12 Dividend Stocks for 2012

Here's a novel idea: As we dive headlong into the new year, why not invest in companies that actually give you their profits?

With decades upon decades of research and scholarly thought sunk into the theory around stocks and the stock market, it can be easy to get lost in layers of abstraction. What's the stock's price-to-earnings ratio? What does a discounted cash flow model say it's worth? Is the stock in a confirmed uptrend that's taking it over the 30-day moving average?

Go ahead and shake your head like an Etch A Sketch to clear that all out. At the end of the day, a stock is an ownership stake in a business. What is that ownership stake really worth to you if the company withholds all of its profits?

What follows are 12 companies that do share their profits and are all on my watchlist for the year ahead.

Flowers Foods (NYSE: FLO  ) . If you've ever found yourself chowing down on Nature's Own, Whitewheat, Country Hearth, Sunbeam, Roman Meal, or Aunt Hattie's bakery products, there's a good chance you've ingested a Flowers Foods product. Cost pressures have been a challenge of late for the food industry, but this is a company that's performed well over time, maintained a reasonable balance sheet, and grown its dividend.

Aflac (NYSE: AFL  ) . We all know the Aflac duck from the iconic TV ads, but there's also a lot that's ducky about Aflac for investors. As I outlined last fall, this is a well-run company with a solid business and, right now at least, an attractive valuation.

Clorox (NYSE: CLX  ) . Around this time last year I called out Clorox as one of the consumer staples to buy in 2011. For all of 2011, the stock's total return was 8.8% -- not bad at all when you consider that the S&P 500 was flat. I'm going back to the well this year and recommending the stock again, except perhaps this time around I should take my own advice and add it to my personal portfolio.

Owens & Minor (NYSE: OMI  ) . I dig companies that you might not think of on a day-to-day basis, but provide very essential services. Owens & Minor fits that bill in a big way. As a distribution and logistics provider for a wide swath of medical gear for hospitals and other health-care providers, the company is a very key piece of the health-care puzzle. The stock yields 2.9% today, but the company's grown its payout around 14% per year over the past five years.

Avon Products (NYSE: AVP  ) . OK, I'll admit the Avon brand seems a bit dated these days. However, the bulk of the company's business -- and profits -- today is outside of the U.S. and in particular in Latin America and Central and Eastern Europe. The debt load may scare some investors off, but the company's profits are more than enough to handle it. In addition to the geographic exposure, I am also a big fan of the 5.3% dividend yield, the low valuation multiples, and a trailing return on capital of nearly 17%.

Exelon (NYSE: EXC  ) . I've hemmed and hawed about Exelon and I've noted in the past that I wasn't crazy about its merger with Constellation Energy. However, when it comes to solid dividends, you can't do too much better than utilities, and so I may end up following fellow Fool Jim Royal's lead and finally taking the bait on this nuclear generation giant.

Hasbro (NYSE: HAS  ) . As a current owner of chief Hasbro rival Mattel, I'm a big believer in the great brands in the toy industry. And, boy, does Hasbro have brands. Playskool, Transformers, G.I. Joe, Milton Bradley, and Nerf are just a few of the many iconic brands in the company's portfolio. So why don't I own this stock yet? That's a very good question.

Molex (Nasdaq: MOLX  ) . Selling electronics connectors is Molex's business, which may alone be enough to put you to sleep. But when you consider that these essential little bits of technology represent a $45 billion industry and show up in everything from mobile phones to tablet computers and automobile safety electronics, you can understand why Molex is a business worth owning. There is no net debt on Molex's balance sheet and the stock yields a cool 3.4%.

National Presto (NYSE: NPK  ) . The first question with National Presto might be how a stock with a 1.1% dividend yield makes it into a list of buy-worthy dividend stocks. But consider this -- for going on five years now, the company has added a hefty special dividend on top of its regular payout. In 2010 that took the company's total dividend to more than $8 per share, which would represent a near 8.5% dividend yield at today's stock price.

Lockheed Martin (NYSE: LMT  ) .There are concerns that the U.S. government is going to have to markedly cut its defense budget as it tries to grapple with the overall budget deficit. And to be honest, I personally wouldn't mind seeing less spending on defense. However, I'm skeptical that any big cuts will be made. Lockheed's stock currently yields nearly 5% and that's on a mere 35% payout ratio for the company. It seems there's a lot of room for investors to score on this one.

