Rising Star Buys: 2 Health Care Winners

This article is part of our Rising Star Portfolios series.

It's time to get some more large-cap exposure in the Rising Stars multivitamin portfolio -- my diversified, well-balanced, complete, one-stop portfolio for all your investing needs that also cures gout.

I'm returning to the same Corporate El Dorados screen that produced our first buy, Coca-Cola. This should give us a nice list of stable dividend-paying blue chips that can stay in the portfolio for years. You can read more about the fantastic long-term performance of these "bear-market protectors" and "return accelerators" here. As for the specific criteria, we'll start with all dividend-paying companies on major U.S. exchanges. They must also pass the following tests:

1. Market cap greater than $20 billion.
2. Total debt-to-capital ratio less than 60%.
3. Average annual earnings-per-share growth over the past 10 years greater than 5%.
4. Projected annual earnings-per-share growth over the next five years greater than 5%.
5. Positive dividend growth over the past five years.

The screen spit out 66 companies. Here are some of the more likely candidates:

Data provided by Capital IQ and Yahoo! Finance.

From the very beginning, I've talked about diversifying this portfolio not only across company size (small- to large-cap) but also across industry and geography. I already have exposure to retail (lululemon athletica) and food and beverage (Coca-Cola). For my third stock, I'm turning turn to the health-care sector -- and it's nice to see how we are already getting a good bit of diversification with just three buys.

Buying: Abbott and J&J
Make that four buys. Thanks to some prior research I've done, it's quite easy for me to narrow things down, here, and I'll be adding both Abbott Laboratories and Johnson & Johnson to the multivitamin portfolio.

To understand what makes these guys special, we need to take a look at some other screens I've run recently. Both J&J and Abbott have passed my tests for safe, low P/E stocks and highest-yielding stocks you'd actually want to buy. If you click through to those stories, you can see how both have good growth prospects, high quality of earnings, low price-to-earnings multiples, healthy balance sheets, and above-average dividend payouts that are likely to continue growing.

It will be fun to explore the actual businesses in greater detail in future articles, but the highlights are easy. Both have been around for over 120 years and offer a broad -- make that, outstanding -- variety of consumer, health care, and pharmaceutical products. From baby powder to life-saving medicine to extremely complicated medical instruments, these two giants have you covered.

They produce and sell these products at consistently high returns on investment, and rake in gobs (official term) of free cash flow.

They are fine examples of the corporate El Dorados we're seeking. I'm going to start off buying a half position, or about 2.5% of my portfolio, in each company. If you're following along, make sure you have things set up to reinvest the dividends you'll be receiving from these companies. This is very important, and it's the entire reason behind the corporate El Dorado philosophy. For a refresher on this, read and understand this article (don't worry, it's pretty easy).

I'll be talking more about Abbott and J&J in the weeks to come. As always, you can keep up with all my portfolio's comings and goings by following me on Twitter.

This article is part of our Rising Stars Portfolios series, where we give some of our most promising stock analysts cold, hard cash to manage on the Fool's behalf. We'd like you to track our performance and benefit from these real-money, real-time free stock picks. Click here to see all of our Rising Stars analysts (and their portfolios).