Top 5 Stocks Must to Sell in May in 2012

You’ve probably heard the adage “sell in May and go away.” It’s a nice little rhyme, and it does have a basis in the market’s seasonal patterns. Over time, the stock market as a whole has typically been weaker from May to October than it has from November through April. Going back to 1950, the Dow is just about flat May to October but up over 7% on average from November to April.
On the other hand, that’s certainly not the pattern every year, and bailing out of stocks altogether for such a long period of time is tricky. For one thing, you have to figure out the right time to get back in. And this year in particular, there’s another historical trend at work that muddies the waters: the Presidential election. Going back to 1950, the S&P 500 has moved higher in the last seven months of Presidential election years 13 out of 15 times, according to Stock Trader’s Almanac.
Also important, first-quarter earnings-reporting season, which lingers into May, has been solid so far, with nearly three-quarters of companies beating expectations. In addition, housing, which was the biggest cause of our economic problems, looks close to bottoming out, European debt contagion risks remain largely contained at the moment, and anemic interest rates are supportive of demand for stocks — many of which pay higher dividend yields than CDs, savings accounts and bonds.
My strategy is simple: I like to make sure I’m properly diversified and that my portfolio is in balance with my desired allocations. I also make sure the stocks I own are the strongest opportunities with specific catalysts in place to drive the stocks higher.
That said, “sell in May” isn’t a bad way to go for stocks you’re not sure about. As an example, let me share a few of the stocks on a list I just put together for subscribers to my GameChangers advisory service.
Many of these stocks have shrinking margins, bleak revenue outlooks, face increased competition and could be affected by a cautious consumer as well. At best, I expect them to be dead money for a long time; at worst, they could drag your portfolio down.

Top 5 Stocks Must to Sell in May in 2012 #1: CMG

Chipotle Mexican Grill (NYSE:CMG) has had a great run — up 200% over the last two years. But the company now faces a number of challenges. One is potential market saturation, which would lead to a decline in its record revenue growth. There’s also a new emphasis among consumers on homemade meals as well as upgraded supermarket takeout food.
In short, Chipotle must deal with labor-cost pressures, unstable commodity/food expenses and customers who are concerned about prices. International growth is Chipotle’s big plan, but it’s not clear yet if its spicier foods will translate as well in international markets as menus of competitors such as McDonald’s (NYSE:MCD) and KFC (NYSE:YUM).

Top 5 Stocks Must to Sell in May in 2012 #2: DNKN

Dunkin Brands Group (NASDAQ:DNKN) has put up some good numbers recently, but I’m leery of several things, including the company’s huge debt load and ownership structure. DNKN is a “controlled company,” with over 80% of its ownership in the hands of three private-equity firms (Bain, Carlyle and Thomas H. Lee), which always raises the concern that private-equity owners will want to “cash out.”
In addition, Dunkin Brands faces a tough challenge in its efforts to do better in the afternoons and evenings and unseat Starbucks, the currently leader at those times of the day. DNKN is also not cheap, trading at more than 25X expected 2012 earnings. I think a more reasonable valuation would be around 16X, which would be closer to $20 a share.

Top 5 Stocks Must to Sell in May in 2012 #3: DTV

DirecTV (NYSE:DTV) is expecting to face rapidly increasing programming costs, in large measure because the company has had to fork over ever-increasing amounts of cash to keep exclusive National Football League content for its NFL Sunday Ticket package.
Not surprisingly, DirecTV has said that customer growth should slow as a result of higher costs, and management recently signaled a shift in focus toward “customer retention” rather than heavy promotions to draw in new subscribers. Equipment subsidies and marketing costs now top $800 for each customer acquired, and it takes about 18 months for DirecTV to get that money back.
In addition, more content is available online, so more people are turning to the Internet for programming. That hurts DTV more than competing cable companies that offer high-speed Internet access along with phone and television service.

Top 5 Stocks Must to Sell in May in 2012 #4: RSH

Radio Shack (NYSE:RSH) is struggling with competition from giants such as Amazon (NASDAQ:AMZN) and Best Buy (NYSE:BBY). The company met analysts’ expectations in its fourth-quarter report, but that came on the heels of four straight earnings misses, and first-quarter results announced April 24 went back to being another miss.
Part of the problem is that a higher percentage of the company’s sales are coming from mobile products, which carry very low margins, and changes at Sprint have also impacted results. In addition, in early March, right as the company was searching for a new lead advertising agency, Executive Vice President and Chief Marketing Officer Lee Applebaum abruptly left the company. I would stay away from the stock until there’s a clearer picture of where the company is going.