Darden Restaurants (NYSE: DRI  ) . Darden needs better results out of its Olive Garden restaurants, plain and simple. If that concept continues to falter, it won't be good news for investors. On the other hand, the stock has been beaten down and trades at a P/E below 14 and yields 3.8%. Historically, Darden has produced good results, so if it can get that swagger back this could be a good one to own.

Strayer Education (Nasdaq: STRA  ) . Speaking of regaining swagger, the entire for-profit education sector has been beaten to a bloody pulp. Frankly it's a darn scary industry to try to invest in right now. But often with real risks comes the potential for oversized payouts -- and I think that's exactly the situation with Strayer.

More? You want more?
I'm confident enough in all of the picks above that I'll be adding every stock to my Motley Fool CAPS portfolio -- at least, the ones that aren't already there.

If you like what I've laid out above and are thirsting for even more dividend stocks, I'd suggest you check out The Motley Fool's special report "Secure Your Future With 11 Rock-Solid Dividend Stocks." You can grab a free copy by clicking here.

The Motley Fool owns shares of Darden Restaurants, Aflac, Lockheed Martin, Clorox, and National Presto Industries. Motley Fool newsletter services have recommended buying shares of Aflac, Flowers Foods, Exelon, Hasbro, and Mattel. Motley Fool newsletter services have recommended creating a write covered strangle position in Exelon. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Matt Koppenheffer owns shares of Mattel and National Presto Industries, but does not have a financial interest in any of the other companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.


Read/Post Comments (17) | Recommend This Article (82)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 05, 2012, at 3:11 PM, philippalmer wrote:

    I agree on Darden. Olive Garden used to be my wife and I favorite restaurant. Lately with all the changes they are making, they have started pi##ing me off. So we have cut back how many times we go there. It used to average 5 times a month, now they are lucky if they get us once. Unless they stop all the poor changes they are making, I do not see this one coming back any time soon. Sorry.

  • Report this Comment On January 05, 2012, at 3:53 PM, Truth2Power wrote:

    You totally need to list all the ticker symbols in your article! How am I to add these to my watchlist if I can't figure out what they are?

    Clorox: CLX

    Owens & Minor: OMI (teehee: "Oh, my!")

    Avon Products: AVP

    Molex: MOLX

    Lockheed Martin: LMT

    Darden Restaurants: DRI

    Strayer Education: STRA

  • Report this Comment On January 05, 2012, at 4:39 PM, TMFeek wrote:

    @Truth2Power: I added the tickers in to make it easier to add them to your watchlist. Sorry for the oversight!

    Best,

    Erin

    Online Editor

  • Report this Comment On January 05, 2012, at 5:28 PM, Darwood11 wrote:

    I agree in principle with the article.

    I also suggest readers go to the S&P Dividend Aristocrats and check out those companies.

    I have about 15% of my retirement portfolio invested in dividend stocks, selected from such a list.

    Why only 15%? Its a matter of maintaining what I consider a reasonable diversification so as to maintain an asset allocation that met my goals.

    I do invest in mutual funds, and anyone who does so, even with low cost Vanguard total stock market funds, is invested to a certain degree in these companies and many other dividend payers. VTSMX had a yield of about 1.9%, which was achieved via dividends.

  • Report this Comment On January 05, 2012, at 5:32 PM, Bsorge10 wrote:

    These are pretty good picks. I really like Darden and this should be good as long as the economy improves. Ditto LMT, but I am not sure that it is worth the risk hoping that defense pending won't dry up. FLO is also an interesting pick and defensive. I seem to recall that every couple of years they fall on their face. I will take a better look under the hood.

  • Report this Comment On January 05, 2012, at 6:07 PM, divybuy wrote:

    With all but two holdings in my portfolio for the last three years, I had a +16% for 2011. All the dividends are in DRIP programs and they just build.

  • Report this Comment On January 05, 2012, at 8:05 PM, midnightmoney wrote:

    "If you've ever found yourself chowing down on Nature's Own, Whitewheat, Country Hearth, Sunbeam, Roman Meal, or Aunt Hattie's bakery products, there's a good chance you've ingested a Flowers Foods product. Cost pressures have been a challenge of late for the food industry, but this is a company that's performed well over time, maintained a reasonable balance sheet, and grown its dividend."

