Thursday December 20, 2012
by Kelley Wright, editor Investment Quality Trends
We believe that high-quality stocks purchased at historically low-price-to-high-yield offers the best potential for downside protection and upside appreciation.
We particularly focus on metrics that are less affected by cyclicality; most specifically the cash dividend and the dividend trend.
For the long-term health and viability of a company’s dividend, it is important that the company builds flexibility into the structure of their business to be able to withstand the inevitable downturns that occur within the normal course of the business cycle.
Two examples of a flexible structure are a manageable level of debt and a payout ratio (the percentage of earnings that are paid to the shareholders as dividends) that will not endanger the dividend in the event earnings are impacted by poor macro-economic conditions.
We continue to suggest that our tried and true screens of identifying high quality and good current value, such as limiting considerations to undervalued companies with a modest level of long-term-debt-to-equity will continue to provide long-term real total returns.
Our latest Timely Ten selections are:
Chevron Corp. (CVX) -- yielding 3.3%
Union Pacific (UNP) - yielding 2.2%
Coca-Cola (KO) - yielding 2.7%
McDonald's (MCD) -- yielding 3.5%
Air Products & Chemicals (APD) -- yielding 3.1%
Nike (NKE) - yielding 1.7%
United Technologies (UTX) -- yielding 2.7%
Disney (DIS) - yielding 1.5%
Occidental Petroleum (OXY) -- yielding 2.8%
Learn more about this financial newsletter at Kelley Wright's Investment Quality Trends.