But if you believe projections, Johnson
& Johnson could see a stunning 48% jump in earnings per share for
fiscal 2012 compared with fiscal 2011. Time will tell if management can
hit those targets. But in the meantime, the dividend is a pretty nice
hedge, even if the stock moves sideways.
Top 10 Dow Dividend Stocks to Invest in 2012
#4: Pfizer
Current Dividend Yield: 3.9%
Performance So Far in 2012: +4%
Pfizer (NYSE:PFE) outperformed the market nicely in 2011 with one of the best returns in the entire Dow Jones
— 23% in gains, to be precise. While performance has cooled a bit and
Pfizer was sitting on a loss earlier this year, the stock has come
roaring back since February as defensive investments like health care
return to favor. It’s now neck-and-neck with the broader Dow Jones
Industrial Average.
Yes, long-term challenges at Pfizer are the
same as the risks that persist across all of Big Pharma — looming patent
expirations, challenges from generic medications and the frantic race
to lock up patients in emerging markets. But the goose still is laying
golden eggs for shareholders in the form of 22-cent quarterly
disbursements, with dividend payments dating back to 1901.
Looking
forward, the company has a decent research pipeline with some
up-and-coming drugs that could rotate in to prop up revenues. Most
importantly for dividend investors, the company has $29 billion in cash
on the books. Even if revenue hits a hiccup across 2012 — as it did in
fiscal 2011 when it slid from $67.8 billion to $67.4 billion — the cash
is there to preserve this juicy dividend.
Top 10 Dow Dividend Stocks to Invest in 2012
#3: Merck
Current Dividend Yield: 4.3%
Performance So Far in 2012: +3%
Merck (NYSE:MRK) is very similar to
Pfizer (NYSE:PFE)
in many ways. It too faces patent expirations. It too is hoping its
pipeline will step up to fill the void. And it too pays a huge dividend.
There
obviously is no breakneck growth in pharmaceuticals, at least on a
share appreciation basis. But the continued roll-in of the $41 billion
Schering-Plough buyout from a few years ago surely will provide new
opportunities for Merck. At the very least, it ensures the company won’t
fade away.
And like its cohort Pfizer, MRK is sitting on a huge
war chest. Some $13.5 billion in cash and $1.4 billion in short-term
investments keeps this pick pretty safe when it comes to writing the
checks.
Dividends have been paid at Merck since 1935, and last
year the payout was increased about 10%, from 38 cents a quarter to 42
cents. You might not find massive share appreciation in this stock, but
you certainly will find stability.
Top 10 Dow Dividend Stocks to Invest in 2012
#2: Verizon
Current Dividend Yield: 4.6%
Performance So Far in 2012: +9%
Verizon (NYSE:VZ)
remains
the leading wireless telecom provider in the U.S. by subscriptions and
gets 50% of its revenue from wireless subscribers. The company also is
one of the top high-speed Internet providers in America via its FiOS
fiber optic network. As the world becomes increasingly wired, it’s more
important than ever for companies like Verizon to be involved with the
operations of businesses and the lives of regular Americans.
This
provides a very stable revenue stream that accounts for huge dividends.
Like many low-risk dividend stocks, this is a double-edged sword because
there might not be any huge growth opportunities for the entrenched
telecom. But strong cash flow generation and the lack of any real
competition from anyone other than
AT&T (NYSE:T) means this telecom stock is a stalwart that’s here to stay.
The telecom giant recently made waves with a decision to kill almost all voice plans and move to a “Share Everything” data model
that will allow users to get up to 10 gadgets wired — including
laptops, tablets and smartphones — on the same plan. The goal is to get
more folks hooked up with more gadgets and using more data (which VZ can
charge more for, of course).
And if this mobile move doesn’t move the stock? Well, you could do worse than a 4.6% annual return via dividends.
Top 10 Dow Dividend Stocks to Invest in 2012
#1: AT&T
Current Dividend Yield: 5%
Performance So Far in 2012: +18%
One of the biggest stories in 2011, as previously mentioned, was that
AT&T (NYSE:T) tried to leapfrog rival
Verizon (NYSE:VZ) in the wireless market via a buyout of T-Mobile. But regulators ran interference, and AT&T abandoned its bid.
Don’t think that means the biggest dividend payer in the Dow Jones
Industrial Average should be cut loose from your portfolio, though. With
a dividend yield of about 5%, this is a heck of an income play.
The
story is the same for AT&T as Verizon, where a strong balance sheet
and its entrenched status are offset by the lack of growth and the
highly regulated nature of the telecom sector (case in point: the
squashed T-Mobile bid). AT&T delivered pretty strong first-quarter earnings, though, so it’s not like this company is completely stagnant.
Admittedly,
these U.S. telecoms aren’t “growthy” and won’t deliver massive share
appreciation. But if you’re looking for a big dividend payer that will
keep throwing off cash for decades, AT&T might be your best bet in
the whole Dow Jones Industrial Average.
