Expert: Invest in Lesser-Known Dividend Stocks

Thursday, 12 Jul 2012 07:09 AM

By Nancy Stanley

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While many investors like dividend-paying stocks in volatile markets and think of the usual suspects such as Exxon Mobil Corp., Pfizer Inc. etc., there are some under-the-radar stocks that are paying above-average dividends and are a little less crowded, Jeff Reeves, editor of InvestorPlace.com, told Yahoo.

An important thing for investors to look at is not just how long the company has been paying dividends, but also if the dividend has been increasing, he said.

“It's only be really been recently, the last couple years, that people have really cared about dividends,” Reeves noted. “Investors really want it, there's not a lot of growth. I think it's just the world that we live in these days.”

Editor's Note: Economist Warns: 50% Unemployment, 100% Inflation Possible

One of the stocks Reeves likes is HCP Inc., a real estate investment trust (REIT) for healthcare, which is in essence housing for seniors. This stock has been paying a dividend since 1984.

“And more importantly, they've been increasing their dividend annually for 25 years,” he said, adding that the dividend yield is 4.5 percent and since it is an REIT, 90 percent of its taxable income has to go back to the shareholders.

“But you know the other story here, where I like the stock a lot is because of the demographics behind it,” Reeves noted. “Obviously the baby boomers are getting older and they're going to need housing as they enter the Golden Years in the retirement facilities and managed care. So this company is in the right place at the right time.”

In addition, the stock has outperformed the market year-to-date and it's up about 15 percent in the last year.

“So not only do you get a nice dividend, there's a chance for some good share appreciation there too,” he added.

Another less-known stock Reeves recommends is Genuine Parts Co., the parent company of Napa Auto Parts. This stock has a dividend yield of 3.2 percent and has been paying a dividend since 1948.

“And they have a strong history of raising it,” he said.

Reeves referenced a recent report that showed the average age of an automobile on the road right now is 11 years.

“[P]eople are driving older cars longer and they need parts,” he stated. “Genuine Parts is there so they can play that trend. And a 3 percent dividend these days is good and in you’re in the right place for the automotive sector.”

Finally, Reeves likes Bemis Co. Inc., a supplier of packaging materials. This company has been paying a dividend since 1922.

“One of the things I like most about this company's is if you look back only a decade ago they were paying $0.13 a quarter. Now it $0.25 a quarter,” he said. “They’ve almost doubled their dividend in about 10 years. So that's really impressive.”

Reeves noted that packaging is a consumer-staples play, adding that “everything has to be in packaging.”

“These companies … are not exactly sexy. They're not tech stocks,” he said. “They're not really a booming growth business, but these are companies where, like a utility stock, you can really serve yourself well by putting a sleepy play in your portfolio that gives you good 3 percent dividend even if it's not a big name.”

A recent analysis by Howard Silverblatt, S&P’s senior index analyst, showed that more S&P 500 companies are paying dividends than any time since January 2000, Bloomberg reported. And these companies have never paid more dividends.

The dividend payouts that have been announced imply an annual dividend rate of $29.02 per index share, Silverblatt said. The prior record was $28.96 in June 2008.

Editor's Note: Economist Warns: 50% Unemployment, 100% Inflation Possible

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