The One Investment You Need to Buy Now

Suppose I told you that there was a category of investments in which you could make good money -- 4%, 5%, even more -- while the bear reigns, and even more money once things turn around.

Nope, it's not a money market fund. They're safe, mostly, but you'll be completely left out of any stock market rally.

Nope, it's not corporate bonds. While they're an important part of many retirement portfolios -- one that has been overlooked by many of us in recent years -- they're likely to get driven down in value as money moves back into stocks.

Nope, it's not Treasuries. (Have you looked at Treasury yields lately? People are giving up an awful lot in exchange for that "full faith and credit" guarantee.)

It's stocks.

Yeah, OK; stop laughing now
That may seem like crazy advice after the stock market drop over the past year and a half. But stocks come in a lot of different flavors -- and not all gains and losses come from changes in share price.

Some stocks are exciting. Some stocks are boring. In good times, many of us are drawn to the exciting stocks and shun the boring ones. But right now, boring can be really good.

Take Kimberly-Clark (NYSE: KMB  ) . Here's a company that's 136 years old and makes boring, low-growth products with names like Kleenex, Huggies, and Cottonelle. About as dull as it gets, right?

Think for a minute. We're in a doozy of a recession. People are cutting spending left and right. But if you've ever used generic toilet paper, you understand why name brands command fantastic recession-resistant loyalty. Folks might forgo the pricey steaks in favor of burgers this week, but they're not going to forgo the Cottonelle in favor of that awful, scratchy stuff. (But if they decide to compromise by getting the cheaper semi-scratchy Scott's brand, that's OK -- Kimberly-Clark owns that one, too.)

"But," I hear you saying, "the market downdraft has still hurt their share price. They could get hurt more."

That's probably true. But meanwhile, you get dividends. At today's prices, that's a yield of about 4.7% a year -- no matter what the stock market does.

And listen up: The best of these companies are ones you can hold in your portfolio for decades. These aren't short-term trades. Think of the current market as a bargain-hunting opportunity -- but you get paid for holding the bargain until it appreciates.

So what's worth buying?
A quick screen on Motley Fool CAPS for four- or five-star large-cap stocks with dividend yields of 3% or more gave me more than 90 names, including these:

Stock

CAPS Rating (out of 5)

Current Dividend Yield

3M (NYSE: MMM  )

****

3.5%

BHP Billiton (NYSE: BHP  )

****

3.1%

Caterpillar (NYSE: CAT  )

****

4.5%

Honeywell (NYSE: HON  )

****

3.7%

PepsiCo (NYSE: PEP  )

*****

3.5%

Procter & Gamble (NYSE: PG  )

*****

3.3%

Source: Motley Fool CAPS.

Are these the best of the lot? Maybe, maybe not. Remember, we're not just looking for a good value; we want good long-term investments, in companies that won't have to cut their dividends even if the economy's stinkage goes on for a while.

So how can we cut to the chase and find the very best buys? If you'd like to save yourself the trouble of doing due diligence on 90 stocks, I suggest taking a look at the Fool's Income Investor service. The team specializes in exactly this problem -- stocks with great dividend yields that are also great long-term investments right now. You can look at its complete list of recommendations, including its best ideas for new money now, free of charge for 30 days. There's absolutely no obligation to subscribe.

For more on dividend stocks:

This article was originally published on Oct. 7, 2008. It has been updated by Dan Caplinger, who doesn't own shares of the companies mentioned in this article. 3M is a Motley Fool Inside Value selection. Kimberly-Clark, PepsiCo, and Procter & Gamble are Income Investor recommendations. The Fool owns shares of Procter & Gamble. Try any of the Fool's newsletters free for 30 days. The Motley Fool has a disclosure policy.


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