As the holidays carry us out of 2011, these three picks are likely to take off regardless of what happens in the greater market, notes Chloe Lutts of Cabot Wealth Advisory.

I’ve been discussing the overall market a lot lately, so today I think we’ll ignore it, and focus on stocks that ignore it too (more or less).

Below are three recommendations from the latest Dick Davis Dividend Digest. Each one of these three stocks is a conservative dividend payer with relatively low correlation to larger market moves. Sounds pretty good right about now, doesn’t it?

Macquarie Infrastructure Company (MIC)
MIC is one of the few stocks that has managed to stay above its 50-day moving average lately, and the strength has not gone unnoticed: it was recommended by two analysts in the latest Dividend Digest. The first was George Southerland, editor of Special Investment Situations, who wrote on October 25:

Macquarie Infrastructure Co. owns and operates a handful of infrastructure assets consisting of relatively basic services where cash flows are predictable.

The flagship asset is a 50% equity interest in NJ-based International-Matex Tank Terminals, or IMTT, that operates a bulk liquid storage terminal business that stores petroleum products and an array of chemicals. Capacity is over 43 million barrels, and the business isn’t particularly sensitive to the economy since storage contracts last from three to five years.

IMTT enjoys a distinct competitive advantage as one of its main facilities (Bayonne) is located near New York Harbor, and can load and unload ships quickly due to the depth of the water in front of its docks.

A kicker here involves the dividend, currently at 20 cents per quarter for a 3.2% yield. Management is working with its partner in the IMTT investment to distribute excess capital that the business is generating. We anticipate an increased distribution probably beginning in the first quarter of 2012, and could see the dividend nearly double within a year.

Note also that a rising payout should prompt capital appreciation from the shares. MIC is a buy up to $26 and becomes particularly interesting on dips below $24.

The second Macquarie recommendation came from Jennifer Dowty, a managing director and portfolio manager at Manulife Asset Management who writes for Investor’s Digest of Canada. On November 18, she wrote:

On November 2, the company reported strong operational third-quarter results, with revenue climbing nearly 18% year-over-year. Five analysts rate Macquarie a "buy." Their average one-year price target is $29.50 a share.

A key catalyst for the company is speculation that management could substantially boost the dividend in early 2012.

The company has been unable to resolve a dispute regarding distributions with the co-owner of International-Matex Tank Terminals. A hearing on the issue is set for January 9 and the company anticipates the process will be completed by the end of March. But if the outcome favors Macquarie and the economy is good, the company is likely to raise the dividend by roughly 70 cents a share.

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White River Capital (RVR)
Our next stock is very small—its market cap is only $78 million—but it is actually hitting new 52-week highs right now. It also pays a 4.5% dividend. On October 14, Eric Dany, editor of Stock Prospector, wrote:

There’s more upside ahead for this subprime auto finance company because they are buying back shares and growing their financing portfolio.

The share repurchase program could remove 6.9% of the outstanding shares, which would boost book value to about $25. The sub-prime auto finance company operates Coastal Credit in 24 states. They acquire the subprime notes through franchised and independent auto dealers and then service the notes.

My earnings estimates are $2.25 in 2011 and $2.50 in 2012. With a P/E ratio of ten, my 12- to 18-month target price is $25 a share…a strong buy.

RVR looks a little over-extended here though, so wait for a pullback before buying in.

Linn Energy (LINE)
Finally, a perennial Dividend Digest favorite, with a 7.6% yield, recommended by Roger Conrad and Elliott Gue in MLP Profits on October 28:

[Linn] has hedged all of its oil output through 2013 and all of its natural-gas production through 2015. The firm has boosted its average daily hydrocarbon output by more than 30% over the past 12 months, leading to a 30% surge in third-quarter cash flow.

These solid operating results enabled Linn Energy to cover its quarterly distribution by a margin of 1.1 to 1. Management expects to cover its full-year distribution 1.18 times. Management also continued to opportunistically lock in favorable pricing with new hedges.

The firm also repurchased 530,000 units at an average price of just $32.76, some 15% below the current price. CEO Mark Ellis projects that Linn Energy’s capital investments will continue to deliver quarter-over-quarter production growth of at least 6%.

Few energy producers are lower-risk plays than Linn Energy LLC. The stock rates a buy up to $40.

LINE can be volatile at times, but the 7%-plus yield is such a draw that most sell-offs are quickly corrected. The current weakness (such as it is) will probably prove to be another such buying opportunity. LINE looks like a good buy right here for the large dividend.

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