Two Dow Stocks for Growth and Safety in 2013

Tickers in this article: BA JNJ
NEW YORK (TheStreet) -- The search for potential dividend plays in 2013 has led me to high-quality names that lagged in 2012. Whether or not we fall off the fiscal cliff in the coming days and weeks, the outlook is for slower economic growth in the first half of the new year. As a result, I believe there will be a rotation into names that appear safer in early 2013.

One such name on my radar screen is Boeing (BA) . At $76, the stock is up just 4% on the year, which is less than half the return of the Dow Jones Industrial Average. That said, the company is in the midst of a multiyear commercial aerospace upgrade cycle and is expected to post accelerating earnings growth over each of the next three years.

Meanwhile, Boeing offers a 2.6% dividend yield at current levels. Even though this isn't the highest yield in the Dow, I believe the company has the capacity to raise its payout more than its index peers over the next several quarters. Boeing just boosted its payout on Dec. 17 to $0.485 a share. Investors at the close of trading on Feb. 12 (the must-own date) will qualify for the next dividend on March 8. The payment can be covered 2.7x with expected 2013 earnings of $5.22.

In addition to the dividend, management pledged to repurchase $1.5 billion to $2 billion (19.7 million to 26.3 million shares) of its stock in 2013. Given the company's A-rated balance sheet and steady cash flow generation, I also believe the quarterly dividend will be raised to $0.55 a share within the next year.

Johnson & Johnson (JNJ) is another laggard of 2012 that I believe will fare relatively better in the new year. The stock has lagged the Dow by 100 basis points year to date, though the company offers a 3.5% dividend yield after raising its payout to $0.61 a share in April.

Johnson & Johnson has boosted its dividend for 50 consecutive years and I expect management will announce another increase in April 2013. In the meantime, the company's payment is twice as much as the yield on the benchmark 10-year Treasury note. Johnson & Johnson has a pristine balance sheet and management can cover the dividend 2.3x with expected 2013 earnings of $5.49 a share.

The key to dividend investing is finding companies with consistent growth. I believe that both Boeing and Johnson & Johnson can deliver 10% or more total returns in 2013, with less risk than the average large-cap stock.