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Low Beta Dividend Stocks for an Uncertain Market

As the markets continue to show uncertainty and a lack of capitulation, investors are looking for a place to hunker down.  The best place at this time is in low beta stocks with dividend yields (defensive stocks) to support the share price.  I had identified 5 stocks that are up in price the last 4 weeks and have a bullish outlook for when the market rallies.  Here are 5 stocks to consider:

Tobacco operator Altria Group (MO) seems to do well in these types of markets.  It is up 4.9% over the last 4 weeks.  It has a low beta of 0.25 with a dividend yield of 4.91%.  MO has an equity summary score of 7.4 out of 10 for a Bullish outlook.

Low cost retailer Wal-Mart (WMT) shines when there is a slow economy.  WMT is up 14% in the last 4 weeks.  It has a beta of 0.33 and a dividend yield of 2.35%.  WMT has an equity summary score of 8.4 out of 10 for a Bullish outlook.

Telecom giant AT&T (T) is a steady as they go in this type of market.  AT&T is up 5.4% in the last 4 weeks.  It has a beta of 0.57 and a dividend yield of 5.03%.  AT&T has an equity summary score of 9.8 out of 10 for a VERY Bullish outlook.

Retailer Target Corp (TGT) has been performing great this year.  TGT is up 5.13% in the last 4 weeks.  It has a beta of 0.58 with a dividend yield of 2.06%. TGT just announced a 20% increase in its dividend.  TGT has an equity summary score of 9.2 out of 10 for a VERY Bullish outlook.

Pharmaceutical giant Bristol-Myers Squibb (BMY) is a solid dividend stock.  BMY is up 3.73% in the past month.  It has a beta of 0.41 with a dividend yield of 3.97%.  BMY has an equity summary score of 9.1 out of 10 for a VERY Bullish outlook.

Best Dividend Stocks with Recent Dividend Increases

As earnings season comes near the end, there are still companies increasing their dividends.  These companies raised their payouts and also have a Bullish outlook based on the equity summary score.

H.J. Heinz Co. (HNZ) scaled back its long-term growth rates slightly as the ketchup-maker plans to invest more into its business amid a challenging global environment.  H.J. Heinz Co. (HNZ) announced that its fiscal fourth-quarter profit fell $175.3 million, or 54 cents, compares to $223.9 million, or 69 cents a share a year ago.  Heinz fourth-quarter sales rose to $3.05 billion, from $2.89 billion a year ago.  HNZ was downgraded by several brokerages including S&P from 5-stars to 4-stars.  Still Heinz raised the annualized common stock dividend by $0.14 to $2.06 per share, an increase of 7.3%.  HNZ has a dividend yield of 3.85%.  HNZ has an equity summary score of 7.8 out of 10 for a Bullish outlook.

Portland General Electric (POR), headquartered in Portland, Ore., is a fully integrated electric utility that serves approximately 825,000 residential, commercial and industrial customers in Oregon.  POR declared a quarterly common stock dividend of 27 cents per share, up from last quarter’s dividend of 26.5 cents per share.  This is the sixth consecutive annual increase since going public in 2006,   POR has a dividend yield of 4.29%.  POR has an equity summary score of 8.0 out of 10 for a Bullish outlook.

Marsh & McLennan Companies, Inc. (MMC), a professional services company, provides advice and solutions in the areas of risk, strategy, and human capital.  MMC announced its quarterly dividend of 23 cents per share, an increase of about 5% over its prior dividend in April of 22 cents. The dividend is payable on August 15 to shareholders of record on July 11.  MMC has a dividend yield of 2.85%.  MMC has an equity summary score of 7.6 out of 10 for a Bullish outlook.

W. R. Berkley Corporation (WRB), an insurance holding company, operates as commercial lines writers in the property casualty insurance business primarily in the United States.  WRB raised its quarterly dividend 13% as the specialty insurer looks to boost shareholder value.  The one-cent increase brings WRBs quarterly payout to $0.9 per share and a 0.93% dividend yield.  WRB has an equity summary score of 7.5 out of 10 for a Bullish outlook.

In other dividend news, McDonalds Corporation (MCD) maintained its quarterly dividend of 70 cents per share (8.9 out of 10 for Bullish outlook).  McKesson Corporation (MCK) maintained its quarterly dividend of 20 cents per share (8.9 out of 10 for Bullish outlook).  Molson Coors Brewing Company (TAP) maintained its quarterly dividend of 32 cents per share (8.4 out of 10 for Bullish outlook).  Yum Brands Incorporated (YUM) maintained its quarterly dividend of 28.5 cents per share (7.4 out of 10 for Bullish outlook).

Building a High Dividend Yield, Low Beta Income Portfolio (Part 2)

For income investors wanting to go it alone, they should consider creating a portfolio of high dividend stocks with low beta.  This type of portfolio will provide a risk to reward profile during times of uncertainty in the markets.  By adding the component of a bullish outlook to the low beta stocks indicates these stocks can be held in a long-term portfolio.  The high dividend yield can be compounded over time and will increase as these stocks raise their dividends each year.  This portfolio will be built in a series of articles.  You can read Part 1 here.  Below is Part 2 with more stocks to look at for adding your portfolio.

Eli Lilly and Company (LLY) discovers, develops, manufactures, and sells pharmaceutical products worldwide.  We believe LLY is executing well on its
strategy to counter the recent patent expiration on Zyprexa and impending expirations on other drugs that in the aggregate are expected to reduce annual
sales by about $7 billion from 2010 through 2014. To rejuvenate sales, LLY plans to bolster growth engines in Japan, emerging markets, animal health, and
drug franchises in oncology and diabetes. As of January 2012, LLY had 14 compounds in Phase 3 trials or under regulatory review. The most important
pipeline drug, in our opinion, is solanezumab for Alzheimer’s disease.  Lilly has a dividend yield of 4.67% and a 3-year beta of 0.54.  LLY has a PE of 10
with a ROI of 20%.  LLY has an equity summary score of 9.9 out of 10 for a VERY Bullish outlook.

Bristol-Myers Squibb Company (BMY) engages in the discovery, development, licensing, manufacturing, marketing, distribution, and sale of biopharmaceutical products that help patients prevail over serious diseases worldwide.  Preparing for looming U.S. and European patent expirations over the next four years on key products such as Plavix, Avapro, Sustiva and Abilify, BMY has become more active in recent years in expanding its new product portfolio through acquisitions and in-licensed products.  In March 2011, the FDA approved Yervoy, a novel treatment for advanced melanoma that we think has over $1.6 billion in sales potential by 2016. Another key R&D drug that we think has significant potential is Eliquis, a bloodthinning agent for stroke
prevention that BMY is co-developing with Pfizer (PFE). Supported by strong clinical data, sales of Eliquis should exceed $3.5 billion by 2016, in our
estimation.  BMY has a dividend yield of 4.17% and a 3-year beta of 0.50.  BMY has a PE of 15 with a ROI of 17%.  BMY has an equity summary score of 9.4 out of 10 for a VERY Bullish outlook.

Merck & Co., Inc. (MRK) provides various health solutions through its prescription medicines, vaccines, biologic therapies, animal health, and consumer care products.  We believe Merck has an impressive new product pipeline, which should provide long-term growth despite headwinds from expiration losses and drug pricing pressures. In early February 2012, MRK said it planned to file five major products in the U.S. during 2012-2013, including: Bridion, a neuromuscular reversal agent; V503, a vaccine for HPV-associated cancers; odanacatib, a once-weekly oral drug for osteoporosis; tredaptive, an extended
release niacinbased agent for cholesterol reduction; and suvorexant, a potential first-in-class insomnia therapy. We also expect MRK to soon realize the
original $3.5 billion in synergies from its 2009 merger with Schering-Plough.  MRK also has an ongoing $5 billion share buyback program.  MRK has a dividend yield of 4.37% and a 3-year beta of 0.67.  MRK has a PE of 19 with a ROE of 11.5%. Merck has an equity summary score of 8.8 out of 10 for a Bullish
outlook.

Dividend Challengers with High Growth Rates and Bullish Outlook

Dividend Challengers are stocks that have raised distributions to shareholders over a period of more than five consecutive years but less than 10 years.  These stocks will continue to grow their dividend for years to come.  These results in a higher yield to cost in the coming years as the dividend increases while the initial investment costs stay the same.  This is how investors can create a stock with a dividend yield in double-digits in 10 to 20 years.  The stocks identified in this analysis possess 5-year dividend growth rates greater than 20%.  In addition, these stocks all have an equity summary score indicating a bullish outlook from analysts.  Here are five Dividend Challengers with a bullish outlook.

