Forget the golf clubs! We have some great investment ideas Foolishly wrapped up in this special series for Father’s Day.
Dad, remember way back when you and Mom paid me an allowance? I loved watching my money grow ... and occasionally spending it on a $3.99 LP at Korvette's or a magazine. Now I think it's time I returned the favor. I'm offering you several stocks that will pay you an allowance.
You'll get that money in the form of dividends, which both of us increasingly appreciate. Years ago, we were entranced by high-flying stocks that often landed with a thud. But with healthy dividend payers, we can not only enjoy a steady (and often increasing) stream of income but also expect some stock-price appreciation, as well. It's a tantalizing combination.
Indeed, as my colleague Rich Greifner has pointed out in his article "The Secret of Dividends," more than 40% of the S&P 500's total return over the past 80 years has come not from rising share prices but from dividend payments.
Dividends for Dad
Here are a few companies you might want to consider as investments:
|
Company |
Recent Dividend Yield |
3-Year Dividend Growth Rate |
Recent P/E Ratio |
5-Year Average P/E Ratio |
|---|---|---|---|---|
|
General Electric (NYSE:GE) |
4.1% |
11.9% |
13.4 |
19.8 |
|
Wells Fargo (NYSE:WFC) |
4.8% |
8.3% |
11.2 |
14.2 |
|
United Parcel Service (NYSE:UPS) |
2.6% |
14.5% |
151.5 |
23.5 |
|
Johnson & Johnson (NYSE:JNJ) |
2.6% |
14.0% |
16.4 |
19.8 |
|
Kimberly-Clark (NYSE:KMB) |
3.6% |
9.8% |
15.0 |
18.5 |
|
Procter & Gamble (NYSE:PG) |
2.2% |
11.1% |
19.6 |
23.8 |
|
Paychex (NASDAQ:PAYX) |
3.7% |
18.9% |
21.9 |
36.9 |
Data from Morningstar.
Who wouldn't want to hold General Electric shares? Despite its massive size, the company's revenue still rose nearly 6% last year. According to Yahoo! Finance, its net profit margin tops 12%, and its return on equity (ROE) is 19%. It also offers quite a bit of diversification, since it's involved in everything from jet engines to financial services to alternative energy. (And water processing, and broadcast television, and medical equipment, and ...)
How much safer can a company seem than Procter & Gamble? Its brands, including Tide, Crest, Gillette, and more, are well known worldwide. And while many financial giants are struggling these days, Wells Fargo is going strong, with even Warren Buffett investing in it. Its annual revenue is up about 35% over the past two years.
UPS might be a harder sell right now, with our economy sputtering and fuel costs soaring. But the company is enjoying solid revenue growth from international operations, and the U.S. economy will pick up one of these days, too.
Johnson & Johnson needs little introduction. It sports a net profit margin of more than 18% and ROE topping 25%. Its own investor-relations department has noted the company's "75 consecutive years of sales increases, 24 consecutive years of adjusted earnings increases, and 46 consecutive years of dividend increases." Over the past 10 years, Johnson & Johnson stock generated an annualized return of almost 8% for investors, compared with just 3.5% for the S&P 500.
Kimberly-Clark may be less well-known for many investors, but it shouldn't be. Its net profit margin is almost 10%, and its ROE tops 30%. Revenue rose 9% last year for its stable of familiar brands, including Kleenex, Kotex, and Huggies.
Finally, Paychex is unknown to many, but it processes payroll and performs many other critical tasks for thousands of companies, perhaps including your own employer. Its revenue has risen 30% over the past two years, while its net margin tops 25% and its ROE tops 35%.
Dad, you can learn more about successful investing and about dividend payers in these articles:
