Today the market has been up and sideways basically, perhaps a little more defensive this afternoon,...
Four Stocks for Safety
07/23/2015 9:00 am EST
Storms are brewing in the global economy and the six-year US bull market is in jeopardy. Take refuge in these four stocks to protect your wealth if the market turns south, cautions Marshall Hargrave in Daily Profit.
There’s plenty to worry about in the investing scene and rising global uncertainty should raise some red flags.
But there’s still safety to be found. Notably, among high and stable dividend payers. It pays to focus on those with a history of dividend payments.
Specifically, if things do start to go downhill in a hurry, you’ll need a company that can maintain its payout. So, here are the top four flight to safety stocks.
AT&T pays a hefty 5.4% dividend yield and has 30 years of paying dividends under its belt.
The reach of AT&T across individual and business customers is impressive. But the real value of AT&T is its network, which would take a lot of capital to replicate.
Then there is the pending DirecTV acquisition, which will make AT&T a wireless and TV giant. There will be a lot of cross-selling opportunities with this deal.
And AT&T is already making a move to tap into the faster growing markets, with an entry into Latin America and the purchase of two wireless companies in Mexico.
American Electric Power (AEP)
American Electric’s business isn’t sexy, operating as a utility, but the dividend is robust and stable, currently yielding 3.8%. It’s paid a dividend for 45 years now.
It does have more upside than your typical utility, however. The company is doing a strategic review and could divest unregulated businesses to keep any volatility related to commodity pricing nonexistent.
JPMorgan Chase (JPM)
JPMorgan pays a 2.7% dividend yield—which is one of the best in the entire banking industry—and has been paying a dividend for 31 years now.
It also doesn’t hurt when you have valuation support. With JPMorgan, the stock is trading at just 1.1x book value and around 10x next year’s earnings estimates.
JPMorgan is an international operator, but historically has done a notable job of managing credit losses and it could take market share from troubled European banks as the Greece shenanigans create an opportunity.
This is a key pharma play, with a 3.3% dividend yield and 42 years of paying a dividend. It also happens to be the largest pharma company in the world, with a market cap of over $200 billion.
With such a large company comes inherent diversification across products. But it’s still not too big to grow, with an acquisition of Hospira pending, which will boost its presence in generic injectables.
The other, rather interesting, angle to the Hospira purchase is that it further beefs up Pfizer’s established pharma unit, which could mean the drug giant is prepping for a split in the near future.
In the end, when I talk stable dividends, I’m talking the biggest and best players in a given industry. The big four dividends above are just that.
Sluggish growth, toppy markets, accelerated stock buybacks, increased M&A and IPO activity…these are all classic signs of a market about to flatten or worse, quickly move into correction territory. They signal it’s time to get a good portion of your money to safe stocks.
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