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Portfolio Strategy

U.S. stocks that make tempting targets Add to ...

A Band-Aid for your portfolio?

Hardly. Johnson & Johnson, maker of the famed adhesive bandage, is a blue-chip, dividend-spewing health-care company that has no peer in a Canadian market dominated by bank and commodity stocks. If you've ever thought of buying this stock, now's an ideal time.

For most of the past decade, a rising Canadian dollar has been a strong disincentive to buy U.S. stocks. As our dollar rises, returns from U.S. stocks are eroded. But with the dollar near parity, there's an opportunity to buy the likes of Johnson & Johnson and benefit from the likelihood that Canada's dollar will be worth less than the U.S. buck over the long term (over the short term, be prepared for anything).

More related to this story

In last week's Portfolio Strategy column, we look at exchange-traded funds listed on U.S. markets. This week, we look at individual stocks.

The Standard & Poor's Five Star Portfolio

Standard & Poor's is best known for rating bonds, but it also produces research on stocks. S&P is independent in that it does not provide investment banking or advisory services for the companies it rates.

Company

Ticker

Price ($)

1-yr % price chg

Dividend Yield %

DreamWorks Animation

DWA

29.94

-24.8

n/a

Vertex Pharmaceuticals

VRTX

34.38

-17.3

n/a

Hewlett-Packard

HPQ

41.23

-19.1

0.8

Chico's FAS

CHS

11.79

-15.7

1.4

ITT Corp.

ITT

50.00

-4.4

2

JPMorgan Chase

JPM

40.21

-1.6

0.5

USG Corp.

USG

14.31

1.8

n/a

Exxon Mobil

XOM

71.85

3.9

2.4

Tupperware Brands

TUP

46.01

-5.4

2.5

Wal-Mart Stores

WMT

54.23

0.5

2.2

General Mills

GIS

36.38

5.8

3.1

AT&T

T

29.13

5.5

5.7

Comments: There are 84 companies in the five-star portfolio, which is made up of stocks that are expected to outperform over a six- to 12-month period. The five-star stocks listed here have all have made less than 6 per cent in the past year, which means they present less risk of being over valued. If you're curious about the best performers on the five-star list, they include Parker-Hannafin Corp. (PH), Xerox (XRX) and Fastenal Co. (FAST). S&P says a five-star rating for a stock indicates an expectation that it will outperform the relevant benchmark by a wide margin. Five stars are the equivalent of "strong buy."

***

Value Line's Dow Safety Stocks

Founded in 1931, Value Line is an independent provider of stock research.

Company

Ticker

Price ($)

1-yr % price chg

Dividend Yield %

3M Co.

MMM

85.81

3.8

2.5

AT&T

AT&T

29.13

5.5

5.7

Chevron

CVX

88.01

13.8

3.3

Cisco Systems

CSCO

19.47

-17.1

n/a

Coca-Cola

KO

64.74

9.6

2.8

Disney

DIS

36.95

14.8

1.1

DuPont

DD

49.24

53.3

3.3

Exxon Mobil

XOM

71.85

3.9

2.4

Hewlett-Packard

HPQ

41.23

-19.1

0.8

Home Depot

HD

34.79

19.9

2.7

IBM

IBM

144.72

12.6

1.8

Intel

INTC

21.28

7.5

2.9

Johnson & Johnson

JNJ

62.57

-3.4

3.4

Kraft Foods

KFT

31.48

17.3

3.7

McDonald's

MCD

76.98

24.2

3.2

Microsoft

MSFT

27.85

-7.2

2.3

Pfizer

PFE

17.08

-6.6

4.7

Procter & Gamble

PG

63.64

2.4

3

United Technologies

UTX

78.95

12.4

2.2

Verizon Communications

VZ

34.63

11.6

5.6

Wal-Mart Stores

WMT

54.23

0.5

2.2

Comments: As part of its analysis, Value Line assigns a safety ranking that compares the risk in a stock with a coverage universe of 1,700 companies. Safety is ranked on a scale of one to five, with one being the lowest risk. What we have here is a subset of the 30 stocks in the Dow Jones industrial average that have a Value Line safety ranking of one. Note the lack of financial stocks on this list. Bank of America, JPMorgan and Travelers Cos. are all part of the Dow, but they didn't make the cut because of their risk profile. Value Line is a subscription service, but it makes its research on the Dow stocks available at no cost on its website at www.valueline.com.

***

ScotiaMcLeod's U.S. Core Portfolio

ScotiaMcLeod is the retail investment dealer arm of Bank of Nova Scotia

Company

Ticker

Price ($)

1-yr % price chg

Dividend Yield %

Freeport-McMoran

FCX

112.05

43.5

1.7

McDonald's

MCD

76.98

24.2

3.2

Nike

NKE

88.58

37.7

1.4

Colgate Palmolive Co.

CL

80.99

-4.2

2.6

Pepsico

PEP

65.24

7

2.9

Marathon Oil

MRO

34.86

11.6

2.9

Occidental Petroleum

OXY

94.80

20.2

1.6

Exxon Mobil

XOM

71.85

3.9

2.4

Metlife Inc.

MET

43.62

19.4

1.7

State Street Corp.

STT

45.36

14

0.1

McKesson Corp.