Top 5 Stocks Must to Sell in May in 2012 #5: SHLD

Sears Holdings (NASDAQ:SHLD) just keeps reporting lower sales and profits. With its poor customer service and consumer concerns about the quality of its appliances and other onetime A-level items, the retailer is on a downward path.
CEO Eddie Lampert has been scrambling to raise cash and calm investor fears, and he does have a history of igniting investor interest from time to time. To stay afloat with enough cash flow, Sears has been trying to sell or spin off stores. One well-respected Wall Street analyst called the process “a controlled liquidation of its chain,” and I agree. While the move sent SHLD soaring more than 20% and put rumors of bankruptcy to rest,  in the end, Sears looks to be on its way to another cash-flow crunch.
You can’t run a business by selling off assets. Sears needs to address its fundamental problems and find a buyer that can provide synergistic upside. Meanwhile, the company has too big of a struggle ahead at a time of high unemployment, shrinking credit and competitors doing a better job both online and in big-box stores.

Four Dividend Stocks to Invest in 2012

Dividend growth investing is a strategy where investors buy stock in companies which consistently raise distributions. This leads to higher dividend payouts over time, and also leads to capital gains, as the market adjusts stock prices to reflect the higher income generated by the stock.
Dividend growth does not just miraculously appear out of a thin air however. In order to get dividend hikes every year, the company has to generate earnings growth over time.
For example, back in 2001, Chevron (NYSE:CVX) earned $1.85 per share, paid a dividend of $1.325 per share and traded at $44.81 per share. Ten years later, in 2011 the company is earning $13.44 per share, the dividend is $3.09 per share. The stock is trading around very comfortable $100 per share. The company is expected to distribute at least $3.24 per share in 2012. Investors who purchased the stock a decade ago are sitting at handsome capital gains, and are earning 7.20% yield on cost.
In order to generate high returns from dividends and capital gains, investors need to focus on companies which will be able to earn higher amounts in the future.
Corporations that have designated roadmaps to generate higher earnings per share, increase investors odds of receiving higher distributions and enjoying capital gains in the process are a great place to start earning money for your portfolio.
Below, you could find a list of four companies which have outlined their corporate strategies of achieving high earnings per share for the next several years:

Four Dividend Stocks to Invest in 2012 #1 Coca-Cola

Beverage company Coca-Cola (NYSE:KO) engages in the manufacture, marketing, and sale of nonalcoholic beverages worldwide. This dividend king has raised distributions for 50 years in a row.
Coca-Cola’s 2020 Vision Strategy strives for a high single digit annual EPS growth throughout this decade, driven through 5%-6% annual increases in revenues as the company expects 3%-4% yearly increase in sales volumes. The company is focusing more of its attention to still beverages like waters and juices, which stand the chance of delivering strong growth over time.
In addition, growth could come from emerging markets such as China and India, where the average number of servings per capita is much lower than that of the US. The company is pursuing differing strategies to capture the imaginations (and dollars) of consumers in emerging, developing and developed markets.
While the company might be focusing on growth through innovation and productivity initiatives in the developed markets, it might generate growth in emerging markets by heavy investing and maximizing volumes.
In addition, the company is playing on strong long-term demographic trends of continued rise in the global population, increased urbanization as well as the expected rise of the middle class worldwide. Yield: 2.70% (analysis)

Four Dividend Stocks to Invest in 2012 #2 Clorox

Clorox (NYSE:CLX) manufactures and markets consumer and institutional products worldwide. The company operates in four segments: Cleaning, Lifestyle, Household, and International. This dividend champion has consistently raised distributions for 34 years in a row.
In 2007 the company introduced its Centennial Strategy where the company is focused on achieving double-digit annual growth in economic profit. A key driver of the strategy is to accelerate sales by growing existing brands, including expanding into adjacent categories, entering new sales channels and increasing penetration within existing countries.
The company also anticipates using its strong cash flow to pursue growth opportunities and increase shareholder returns.
Basically the company will try to deliver further growth through an ongoing focus on consumer megatrends.
In addition to that the company will be targeting a 2% sales growth through product innovation. The company projects sales growth of 3-5 percent, excluding acquisitions and expansion into new geographies through 2013.
Last but not least Clorox will target margin expansion and maximizing cash flow through implementation a continued robust cost-saving program and maintaining price increases the company has taken. Yield: 3.40% (analysis)

Four Dividend Stocks to Invest in 2012 #3 Kimberly-Clark

Kimberly-Clark (NYSE:KMB), together with its subsidiaries, engages in manufacturing and marketing health care products worldwide. The company operates in four segments: Personal Care, Consumer Tissue, K-C Professional and Other, and Health Care.
This dividend aristocrat has consistently raised dividends for 40 years in a row. As with other consumer products companies, the growth is likely to come from developing and emerging markets, rather than developed markets.