Accenture (ACN), formerly Andersen Consulting, is a leading global management consulting, technology services and outsourcing enterprise, with operations in 48 countries, serving 17 industries. The company seeks to use its extensive knowledge of industries and business processes to help clients identify new business and technology trends, and to formulate and implement solutions to boost revenue, enter new markets, and deliver products and services more efficiently.  ACN is trading at $64.50 with a dividend yield of 2.09%.  In the past year, ACN increased its dividend by 63%.  ACN has a 5-year dividend growth
rate of 30%.  It has an equity summary score of 8.7 out of 10 for a BULLISH outlook.  The 12-month target price of $71 is based on a peer-premium P/E of 17.9X our calendar 2012 EPS estimate of $3.96. We think a premium P/E is warranted given what we see as ACN’s healthy new bookings and a solid balance sheet that has nearly $5.6 billion in cash and cash equivalents and little debt.

From the first coffee and donut shop opened by Canadian hockey star Tim Horton in 1964, Tim Hortons (THI) has grown into Canada’s largest quick service restaurant chain, specializing in coffee, baked goods and home style lunches. In 2006, the company went public after Wendy’s International, Inc. (WEN), which had bought the company in 1995, completed an initial public offering of a minority stake and subsequently distributed the remaining shares to WEN shareholders on September 26, 2006. THI is trading at $53.54 with a dividend yield of 1.57%.  In the past year, THI increased its dividend by 23.5%.  THI has a 5-year dividend growth rate of 24.5%.  It has an equity summary score of 8.7 out of 10 for a BULLISH outlook.   The 12-month target price of $58 is based on our relative analysis. We apply a 21X P/E multiple to our 2012 EPS estimate, which is slightly above its peer average of about 19X.

Cummings (CMI) is a global equipment company makes and services diesel and natural gas engines, electric power generation systems and engine-related component products.  CMI has over 600 company-owned and independent distributor locations and about 6,500 dealer locations in over 190 countries and territories. CMI’s key markets are the on-highway, construction, and general industrial markets.  CMI is trading at $120.04 with a dividend yield of 1.34%.  In the past year, CMI increased its dividend by 52%.  CMI has a 5-year dividend growth rate of 34.7%.  It has an equity summary score of 9.6 out of 10 for a VERY BULLISH outlook.  The 12-month target price of $152 values the shares at 15X our 2012 EPS estimate of $10.13, in the middle of CMI’s five-year historical P/E range of 4.3X-23.9X. We think we are still in the early stages of a new earnings up cycle that we expect to last for several years.

The Williams Companies (WMB) primarily gathers, processes and transports natural gas. Operations are concentrated in the Rocky Mountains, the Gulf Coast, and on the Eastern Seaboard. On January 3, 2012, WMB completed the separation of its midstream and exploration businesses into two publicly traded companies via a tax-free spin-off to Williams’ shareholders. WMB is now an energy infrastructure company focused on North America.  WMB is trading
at $30.81 with a dividend yield of 3.38%.  In the past year, WMB increased its dividend by 107%.  WMB has a 5-year dividend growth rate of 23.5%.  It has an equity summary score of 7.7 out of 10 for a BULLISH outlook.  The 12-month target price of $33 is based on 22X our 2012 EPS estimate, in line with its six
year historical multiple average.

Coco-Cola Femsa (KOF) ADT is a Mexican bottler that produces, distributes and markets Coca-Cola, Fanta and other Coca-Cola trademark beverages in Mexico, Central America, Colombia, Venezuela, Argentina & Brazil.  Over the past year the stock has pleased investors by producing strong relative performance. Its 28% advance led 94% of stocks in the TWI Intl Index (similar to the S&P ADR Index) and 87% of the Latin American stocks in that index.
KOF is trading at $105.91 with a dividend yield of 1.96%.  In the past year, KOF increased its dividend by 80%.  KOF has a 5-year dividend growth rate of 44%.  It has an equity summary score of 7.3 out of 10 for a BULLISH outlook.

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