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Jeff Reeves
March 31, 2011, 12:01 a.m. EDT
View all Jeff Reeves "º
"¹ Previous Column
How to invest in dangerous places
First Take "º
One way to end Irish crisis "” let banks go bust
By Jeff Reeves
ROCKVILLE, Md. (MarketWatch) "” There's a lot of uncertainty whether the market's 25% run since July is flagging or if the bulls are picking up momentum once more.
But as volume remains fairly weak on Wall Street amid continued geopolitical unrest, government debt fears at home and abroad, and overall economic uncertainty, it's hard even for the most sophisticated trader to tell how things will shake out.
So what's a regular investor to do? Well, if your investment goal is simply to steadily grow (and protect) your retirement savings, now is the time to take a serious look at dividend stocks.
For stock pickers constantly seeking the next Netflix Inc. /quotes/comstock/15*!nflx/quotes/nls/nflx (NFLX 235.81, -2.14, -0.90%) in order to double their cash quickly, getting a few pennies on the dollar in dividends sounds like a waste of time. But many of us aren't trying to turn $10,000 into $100,000 by the end of the year "” to us, a "sleepy" stock that provides 10% annual returns like clockwork is a solid investment, and one we're happy to own.
If this describes your strategy, then high-paying dividend stocks should be a key part of your portfolio. If you can get a stock that returns 7% of your investment via dividends each year, you could beat the market handily even if shares don't pop impressively.
Amy Chua, author of "Battle Hymn of the Tiger Mother," discusses the controversy surrounding her book.
By way of example, here are seven solid dividend stocks to consider for your portfolio. This diverse list covers everything from tobacco and drug companies to telecom and oil, and averages a dividend yield of over 7% per pick.
While Big Pharma is indeed underperforming the market over the past year or so due to fears over expiring patents and generic competition, there is still some long-term potential in the sector's low valuations and big dividends. Take Astra Zeneca /quotes/comstock/13*!azn/quotes/nls/azn (AZN 46.25, -0.33, -0.71%) , trading with a forward P/E of just 7.3, the lowest among pharmaceutical majors. Though AZN dividends are tricky to track, with a big payment in March and a smaller payment in September, based on the last two payouts the yield is a plump 5.5%.
Now that a ban on menthol cigarettes is "unlikely" following an study by the Food and Drug Administration, tobacco giant Lorillard /quotes/comstock/13*!lo/quotes/nls/lo (LO 95.35, -0.44, -0.46%) is cruising near a new 52-week high. But even after a nearly 25% surge in shares over the past two weeks, the company still trades at the lowest forward P/E of its peers, at just 11.7 times future earnings. Add in projected revenue growth of over 13% this year and a profit forecast over 10% above 2010 totals and this tobacco giant is a very safe bet.
More importantly for income investors, this steady growth means the 5.7% dividend yield is safe "” even after two significant increases to the payout since August. Read about eight companies that raised dividend recently on InvestorPlace.com.
On March 28, after the T-Mobile /quotes/comstock/11i!dteg.y (DTEGY 15.42, +0.10, +0.65%) deal was announced, Robert W. Baird upped its rating on AT&T /quotes/comstock/13*!t/quotes/nls/t (T 30.60, -0.11, -0.36%) from "neutral" to "outperform" and boosted its price target from $30 to $34 a share. That gives shares the possibility of a 13% upside above current valuations. Throw in a dividend yield of 5.8% "” the best out of all 30 Dow Jones components "” and you have a compelling case to dial up AT&T. Even if the merger runs into a snag, there's no denying that both T-Mobile and the struggling Sprint Nextel Corp. /quotes/comstock/13*!s/quotes/nls/s (S 4.63, +0.07, +1.54%) will never pose a serious threat to this telecom stock.
Missing in the 88 pages the Central Bank of Ireland has produced in determining that the Irish banking system is undercapitalized by some $34 billion is a different way to end the euro-zone nation's financial crisis, says Steve Goldstein.
1:24 p.m. Today1:24 p.m. March 31, 2011
"Gold ends the first quarter at a record high of $1,439.90 an ounce http://on.mktw.net/dJChPY" 1:10 p.m. EDT, March 31, 2011 from MarketWatch
"Microsoft blasts #Google joins EU probe http://bit.ly/hTZeLs" 12:50 p.m. EDT, March 31, 2011 from MarketWatch
"#Zipcar sets terms, price range for #IPO http://bit.ly/eE6vFC" 12:26 p.m. EDT, March 31, 2011 from MarketWatch
"Do you live in the #SF Bay Area? We are hosting a free 'Investing Insights' event on April 5, 6pm at Clift Hotel. http://on.fb.me/flYoy3" 11:53 a.m. EDT, March 31, 2011 from MarketWatch
"Stress tests show four Irish banks need 24 billion euros in new capital http://on.mktw.net/iby4OW" 10:57 a.m. EDT, March 31, 2011 from MarketWatch
Tech Tales
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On Personal Finance
Don't neglect your retirement fund
Strength in Numbers
Seven dividend stocks averaging 7% yields
On Retirement
Five retirement-plan tax mistakes to avoid
On the Markets
The first quarter, by the numbers
Money and Power
On inflation, don't believe your eyes
Home Economics
How a tsunami lowered your mortgage rate
Media Web
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