Developed markets could benefit from cost cutting and efficiency profits, which would decrease the total price of doing business. Under the company’s global business plan, announced in 2003, it is looking for annual sales growth in the 3%-5% range, EPS growth in the mid to high single digits and dividend increases in line with earnings growth.  Yield: 3.80% (analysis)

Four Dividend Stocks to Invest in 2012 #4 IBM

IBM (NYSE:IBM) provides information technology (IT) products and services worldwide. The company operates in five segments: Global Technology Services, Global Business Services, Software, Systems and Technology, and Global Financing. This dividend achiever has rasied distributions for 17 years in a row.

IBM has publicly announced its goal to hit $20 in earnings per share by 2015. The company is one of the most consistent repurchasers of stock, having reduced the total shares outstanding by 50% since 1995.
The company expects that one third of the gains would come from revenue growth driven by organic growth and acquisitions. The company is relying on growth markets, its business analytics segment, its smarter planet initiative as well as its cloud and next generation data center businesses to deliver revenue growth.
Almost one third of the growth would come from share buybacks as well. The remainder would come from increased productivity in its core segments, as well as continuing its focus on offering high value to its customers. Yield: 1.70% (analysis)

3 Crash-Proof Dividend Stocks to Buy in 2012

The market is having an off week and has lost ground six of the last eight days. That has some investors wondering if the rally is “too good to be true.”
There’s no doubt we could be in store for some short-term volatility. There’s the “sell in May” seasonality at play that we hear so much about. Earnings season always is a period of uncertainty, where a few bad headlines could sink a sector or send the market running for cover. There also are continued fireworks in Europe, with Spain now the crisis du jour. And let’s not forget the fact that some jobs data at home was less than impressive and has caused some to wonder if the economy is healing fast enough — or still healing at all.
I know it’s hard to do … but if you’re a buy-and-hold investor, you have to just tune this out. There are a host of excellent low-risk dividend stocks that will serve your portfolio well over the next few years, even if they do take a short-term stumble. And if you’re smart, you can use a short-term slide as a buying opportunity.
So what picks should be on your radar right now even if the market could take a spill? Here are three of my favorite crash-proof dividend stocks to consider as long-term plays.

3 Crash-Proof Dividend Stocks to Buy in 2012 General Mills

Here’s an impressive stat for you: General Mills (NYSE:GIS) has paid a dividend for 113 years, never once cutting its payouts in over a century. The current yield is an attractive 3.1%, and the payout ratio — that is, the portion of profits that are dedicated to dividends — is a very sustainable 45%. Historically, most dividend stocks’ payout ratios are around 50%.
The trajectory of earnings and revenue at General Mills is understandably sleepy. After all, this is a packaged foods company and there’s only so much growth in the grocery aisles. However brands like Lucky Charms, Betty Crocker and Hamburger Helper are some of the most powerful names in the business. That means stability — and has resulted in an S&P Quality Ranking of A+, an exclusive rating reserved for only the most reliable and low-risk stocks reviewed by Standard & Poor’s.
But don’t think growth is out of the question. General Mills is building a big international presence that’s paying off. Fiscal third-quarter net sales for General Mills, reported in March, showed that international sales grew 51% year-over-year — 43% of that growth coming from a shrewd 2011 Yoplait acquisition.
In short, the dividend and balance sheet are both bulletproof. So why worry about short-term macro fears with a stock like this?
For those concerned about buying a top, it’s also worth noting that GIS stock has rolled back recently about 5% from its 52-week high in January. That might not sound like much, but the 52-week range for GIS is a very tight band of $34.64 to $41.06 — so buy the minor dip if you can, because this stock is pretty much crash-proof.
Oh, and long-term performance hasn’t exactly been sleepy, either. GIS has a five-year return of 32% vs. about 3% for the Dow Jones Industrial Average. Not bad.
Yes, rising input costs for packaged foods companies is a concern. But long-term investors should see this as an opportunity to build a position in a crash-proof dividend stock in the sector like General Mills.

