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3 lesser-known dividend stocks for a rocky summer

May 8, 2014, 6:00 a.m. EDT
Article from http://www.marketwatch.com/

Opinion: They’ve beaten the broader market this year but are still overlooked

It’s been a choppy stock market so far in 2014, particularly for the “risk on” momentum shares that were last year’s leaders.

Popular biotechs like Vertex VRTX +1.96%  are off by double-digits. Tech mainstay Amazon AMZN +1.36%  is down about 30%. And recent cult stocks Twitter TWTR -0.03% and 3D Systems DDD -0.08%   have been cut in half this year.

Of course, it’s not all gloomy. The broader market indexes have slowly plodded about 1% higher in the face of these troubles.

And some stocks have pushed even higher.

What are those picks? Surprisingly, they are some of the sleepiest names on Wall Street — defensive blue-chip dividend payers that were largely overlooked during the market’s roaring run of 2013.

And as the market gets more selective and investors increasingly move “risk off,” these picks could continue to do very well across the rest of 2014.

Here they are:

Ventas VTR -0.94%  — 19% return this year, dividend yield of 4.3%. VTR -0.94%

Longtime readers of my column (hello to all three of you!) will know that one of my favorite long-term investing trends is the demographic shift in America that is taking place. As Baby Boomers age, it will transform many industries, particularly across health care.

A great way to play this trend is via high-yield real estate investment trusts that focus on elder care. A company like Ventas is a perfect example, since it controls some 700 senior-housing facilities, 400 skilled-nursing facilities and 250 medical-office buildings across the U.S.

Of course, this demographics trade hadn’t really borne any fruit across 2011 and 2012 as health-care REITs remained stuck in neutral, but the risk-off environment and a hunger for yield amid falling Treasury interest rates has re-energized interest in stocks like Ventas.

But short-term stock performance aside, the dividend is what should keep you interested in Ventas long term.

Even after the run-up, the stock, VTR, yields 4.3%. The company has increased its distributions 120% in the past 10 years, from 32.5 cents per share in 2004 to 72.5 cents today.

Ventas is also gobbling up smaller competitors, with eight major acquisitions over the past decade that total over $16 billion, in order to ensure future growth. These are also high-quality purchases, with so-called triple-net leases that mean tenants, not Ventas, are obligated to pay for any property-related expenses like taxes, maintenance and insurance.

Given the recent tailwind in a risk-off environment, Ventas could perform well for the rest of the year. And given its long-term dividend potential, investors should have confidence that this REIT is not just a swing trade but a legitimate holding for many years to come.

Johnson & Johnson JNJ +0.41%  — 9% return this year, dividend yield of 2.8%.

Johnson & Johnson is an old favorite among defensive dividend stocks. It’s a health-care play — but also a consumer-staples play, thanks to popular brands including Band-Aid, Tylenol and Splenda.

The health-care angle makes the stock, JNJ, pretty recession-proof, since medical expenses don’t go away even in tough times, and the company’s consumer-brand power gives it stability for the long run.

Many investors have been overlooking Johnson & Johnson after the company struggled from 2010 to 2012 amid quality-control issues and big product recalls. However, since CEO Alex Gorxy took over two years ago, the company has been marching steadily higher. The stock is up almost 60% since Gorsky took over vs. 35% or so for the S&P 500. That includes an impressive gain of 9% this year despite a pretty flat market.

And, long term, J&J has a total return of about 140% including dividends over the past 10 years, thanks to distributions that have increased 145% from 28.5 cents per share each quarter in 2004 to 70 cents today.

While naysayers may point out that Johnson & Johnson could be overvalued after this run, it’s still trading for about 15.5 times future earnings — which is exactly the forward P/E of the broader market right now.

I have confidence that J&J will hang tough even if things get increasingly volatile in 2014. But more importantly, I’d have confidence in buying shares for a long-term, dividend-oriented portfolio right now.

Intel INTC -0.08%  — 2% return this year, dividend yield of 3.4%.

Intel is another stock like Johnson & Johnson that has largely been overlooked for the past few years. But those who haven’t been paying attention for some time may have missed out on the recent strength in this chip maker.

Sure, the mobile revolution is severely limiting the growth potential for Intel, and revenue has been stagnant since 2011. However, despite a continuation of top-line issues in the first quarter, there are signs that Intel is much better off than some naysayers believe.

Intel beat expectations in the first three months of the year, thanks in part to its data-center business and (surprise!) corporate PC sales.

The strong outlook for corporate sales resulted in a number of analyst moves on Intel, including an upgrade to “buy” at Deutsche Bank with a $30 target. Separately, Pacific Crest and Jefferies each reiterated bullish calls with $32 and $35 targets, respectively.

I remain convinced that the poor performance of enterprise tech over the past few years will start to change as businesses begin to invest again. And if that trend proves true, we could see Intel continue to see growth in its data center and PC business in the short term.

Long term, Intel continues to make progress on mobile chip sets and adapting its business to a new environment. Beyond the strategy, there’s the juicy dividend and a strong history of increases. Intel’s dividends have advanced 450% in the past 10 years, from 4 cents quarterly to 22 cents, but are still comfortably below half of projected earnings.

