Last week, fellow Fool Dan Caplinger asked investors if they were ready for the meltdown that's on the horizon because of the eurozone crisis.
Taking his story a step further, I'll show you stocks in the Dow Jones Industrial Average (INDEX: ^DJI) that have dividends that are: (1) large, (2) safe, and (3) have less exposure to Europe than others.
Dividends, narrowing the field
It's no secret that during recessionary times, dividend stocks can save a portfolio. Not only do they provide consistent payouts to shareholders, but their prices are also prone to be far less volatile because investors are still willing to pay a premium for the dividend yields.
In narrowing my search for Dow dividend stocks that could weather a eurozone meltdown, I wanted to throw out those with yields that were puny. I did this by eliminating from consideration any company that didn't at least offer its shareholders a 2.5% yield.
Furthermore, I wanted to be sure that the dividends were healthy. In order to do this, I checked out the company's dividend payout ratio. Essentially, this measures the amount of a company's earnings that are used to pay out its dividends. I eliminated all companies with payout ratios above 80%.
|
Company |
Dividend Yield |
Payout Ratio |
|---|---|---|
| 3M (NYSE: MMM) | 2.9% | 37% |
| Boeing (NYSE: BA) | 2.7% | 33% |
| Chevron | 3.5% | 22% |
| Coca-Cola | 2.9% | 34% |
| DuPont (NYSE: DD) | 3.7% | 45% |
| ExxonMobil | 2.5% | 22% |
| General Electric (NYSE: GE) | 4.1% | 48% |
| Home Depot | 3.2% | 43% |
| Intel (Nasdaq: INTC) | 3.7% | 32% |
| Johnson & Johnson | 3.7% | 54% |
| JPMorgan Chase | 3.5% | 13% |
| Kraft | 3.4% | 64% |
| McDonald's | 3% | 48% |
| Microsoft | 3.3% | 23% |
| Pfizer | 4.3% | 54% |
| Procter & Gamble (NYSE: PG) | 3.4% | 51% |
| Travelers | 3.1% | 41% |
| United Technologies (NYSE: UTX) | 2.7% | 34% |
| Wal-Mart | 2.6% | 30% |
Source: Yahoo! Finance.
OK, what about Europe?
Now that we've got a list of 19 candidates with large, safe dividends, it's time to dive in and see what their exposure to Europe looks like. I chose to go back to each company's annual report and investigate how much revenue -- percentagewise -- was derived from Europe.
Wal-Mart, Travelers, and Microsoft didn't offer detailed enough information on European exposure in their reports, so they were thrown out of the equation for this exercise. Of the remaining 16 companies, here is how they stacked up, listed from least to most European exposure.
|
Company |
Percent of Revenue From Europe, 2010 |
|---|---|
| Home Depot | 0% |
| Chevron | 7% |
| Boeing | 12% |
| Intel | 13% |
| Coca-Cola | 15% |
| ExxonMobil | 21% |
| General Electric | 21% |
| 3M | 23%* |
| Kraft | 24% |
| United Technologies | 25% |
| Johnson & Johnson | 26%** |
| DuPont | 26%* |
| McDonald's | 40% |
| JPMorgan Chase | 28%* |
| Pfizer | 28% |
| Procter & Gamble | 34%* |
Source: Reuters, company SEC filings. *Includes Europe, Middle East, and Africa. **For first nine months of 2011.
Next steps
Looking at these numbers, it seems like Home Depot, Chevron, Boeing, Intel, and Coca-Cola are all worthy of further consideration.
Because I know comparatively little about the aerospace and housing industries -- though I think the latter will take quite a while to recover -- I'm personally not going to chase after shares of Boeing or Home Depot.
I also won't be giving Chevron a green thumb on my CAPS profile -- for two reasons. First, a recession in Europe would likely lead to slowed demand for oil worldwide, driving the price of gas and, likely, shares of Chevron lower.
Two companies I do like, and have already made a CAPScall on in my profile, are Coca-Cola and Intel. Though demand might dip slightly in the case of a recession, these two have powerful brands, large and healthy dividends, and a balance sheet to stave off a recession.
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