While talking to me about stocks the other day, my dad said, "At this point, I'm not looking to buy anything exciting." These days, he's willing to skip the next big thing in favor of huge, profitable companies that spit out generous dividends.
That's not a bad strategy. History has shown that a real snoozer company can generate impressive returns. With that in mind, here are five somewhat dull companies from my watchlist that you can get excited about.
|
Company
|
Forward P/E
|
Projected Yield
|
Payout Ratio
|
| Philip Morris International (NYSE: PM ) |
14.4 |
4% |
57% |
| Home Depot (NYSE: HD ) |
14.7 |
3% |
43% |
| Vodafone (Nasdaq: VOD ) |
9.6 |
7.7%* |
54% |
| Microsoft (Nasdaq: MSFT ) |
8.3 |
3.1% |
23% |
| Intel (Nasdaq: INTC ) |
9.7 |
3.4% |
32% |
Source: Yahoo! Finance.
*Based on trailing 12-month dividends.
Got a light?
Philip Morris International remains my favorite tobacco stock. It spun off from Altria (NYSE: MO ) in 2008 and now focuses on international business. As a result, you get exposure to markets where the smoking rates are higher and the risk of lawsuits lower than here in the United States. The company also boasts a wide moat. It holds roughly 16% of the international tobacco market and owns seven of the top 15 cigarette brands. The company should continue to reward shareholders with a generous dividend for years to come.
Because hammers are cool
I've developed a grudging respect for Home Depot over the years. When I worked in construction, I hated the place and much preferred the local mom-and-pop lumber yards. However, I can't ignore its perpetually full parking lots -- regardless of which location I go to -- or how giddy my homeowner friends get when they have an excuse to visit the store.
Admittedly, the past few years have been hard on the company. Nothing inspires multiple trips to the Home Depot like buying a house -- or preparing to sell one. However, the company appears to have ridden through the worst of it, and now things are looking a little brighter. Comparable-store sales for the last quarter increased 4.2% year over year, and diluted earnings per share increased 17.6% to $0.06. It still has a way to go before earnings return to pre-housing crisis levels, but that just means you can pick up a healthy retailer at a reasonable price.
A global telecom
Compared with Frontier Communications' (NYSE: FTR ) 13.1% projected yield, Vodafone's yield looks almost inconsequential. However, if I had to pick between the two, I'd go with Vodafone. The company offers international exposure, including emerging markets such as India and Turkey. It also owns a 45% stake in Verizon Wireless. Its sprawling geographic reach makes Vodafone appealing under today's economic conditions, since revenue increases in one region can help balance declines in another. As a result, the company can generate more stable cash flows, which means it should also produce stable dividends.
A tale of two tech giants
The PC is dying. Soon we'll do most of our computing on mobile devices like tablets and smartphones. Apple, Google, and ARM Holdings have become clear winners in the mobile space and have left little room for Microsoft and Intel, or so the theory goes.
I won't deny that both Intel and Microsoft have struggled with mobile devices, but I don't believe you should dismiss either company. Intel, for example, still has plenty of room for growth in emerging markets. It will also benefit from the need for massive data centers to power cloud computing. The majority of those servers are powered by Intel chips. Finally, the company spends billions annually on research and development and recently shuttered its consumer electronics division to put more focus on tablets. Given the company's resources, I wouldn't bet against it.
As I've said before, I think Microsoft is better positioned for the post-PC era than many investors realize. It's prepared for the shift toward cloud computing with the cloud-based Office 365 and its cloud-hosting platform, Windows Azure. And although the latest data from Forrester Research says that consumer interest in Windows tablets has fallen since the beginning of the year, the OS remains a more popular choice than Android. Based on what I've read about Windows 8, the company has figured out touchscreens. It's true that Microsoft will have a late start in tablets, but I don't think it'll get left behind.
Finally, I wouldn't discount the Xbox's role in the company's future. The product is now seven years old yet still managed to sell nearly a million so far this holiday season. The launch of Xbox TV will make many of the features predicted for the rumored Apple TV set available to Xbox owners this month. And the company's decision to bring Xbox Live to PCs and smartphones hints at the possibility of cross-platform gaming, which could drive more Xbox 360 owners to Microsoft products.
Foolish takeaway
Other than Philip Morris International -- which I already own -- I'll be following these companies closely as potential portfolio candidates. If I decide to pull the trigger on any of them, I'll be sure to let you know. In the meantime, if you'd like more investing ideas, then you should check out the special report "Secure Your Future With 11 Rock-Solid Dividend Stocks." It's absolutely free, so download it today.
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