Timely Ten: Blue-Chip Dividends

07/12/2013 9:45 am EST

Focus: STRATEGIES

Kelley Wright

Managing Editor, Investment Quality Trends

Value investor Kelley Wright of Investment Quality Trends highlights ten undervalued blue chips for growth and income over the next five years.

Our primary purpose is to assist investors in growing their capital and income base from which to generate cash for their current and future needs.

To that end, we believe that shares of high-quality stocks purchased at an historically repetitive area of low-price/high-yield offers the greater potential for downside protection and upside appreciation.

Our Timely Ten list of stocks is not just another “best of, right now” list. Rather, it is our reasoned expectation based on our methodology and experience, that these ten currently undervalued stocks offer the greatest real total-return potential over the next five years.

Do we believe that all 10 will appreciate simultaneously or immediately? Of course not. Our four-plus decades of research and experience, however, leads us to believe that these stocks, purchased at current undervalued levels, are well positioned for both growth of capital and income.

Whether you are building a portfolio from scratch, are partially invested and seeking new positions, or are fully invested and in need of some affirmation and hand holding, The Timely Ten represents our top ten recommendations as of each issue.

The Timely Ten is comprised of stocks that are undervalued based on their historic yield level. They generally have an S&P Dividend & Earnings Quality ranking of A- or better, and show exemplary long-term dividend growth.

These stocks also typically have a P/E ratio of 15 or less, a payout ratio of 50% or less (75% for utilities), long-term debt-to-equity of 50% or less (75% for utilities), and technical characteristics on the daily and weekly charts that suggest the potential for imminent capital appreciation.

Our latest Timely Ten selections are:

CVS Caremark (CVS) – yielding 1.6%
Coca Cola (KO) – yielding 2.8%
Chevron (CVX) – yielding 3.4%
Air Products & Chemicals (APD) – yielding 3.1%
Baxter International (BAX) – yielding 2.8%
Exxon Mobil (XOM) – yielding 2.8%
Wal-Mart Stores (WMT) – yielding 2.5%
Reliance Steel (RS) – yielding 1.8%
Walgreen (WAG) – yielding 2.5%
Norfolk Southern (NSC) – yielding 2.8%

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