5 Solid Income Stocks Ready to Grow
03/09/2012 8:00 am EST
Investors continue to seek out income stocks that have dividend yields like growth stock returns, but it usually means hit or miss results. So why not stick with solid companies with great growth prospects and solid dividends, asks Richard Young of Intelligence Report.
T. Rowe Price Group (TROW)
T. Rowe Price was founded 75 years ago. The company enters 2012 on a strong note, notching record annual average assets under management, annual net revenue, net income, and earnings per share for 2011.
Assets under management rose to $489.5 billion. The company's popular target-date retirement funds accounted for $66.9 billion of T. Rowe's assets under management at year-end.
Running up short-term records is something any company can achieve by taking on enough risk and debt. But at T. Rowe, management focuses on the quality of earnings. T. Rowe Price carries no debt. The company also holds $1.7 billion in cash and mutual fund investments; that's over a tenth of its market capitalization.
But not only is the fundamental case for investing in T. Rowe Price strong, the technical case is strong as well. The stock's 50-day moving average has crossed over its 200-day moving average, and is headed upward. That's a bullish sign.
T. Rowe Price has increased its dividend in each of the last 24 years. Over the last five years, the dividend has been increased at a compound annual growth rate of 16%. Buy T. Rowe Price today.
3M Company (MMM)
This is 3M's 100th year in business and of innovation. 3M uses its research and development teams to churn out new products for its customers.
One of 3M's newest innovations is an ingenious patch that injects immunizations using hundreds of micro-needles. The invention allows injections without intimidating syringes.
3M is adept at building on its own innovations. To create the micro-needle patches, 3M repurposed microreplication technology it had pioneered to enhance the visibility of reflective road signs.
3M's breakout over its 50-day moving average is a strong signal. Buy.
Illinois Tool Works (ITW)
The simple 80/20 business model at Illinois Tool Works generates success. It's called the ITW Toolbox.
The system behind the Toolbox is to focus investment and resources on the 20% of subsidiaries that generate 80% of revenues. Then focus on the 20% of customers that generate 80% of the revenues. If you can keep focused on these main drivers of success, the company will prosper.
The strategy is working. Over the past 25 years, ITW has provided shareholders with a compounded annual return of 15%. The stock's sharp jump above its 200-day moving average is also a bullish sign. Buy.
Sysco Corp. (SYY)
America's largest foodservice company is Sysco, which operates out of 180 locations nationwide. Sysco serves around 400,000 customers including hospitals, schools, restaurants, and hotels.
My relative strength chart for Sysco shows a positive trend developing. Buy.
Plum Creek Timber (PCL)
Prices for lumber are improving after a big drop in early 2011. Plum Creek took advantage of the increased export demand from China last year by increasing its harvest by 40%.
As I have written, when lumber prices fall, timber companies can wait out the hard times with assets (the trees) that keep increasing in value. My price chart for Plum Creek shows a nice breakout around its 200-day moving average. Buy.