And with $30 billion in cash and investments on the books, and over $20 billion in annual operating cash flow, there’s a reasonable expectation of continued dividend growth going forward.

May 8, 2014, 6:00 a.m. EDT
Article from http://www.marketwatch.com/

Top 20 stable stocks to buy now

By Matt Egan  @mattmegan5 May 1, 2014: 10:02 AM ET
Article from http://money.cnn.com/


Forget April showers. A storm descended on Wall Street in recent weeks, and high-flying momentum stocks like Facebook (FB, Fortune 500) and LinkedIn (LNKD) have been washed out. Cash has been flowing instead into the more comforting arms of stable names such as Walt Disney (DIS, Fortune 500) and Comcast (CCV).

Call it the "safe rotation" on Wall Street: Sexy is out, boring is in.

Investors are hunting for stocks with a track record of churning out consistently good earnings and dividends. So what are those companies?

Sam Stovall, chief investment strategist at Capital IQ, put together a list of 20 undervalued S&P 500 stocks fitting the "boring, but stable" characteristics.

His stable stock list includes NBC owner Comcast (CMCSA, Fortune 500), apparel maker Gap (GPS, Fortune 500), discount retailer Target (TGT, Fortune 500) and energy behemoth Chevron (CVX, Fortune 500).

"When the seas start to get rough, investors will likely prefer those companies that offer a higher quality of earnings and greater stability of price returns," he said.

Stovall started his search by looking at the letter grades S&P gives companies. The grades are based partially on the consistency of their earnings and dividend growth during the last decade.

Interestingly, the 128 companies with "A" grades have underperformed their peers over the past year. S&P said these more stable stocks had an average return of 16.9% over the last 12 months, compared with 21.7% for below average (aka B, B- or C) companies.

But higher returns often come with higher risks. People have become jittery about whether many "B" and "C" grade stocks can really continue to grow.

One of the best ways to get a "gut check" on whether companies are overvalued is to look at the price-to-earnings ratio. Stovall said the average 2014 price-to-earnings ratio of B and C grade companies is 26.6, compared with just 16.9 for above average stocks.

"It would appear natural to us that investors now begin reemphasizing large-cap stocks over the more volatile and expensive small-cap issues," he said.

To whittle down the list of stocks that could stand to benefit from this safe rotation, Stovall looked only at S&P 500 stocks with both a high letter grade and a rating of "buy" or "strong buy" from S&P Capital IQ.

That leaves a broad list of 20 stocks from six sectors, including seven from the consumer discretionary sector: cable giant Comcast, media conglomerate Disney (DIS, Fortune 500)apparel maker Gap, (GPS, Fortune 500) toy company Mattel (MAT, Fortune 500), retailer Ross Stores (ROST, Fortune 500), discount retailer Target (TGT, Fortune 500), and Nautica owner V. F. Corporation. (VFC, Fortune 500)

These names could benefit from resilient consumer spending. Consider that the latest data show personal spending jumped 0.9% in March, the fastest pace since August 2009.

There's also seven health care stocks that fit the criteria: AmerisourceBergen (ABC, Fortune 500), C.R. Bard (BCR), Baxter International (BAX, Fortune 500), McKesson (MCK, Fortune 500), Mylan (MYL, Fortune 500), Quest Diagnostics (DGX, Fortune 500) and Stryker (SYK, Fortune 500). The health-care sector has been boosted in recent weeks by a flurry of M&A, with deal activity in this group soaring to the fastest pace on record, according to Dealogic.

S&P's list of stable stocks is rounded out by energy behemoth Chevron, money manager T. Rowe Price (TROW), blue-chip insurer Travelers (TRV, Fortune 500), railroad company Norfolk Southern (NSC, Fortune 500), diversified manufacturer United Technologies (UTX, Fortune 500) and chip maker Qualcomm (QCOM, Fortune 500).

Related: Wall Street is addicted to a new drug: M&A health care deals

To be sure, there's no guarantee the flow of funds out of momentum names will continue.

The rotation out of momentum stocks began in early March, hammering previously red-hot Internet and biotech stocks. The carnage has left Facebook (FB, Fortune 500), Twitter (TWTR), Gilead Sciences (GILD, Fortune 500) and Tesla (TSLA) all down more than 10% from the end of February, while Netflix (NFLX) has tumbled over 20%, and cybersecurity company FireEye (FEYE) has plunged close to 30%.

Related: Twitter stock tanks. Down more than 10% in a day

"It's hard to tell what exactly is motivating this move, although it could be some form of risk aversion," said Kristina Hooper, U.S. investment strategist at Allianz Global Investors. She points to the geopolitical trouble in Ukraine and concerns about the true value of some social media companies as possible catalysts.

"We think that rotation into value may be short-lived," said Hooper, noting it's historically unusual to see such a move at this stage of an economic expansion, not to mention that many average Joe investors often pull out of stocks at the first signs of trouble.

Still, this is hardly a "usual" stock market, especially given the unprecedented measures by the Federal Reserve to jumpstart the economy and keep it humming.

"This is a very unique market environment. We have to expect the unexpected," said Hooper. To top of page

Matt Egan  @mattmegan5 May 1, 2014: 10:02 AM ET
Article from http://money.cnn.com/