Background: Wells Fargo & Company is a diversified financial services company providing banking, insurance, investments, mortgage and consumer finance services through stores, its Internet site and other distribution channels across North America as well as internationally. Wells Fargo set the bar for other banks in risk management. While many other banks experienced an implosion in book value during the housing crisis, Wells Fargo's risk controls ensured investors were protected.
52-Week Range: $27.08 to $36.60
Price To Book: 1.3
Earnings Payout Percentage: 25 per cent
The company currently pays 88 cents per share in dividends for a yield of 2.6 per cent. Dividends are lower from early 2009 but unlike many other financial institutions, dividends, albeit smaller, were not halted. Investors can count on the Federal Reserve to keep banks healthy until the economy turns around.
Having the Fed as your sugar daddy should not be discounted. It's the ultimate in privatization of profits and socialization of losses. Once the economy begins growing again (and it will), a river of profits along with dividend increases can be expected. Wells Fargo is nothing less than a heads-you-win, tails-you-break-even type of play.
Stocks making money in good times and bad don't need analysts to convince you to buy them, but Wells Fargo has the backing of analysts, too: 21 of the 36 analysts covering the company give a buy recommendation.
Background: Intel designs, manufactures, and sells integrated digital technology platforms primarily in the Asia-Pacific, the Americas, Europe and Japan. Intel is my "on a limb" suggestion.
52-Week Range: $19.23 to $29.27
Price To Book: 2.1
Earnings Payout Percentage: 37 per cent
Shares have fallen since April and are down for the year. The fall for previous shareholders is an opportunity for new investors.
The opportunity comes from investors who are not paying attention to the long-term theme. The long-term theme is a company that took a few arrows recently but is in great shape to exploit new markets. It's a huge mistake to discount the ability of Intel to adapt to and dominate new markets.
New markets include increased use of smart devices – and I don't limit devices to smartphones. Expect everything we touch to become smart or smarter. Cars, homes, TVs, other appliances and more will increasingly come together.
Will everything, including the family pet, have an Intel chip by the end of 2013?
Probably not, but Intel will pay you a fat yield of 4.4 per cent while you wait. Not only is the dividend relatively safe, the payout ratio is low enough that investors can expect an increase as earnings grow.
In the last 52 weeks, the shares are about even with a small gain of 1.8 per cent. Intel has an average analyst target price of $23.14. Not everyone buys into an up and coming Intel in 2013. Short interest is over 4 per cent even though it's expensive to hold a short position. Short-sellers are generally the smart money, but they don't always get it right. Intel has reached bargain-level pricing and shorts who don't cover soon may wish they had.
Background: General Electric is one of the largest and most diversified industrial corporations in the world. GE is engaged in developing, manufacturing and marketing a wide variety of products for the generation, transmission, distribution, control and utilization of electricity.
52-Week Range: $17.72 to $23.18
Price To Book: 1.8
Earnings Payout Percentage: 52 per cent
GE is currently trading near the 200-day moving average. The weekly chart is more bullish but, pushing the technical aside, it's hard for me to find many companies I am more bullish on from a long-term hold point of view.
GE walked up to the edge of the abyss in 2009 and was forced to cut dividends. Before 2011, GE started increasing the dividend payout and this month increased the amount to 19 cents per quarter.
GE's 76 cents a year in dividends is a yield near 3.7 per cent. The current yield is attractive relative to other stocks, however. The real investment story is future dividend increase prospects. I wrote about GE recently in this dividend-focused article.
Revenue and earnings are once again meeting or exceeding investor expectations, and GE is a dominant presence around the world. The payout ratio based on next year's estimates and the current dividend is under 50 per cent.
Fiscal cliff or no fiscal cliff, GE is international enough to grow either way. The majority of analysts believe GE continues to offer a buying opportunity, with 12 of the 16 analysts covering the company giving it a buy recommendation. The average analyst target price for GE is $24.71.
After accounting for stability, dividends, capital gains expectations and worldwide exposure, GE makes my very short list of dividend stocks you can buy and forget about.
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