3 Crash-Proof Dividend Stocks to Buy in 2012 DuPont

E.I. du Pont de Nemours and Company (NYSE:DD) — or just plain old DuPont to most of us — is only the top chemicals producer in the world. It’s not a sexy business, making polymers and adhesive and the like, but it’s certainly a profitable one. It’s also worth noting that DuPont has taken great strides to move beyond nylon — with R&D centers all over the world working on genetic research, biofuels and electronics.
Like General Mills, Dupont offers a 3.1% yield, and its dividend payout ratio is about 45% based on fiscal 2011 earnings. DuPont also has paid dividends for over a century, dating back to 1904. Quite an income play, without a doubt.
On the earnings and sales side, the numbers are growing strongly. Take a look at these figures since the recession and financial crisis:

• Fiscal 2009: $26.1 billion in revenue, $1.92 in earnings per share.
• Fiscal 2010: $31.5 billion in revenue (+20%), $3.28 in EPS (+70%)
• Fiscal 2011: $38.7 billion in revenue (+22%), $3.68 in EPS (+12%)
• Fiscal 2012 Forecasts: $41.4 billion in revenue (+6%), $4.25 in EPS (+15%)

Some of that growth has come on acquisitions, such as the 2011 integration of Denmark food, chemical and biofuel company Danisco. That deal added more than $2 billion in revenue to DuPont. But organic growth also is very much part of the DuPont success story, with consistent improvement in the bottom line as shown above. The company is riding nine straight quarters of year-over-year revenue growth and four straight quarters of EPS growth as it prepares to report earnings Thursday, April 19.
DuPont is up 15% year-to-date in 2012, and seems to be heating up. However, shares remain almost 10% off their 2011 peak. What’s more, DuPont has a forward P/E of under 11 based on fiscal 2013 earnings — and a current P/E of just 14.
Admittedly, long-term performance isn’t much to scream about. The stock has a five-year return of 6% vs. 3% for the Dow — outperforming, but not by much. More troublesome is a 10-year return of just 12% vs. 26% for the benchmark Dow Jones Industrial Average.
However, there is reason to think that the past several years have been an important turning point for DuPont, as it has refocused through divestitures, acquisitions and product development. And if the last few years of big growth can’t be replicated in the years ahead? Well, then investors still can be content with DuPont’s industry dominance and nice dividend — making it an attractive low-risk investment with limited downside.

3 Crash-Proof Dividend Stocks to Buy in 2012 Johnson & Johnson

Many investors might not see any pharma stock as “low-risk” right now, even with a plump dividend yield. However, Johnson & Johnson (NYSE:JNJ) is not your typical pharmaceutical company because of its very strong consumer health business. Band-Aid bandages, Tylenol medications, Neutrogena skin care and Acuvue contact lens products are just a few of the items J&J sells at the grocery store instead of behind the pharmacy counter.
On the dividend front, you’ll be hard pressed to find a company with a better track record of distributions. The company has paid dividends since 1944, but more importantly has raised its dividend annually for 49 years in a row! In the past 10 years, the company has boosted distributions by a 12.4% annual rate. Think about that — as companies from Citigroup (NYSE:C) to General Electric (NYSE:GE) to Ford (NYSE:F) have shadows of their pre-recession dividends, Johnson & Johnson has been upping the ante at more than 12% per year on average.
And don’t think those increases have been from a measly sum to a slightly bigger sum. The annual payout is $2.28 a year with a headline yield of 3.5%. It has a slightly higher dividend payout ratio than these other two picks, of around 64%, but it also is one of the only four blue-chip stocks to get a AAA debt rating from Standard & Poor’s.
But enough about the dividend: Let’s talk about the prospect for growth and stability. The trouble with Johnson & Johnson lately has been serious concerns about product quality — including more than 50 drug and device recalls since 2010 thanks in part to problems at manufacturing facilities. This has been a major distraction and a hit to the company’s reputation.
However, even amid those costly recalls and the tarnish on the J&J brand, the company has managed to post four consecutive quarters of year-over-year revenue growth. And while profits took a hit in fiscal 2011, the company is projecting earnings growth of more than 45% in fiscal 2012!
More interesting to me is the 2011 buyout of Swiss-American medical device maker Synthes for a massive $21.3 billion. Before the deal was announced, JNJ stock was hanging out at around $59 a share. After the deal was announced, the stock spiked 10% in a matter of days.
But continued recall woes have been a distraction, and Wall Street has been focused on changes in the corner office as longtime leader William Weldon will hand the reins over to a former Army Ranger. JNJ is now about 7% off its 52-high attained last summer, and is in the red year-to-date in 2012.
Calling JNJ a turnaround play is a bit of an overstatement, since this company never was at risk of going anywhere. But it’s safe to say that now is a good buying opportunity as the company looks to refocus and win back Wall Street.
And if it doesn’t? Well, the bad news is baked in and the Synthes acquisition is going to naturally inflate numbers in the next few quarters. Look for proof of that when JNJ reports on Tuesday, April 17.