Bluest of the Blue Chips

10/07/2016 10:00 am EST

Focus: STRATEGIES

Jim Powell

Principal Analyst, Global Changes & Opportunities

Rather than get caught up in market noise, Jim Powell firmly believes that path to success is based on long-term investing; he's particularly fond of high quality stocks, firms with long histories of financial stability, dividends and growth. Here's a trio of favorites, each of which has raised dividends for over 50 consecutive years.

Steve Halpern:  Joining us today is Jim Powell, one of the advisory industries leading experts on long-term investing and editor of the top rated Global Changes & Opportunities Report.  How are you doing today, Jim?  

Jim Powell:  Fine, Steve and how are you?  

Steve Halpern:  Very good.  Thank you so much for taking the time.  Now today we're going to talk about what you refer to as the bluest of the blue chips or what's called the dividend aristocrats.  Could you explain what those are?  

Jim Powell:  The dividend aristocrats is a list maintained by S&P of companies that have 25 years of consecutive dividend payouts, which is just an incredibly record and they increase their payouts on a regular basis.

I think that growth stock investors who are looking to the long-term should really look to the dividend aristocrats, especially if the market has a problem and gives them the stocks at a lower price.  

Steve Halpern:  Now when you look at the dividend aristocrats, you even took a more particular approach by focusing on those that have increased their payouts not just for 25 years but for 50 years and one of those stocks that you find attractive is Johnson & Johnson (JNJ).  What's the attraction here?

Jim Powell:  It's one of the premier companies in the world in my opinion.  It's just superb for personal long-term accounts, IRAs, children trusts, family trusts of all sorts.  

It's a worldwide company that's familiar to nearly everyone.  They make Listerine, Band-Aids, Tylenol, and many other brands and products that are used by millions of people worldwide.

And one of the attractions of Johnson & Johnson is we have so many newly affluent people in developing countries, in Asia, and they can afford a better life and they are purchasing more of these kinds of products.  I think Johnson & Johnson is an excellent choice.  

Steve Halpern:  Now you also point to 3M Company (MMM).  What do you like about this situation?

Jim Powell:  Well 3M is the master of what I refer to as practical technology.  They make post-its and various kinds of tapes and adhesives and sealants and filters.  Most of what they make is not super high tech, so it doesn't get replaced by the marketplace in just a few years like let's say smart phones do.  

People have been using most of 3M's products for decades and will probably continue to do so.  It's just an excellent company.  It's familiar to everyone in name-wise but most people don't pay much attention to it as an investment and they should.  It's not - most of its products are not particularly exciting but its long-term potential is.  

Steve Halpern:  It also has a long history of paying dividends, correct?  

Jim Powell:  Oh, yes, definitely.

Steve Halpern:  Now among the dividend aristocrats you also highlight Coca-Cola (KO).  Could you share your thoughts here?  

Jim Powell:  Yes.  Coca-Cola is much more than Coca-Cola though they have several types of cokes as I'm sure you know.  They also make Sprite and Fanta but they've also branched off into more natural products that a large segment of the population likes as opposed to your traditional sodas.

They have Minute Maid and Powerade and several specialty waters which is a really hot field right now.  Dasani is one of them and the mark ups on those products are very high.  

Coke is found around the world.  I like to tell the interesting comment of the missionary who trucked into a part of remote New Guinea that they thought no one had ever been before and they walked into the village and found a Coca-Cola can, so this company is also everywhere and I think deserve a special place in long-term portfolios.

Steve Halpern:  Now you point out with all three of these stocks as suitable for conservative long-term investors but you also suggest that the best way to buy is very market declines.  Could you expand on this strategy and perhaps touch on your outlook for the market going ahead?  

Jim Powell:  Yes.  These stocks are favorites of pension funds and college and dominants in insurance companies and so forth and you're not going to get a really good price on them unless you have some sort of a market emergency.  When you do, you should move and move quickly.  

Reach for your checkbook.  Because these companies are rarely heavily discounted and when they are, it's just a blessing.  I think that if we have a market emergency in the next few months and I think it's possible.  

I'm not predicting it but I think it's possible given the slow economy and the possibility that the Fed will raise interest rates in December. I just think that you should have your target list ready and your funds ready to pounce and move quickly.  

One thing that I should mention about all of these really high quality companies, you don't have to worry about whether they're going to bounce back.  It's not like a super widget company or some high tech company with products that may be obsolete in a few years.  

All of the companies that are on this list are 100 years old and more and they're going to come back.  If you don't live long enough to see the recovery, you put it in a trust or give it to your children or whatever.  

One thing that you don't have to worry about is losing money if you buy it really cheaply.  I just don't think that the chances of that are very great at all.  
Steve Halpern:  Again, our guest is Jim Powell of Global Changes & Opportunities Report.  It's always fascinating to hear your thoughts.  Thank you so much for your time today.  

Jim Powell:  It's a pleasure, Steven.

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