At the end of each month I do an evaluation to determine which dividend stocks I will purchase in the following month. There is always a warm feeling of joy that comes over me when when I buy one of my "favorite" dividend growth stocks. These are stocks that have earned a special place in my heart as a result of performing well over the decades and they are generally considered among the best managed companies in the world. Here are the six stocks that make me smile when it is time to buy...
Abbott Laboratiores (ABT) unlike many big pharmaceutical companies ABT is highly diversified. Its products include pharmaceuticals, medical devices, nutritional products and an emerging vascular group. This diversity provides ABT with a very wide customer base mitigating the company's dependence on the pharmaceutical pipeline. The company has increased its dividend for 38 consecutive years, with a 10% increase last February. The company ended 2009 with $9.9 billion dollars of cash on its balance sheet and $3.9 billion at the end of Q3/2010, both more than enough to cover its annual $2.5 billion (TTM) dividend. ABT is a cash machine generating $7.3 billion dollars of free cash flow over the last 12 months. At 48%, its debt to total capital is slightly higher than the 45% I look for, but with the company's ability to generate cash, this does not cause me concern. ABT is currently yielding 3.5%.
Johnson & Johnson (JNJ) is another well diversified health care company. The company is the world's second largest manufacturer of health care products holding a significant shares in the consumer and pharmaceutical markets. In addition, JNJ is the world's largest developer and manufacturer of medical treatment and diagnostic devices. Near-term results have been affected by patent losses on Risperdal and Topamax. The company ended 2009 with over $19 billion dollars of cash on the balance sheet - nearly $5 billion more than its $14.5 total debt. Generating over $15 billion of free cash flow over the last 12 months, JNJ is a cash generating machine. JNJ has increased its dividend for 48 years and its stock is currently yielding 3.4%.
Coca-Cola Company (KO) is the world's largest manufacturer, distributor, and marketer of nonalcoholic beverages concentrates and syrups with over 400 brands. In addition, the company also sells a variety of non-carbonated drinks such as water, juices, and teas. Its core brands include household names such as Coca-Cola, Sprite, Dasani, Powerade and Minute Maid. An increased consumer preference for healthier drinks in its large North American market has resulted in slowing growth rates for sales of carbonated soft drinks. However, with almost three fourths of the company's revenues generated outside of the United States and its unparalleled brand of the Coca-Cola trademark, KO will continue to be a dominate player in the world market. KO ended 2009 with $12.9 billion of debt and $9.6 billion of cash on its balance sheet. In the last 12 months it generated over $7 billion in free cash flow, more than enough to cover its $4.0 billion dividend. KO has increased its dividend for 48 years and its stock is currently yielding 2.8%.
McDonald's Corporation (MCD) is the largest fast-food restaurant company in the world, with about 32,500 restaurants in 117 countries. It generates income through company-owned restaurants, franchise royalties and licensing pacts. Its unrivaled scale advantages, strong brand and international growth opportunities more than offset challenges from food costs, competitive discounting, and exchange rate volatility. At the end of 2009, MCD had $2.5 billion of cash and $11.4 billion on its balance sheet. In the last twelve months the company generated over $4 billion dollars of free cash flow and paid out nearly $2.4 billion dollars in dividends. MCD has increased its dividend for 34 years and its stock is currently yielding 3.1%.
Procter & Gamble Co. (PG) is the world's largest producer of household and personal products by revenue, with its products reaching 4 billion people worldwide in more than 180 countries. The company's size provides tremendous benefits in terms of distribution, brand reach and scale with suppliers. PG's major competitors include The Clorox Company (CLX), Colgate-Palmolive Company (CL), Energizer Holdings (ENR) and Kimberly-Clark (KMB). PG ended its fiscal year on June 30, 2010 with $29.8 billion in debt and $2.9 billion in cash. Over the last twelve months the company generated $10.9 billion of free cash flow. PG has increased its dividend for an astonishing 54 years and its stock is currently yielding 3.0%.
Wal-Mart Stores Inc. (WMT) is the world's largest retailer and grocery chain by sales. The firm is divided into three segments: Wal-Mart U.S. (63% of revenue, 3,700 stores), international (24%, 4,100), and Sam's Club (12%, 600). As a result of its size and buying power, Wal-Mart can buy its products at rock-bottom prices, exchanging high purchase volumes for low cost while passing the savings onto its customers. Many suppliers give in to Wal-Mart's pressure because they depend on the discount retailer for a majority of their sales. International expansion should continue to fuel WMT's growth. With $37.8 billion of debt and $7.9 billion of cash on its January 2010 year end balance sheet, the company is well-positioned for future growth. Generating $14.4 billion dollars of free cash flow, WMT's $4.3 billion dividend is covered more than three times over. WMT has increased its dividend for 36 years and its stock is currently yielding 2.2%.
We should never never fall in love with a stock, for one day you may have to send it packing. However, there is nothing wrong with admiring the long-term execution of well-run companies, and enjoying the fruits of their labor.
Full Disclosure: Long ABT, JNJ, KO, MCD, PG, WMT. See a list of all my income holdings here.
- Dividend Investing in a Bear Market
- Three Dividend Stocks With A Perfect Risk Score
- Searching the World For The Best Dividend Stocks
- Charlie Munger's 10 Rules for Investment Success
- Who is David Dodd and Why Should We Listen to Him
Tags: [ABT] [JNJ] [KO] [MCD] [PG] [WMT]
Popular Posts - Last 7 days
In an utopian world, the perfect dividend stock would be one that is both high-yield and provide a high dividend growth rate. Its share pri...
Linked here is a detailed quantitative analysis of Apple Inc. (AAPL). Below are some highlights from the above linked analysis: Company D...
As mentioned in previous articles, I love inspirational (and other) quotes . I see quotes as a portal to someone’s inner self. They reveal m...
Linked here is a detailed quantitative analysis of The Clorox Company (CLX). Below are some highlights from the above linked analysis: Co...
Dividend sustainability is paramount for the high-yield investor. Having a stock cut its dividend could potentially crush their income. A hi...
Each weekend I highlight any notable articles that I came across over the past week. Though I may not always agree with each of the articles...
I couldn't begin to estimate how many different stocks are traded around the world on the various exchanges. Like everything else, there...
Charlie Munger, Warren Buffett's friend and partner, is quite an investor in his own right. Munger is vice chairman of Berkshire Hathawa...
Presented below are are my Dividend Growth Stocks portfolio holdings. This is not a recommendation to buy these securities. I have classifi...
Linked here is a detailed quantitative analysis of Microsoft Corporation (MSFT). Below are some highlights from the above linked analysis: ...