  • Report this Comment On January 05, 2012, at 8:36 PM, midnightmoney wrote:

    You pick it and describe it in the briefest of terms, so we should buy it in 2012? Very seeking alpha.

  • Report this Comment On January 05, 2012, at 8:57 PM, midnightmoney wrote:

    Strayer Education (Nasdaq: STRA ) . Speaking of regaining swagger, the entire for-profit education sector has been beaten to a bloody pulp. Frankly it's a darn scary industry to try to invest in right now. But often with real risks comes the potential for oversized payouts -- and I think that's exactly the situation with Strayer.

    What on earth does this description mean? It's a bad industry to invest in, or it's good? Well, it's regaining its swagger (a nice metaphor) but it's also 'scary', so it's a bed of roses but really quite the opposite, no bed of roses, or at the very least a scary bed of roses--if you can handle coming up with a fistful of thorns, do go for the rose petals, because they might pay you handsomely? Is that what you're saying? Is that how I should be investing? I'm not sure a description of robbing a bank would be so much different...

  • Report this Comment On January 05, 2012, at 9:40 PM, TMFKopp wrote:

    @midnightmoney

    From the beginning of the article:

    "What follows are 12 companies that do share their profits and are all on my watchlist for the year ahead."

    We do offer readers long, in-depth, specific "buy" recommendations -- they are in our subscription newsletters.

    Many of the articles on the Fool.com are meant to provide ideas to readers that they may want to dig into and research further -- written by investors for investors. The article above is in that vein. All of the stocks mentioned are on my personal watchlist (and in my CAPS portfolio) and I'll be researching them further and potentially buying them myself.

    If none of the quick run-downs above pique your interest, then you're free to move on to other ideas.

    Matt

  • Report this Comment On January 05, 2012, at 9:49 PM, TMFKopp wrote:

    @midnightmoney

    "so it's a bed of roses but really quite the opposite, no bed of roses, or at the very least a scary bed of roses--if you can handle coming up with a fistful of thorns, do go for the rose petals, because they might pay you handsomely? Is that what you're saying? Is that how I should be investing? I'm not sure a description of robbing a bank would be so much different.."

    As they say, every rose has its thorn, right? Your rose metaphor is actually very apt -- often times there is great reward for investors willing to take the risk at getting stabbed by the thorns. Of course, in some cases there may be thorns, but other investors may have the mistaken view that there are far more thorns than actually exist -- as may be the situation with some of the for-profit education companies.

    On the other hand, the bank robbing comparison is kind of off in left field.

    "Is that how I should be investing?"

    I have no idea. You are the master of your own portfolio. In my own portfolio I invest primarily in solid, high-quality companies, most of which pay decent (or better) dividends. In a smaller corner of my portfolio, I go in on higher risk, but also potentially higher-return, bargain-basement stocks.

    (as seen: http://www.fool.com/investing/general/2011/12/15/5-bargain-b...

    Hope this helps

    Matt

  • Report this Comment On January 06, 2012, at 10:38 AM, 48ozhalfgallons wrote:

    Olive Garden..... I've "dined" at the garden three times in the past ten years, three different locations. Each was a nefarious experience. You'd think I'd learn.

  • Report this Comment On January 06, 2012, at 11:00 AM, lawyerrjs wrote:

    Please! No more videos. They take to long for a fast reader. Also, there is no way to go back without starting all over.

    If you agree, tell the Fool.

  • Report this Comment On January 06, 2012, at 12:41 PM, GETRICHSLOW2 wrote:

    I AGREE. STOP WITH THE VIDEOS!!!

  • Report this Comment On January 08, 2012, at 5:27 PM, moredivs wrote:

    Me Too! Please no more videos.

  • Report this Comment On January 08, 2012, at 6:50 PM, LMedico wrote:

    As their is no video in this particular article, I find the past few comments to be off topic. Please, next time, post your thoughts on an article that is really a video.

  • Report this Comment On January 08, 2012, at 8:37 PM, GW1000 wrote:

    Matt:

    How does OMI compare with some of the other companies in the healthcare distribution sector? I have taken a look at Cardinal Health and McKesson in the past but for some reason never pulled the trigger. Also, what do you think about Amgen now that they pay a dividend?

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