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Baker's Dozen: Dividends and Value

05/26/2014 8:00 am EST


John Buckingham

Editor, The Prudent Speculator

No one has a crystal ball; in the short run, it is anybody's guess where the equity markets are headed, explains John Buckingham, value investor and editor of The Prudent Speculator.

In the long run, however, stock prices are virtually certain to be higher as the global economy grows and corporate profits march inexorably higher.

The key for investors—from where we sit—is to remember that the markets often do a fine job of transferring money from the active to the patient, so we are generally standing pat during earnings season—remaining vigilant for overreactions.

Though we have just entered the seasonally less favorable time of the year (May-October), we still think that those who share our long-term time horizon should be optimistic about the US equity markets. Our rationale includes:

1. Valuations are reasonable for the stocks in our portfolios.

2. Dividend payouts are on the rise; 30 of the 100, or so, companies that we own across our portfolios have already boosted their dividends, so far, in 2014.

3. The US and global economies are muddling along; despite awful domestic numbers in Q1, the current quarter looks likely to generate much stronger growth.

4. Interest rates are still microscopic. It’s hard to get excited about a 1.7% 5-year US Treasury yield.

5. The Fed is still very much accommodative; tapering is not tightening.

6. Investor sentiment is far from euphoric.

In terms of individual sectors and stocks that we like, we always advocate broad portfolio diversification, so we generally have exposure to all ten of the S&P Sectors as we own 60 to 90 stocks in our accounts.

That said, we put together a bakers dozen of dividend-paying favorites that are of particular interest today:

Apple (AAPL)—yielding 2.2%

Amgen (AMGN)—yielding 2.2%

Baxter Int’l (BAX)—yielding 2.7%

BioMed Realty Trust (BMR)—yielding 4.8%

Canadian Imperial Bank (CM)—yielding 4.4%

Ensco (ESV)—yielding 5.9%

Freeport-McMoRan (FCX)—yielding 3.6%

General Electric (GE)—yielding 3.3%

Int’l Game Technology (IGT)—yielding 3.5%

Staples (SPLS)—yielding 3.8%

Symantec (SYMC)—yielding 3.0%

Travelers Cos. (TRV)—yielding 2.4%

Wal-Mart Stores (WMT)—yielding 2.4%

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