MCK

68.29

7.1

1.1

Pfizer

PFE

17.08

-6.6

4.7

Fluor Corp.

FLR

61.31

41

0.8

United Technologies

UTX

78.95

12.4

2.2

Waste Management

WM

36.17

9.5

3.5

Cisco Systems

CSCO

19.47

-17.1

n/a

Intel

INTC

21.28

7.5

2.9

Microsoft

MSFT

27.85

-7.2

2.3

Oracle Corp.

ORCL

30.49

31.6

0.7

AT&T

AT&T

29.13

5.5

5.7

Comments: Scotia describes this portfolio as being aimed at growth-oriented investors seeking consistent long-term returns from quality U.S. companies. An attempt has been made to diversify across four sectors - interest rate sensitive, consumer, industrial and commodity. With the exception of Cisco, each company on the list pays a dividend. Investors looking for U.S. stocks in sectors that are under-represented in the Canadian market, your attention is drawn to tech stalwarts Cisco, Intel and Oracle, as well as pharmaceutical distributor McKesson, drug giant Pfizer and Nike.

***

The Morningstar Tortoise Portfolio

Chicago-based Morningstar is an independent provider of investment research

Company

Ticker

Price ($)

1-yr % price chg

Dividend Yield %

Berkshire Hathaway

BRK.B

79.55

20.2

n/a

Novartis

NVS

58.99

9.7

3.5

Exelon

EXC

40.83

-20

5.1

Exxon Mobil

XOM

71.85

3.9

2.4

Kinder Morgan Mgmt

KMR

64.23

21.1

6.8

Lowe's Cos.

LOW

25.16

4.8

1.8

Johnson & Johnson

JNJ

62.57

-3.4

3.4

Wal-Mart Stores

WMT

54.23

0.5

2.2

Automatic Data Proc.

ADP

46.6

8.6

3.1

General Dynamics

GD

69.35

-0.5

2.4

Sysco

SYY

29.19

3.5

3.6

J.P. Morgan Chase

JPM

40.21

-1.6

0.5

Cintas

CTAS

28.95

-1.6

1.7

TransCanada

TRP

37.95

12.1

4.2

CoreLogic

CLGX

18.08

-2.8

n/a

American Express

AXP

46.12

12.6

1.6

Pepsico

PEP

65.24

7

2.9

Procter & Gamble

PG

63.64

2.4

3

Home Depot

HD

34.79

19.9

2.7

Diageo

DEO

72.84

6.3

4

First American Financial

FAF

14.85

n/a

1.6

3M Co.

MMM

85.81

3.8

2.5

Comments: The Tortoise Portfolio has been designed to both outperform the S&P 500 index and to generate positive investment returns no matter what the broader market is doing. Companies in the portfolio are large, have a risk rating of moderate to low and are slow growing. Morningstar says it also looks for companies "with an economic moat, preferably wide." Note the inclusion here of a Canadian company, TransCanada, and a British firm, Diageo, that are listed on the NYSE.

***

The Dividend Growth Investor Blog's Top U.S. Dividend Stocks For Retirees

Dividend Growth Investor is a blog devoted to stocks that regularly increase the flow of dividends they pay.

Company

Ticker

Price ($)

1-yr % price chg

Dividend Yield %

Medtronic

MDT

35.99

-18

2.5

Johnson & Johnson

JNJ

62.57

-3.4

3.4

Procter & Gamble

PG

63.64

2.4

3

McDonald's

MCD

76.98

24.2

3.2

Coca-Cola

KO

64.74

9.6

2.8

Comments: These companies were chosen on the basis of their competitive business advantages, the sustainability of their dividends, their exposure to a variety of sectors and their valuations. These stocks also have an impressive record of dividend growth. Medtronic has raised dividends for 33 years in a row, according to the Dividend Growth Investor. Johnson & Johnson has raised its payout 48 years in a row, McDonald's has done it 34 years in a row, P&G has done it 54 years in a row, and Coca-Cola for 48 years. You can keep up with the Dividend Growth Investor at www.dividendgrowthinvestor.com.

***

The Broad Dividend Achievers Index

Developed by a company called Mergent, this index is made up of U.S. companies that have increased their dividends for at least each of the past 10 consecutive fiscal years.

Company

Ticker

Price ($)

1-yr % price chg

Dividend Yield %

Exxon

XOM

71.85

3.9

2.4

IBM

IBM

144.72

12.6

1.8

Chevron

CVX

88.01

13.8

3.3

Procter & Gamble

PG

63.64

2.4

3

Wal-Mart Stores

WMT

54.23

0.5

2.2

Coca-Cola

KO

64.74

9.6

2.8

Johnson & Johnson

JNJ

62.57

-3.4

3.4

AT&T

AT&T

29.13

5.5

5.7

Pepsico

PEP

65.24

7

2.9

McDonald's

MCD

76.98

24.2

3.2

Comments: Listed here are the 10 heaviest weighted companies in this index, which has been licensed for use in an exchange-traded fund called the PowerShares Dividend Achievers Portfolio .



Starting to notice some overlap in the names on these lists? The favourable consensus on these stocks suggests they're a good place to begin your research. Want to keep your eye on some U.S. stocks before buying? Then give the new watchlists on Globeinvestor.com a try. You'll find them here: http://tgam.ca/BFbB.

Follow on Twitter: @rcarrick

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