7 Dividend Stocks Promising Growth and Protection
With that in mind, I decided to seek out companies with low WACC (weighted average cost of capital), high Altman Z-Scores (a measure of balance sheet health), high ROCE (return on common equity) and above-market-average dividend yields.
After I performed the analytic screen, I examined the top-rated companies for their fundamental outlook and eliminated any stocks I did not believe were worthy of an investment.
What I arrived at was a portfolio of stocks with low WACC and strong financial health . These stocks will provide both moderate growth opportunities along with financial protection and strong cash flow.
In addition, these firms can leverage their already strong balance sheets at low costs in order to expand existing business capability and make acquisitions while still returning cash to investors.
Philip Morris International
Philip Morris International (PM) is a leading manufacturer of cigarettes outside of the U.S. The company owns the top-selling Marlboro and L&M cigarette brands, among others.
In 2010, the company sold nearly 300 billion Marlboro cigarettes, which was greater than the next two international competitors combined. Earnings per share for Philip Morris International grew by 24% in 2011 and are expected to grow by a steady 9% in 2012. The stock sells as a reasonable 15 times current year's earnings.
Follow @stockpickr McDonald's
Here is an important fact about McDonald's(MCD) , the largest quick casual restaurant in the world: The stock has not declined in a calendar year since 2002. Since 1980, McDonald's has only declined in four calendar years: 1990, 2000, 2001 and 2002. The compounded annual price return for McDonald's stock is 15.3% since 1980. This does not factor in the annual dividend, which the company has consistently paid.
2012 will be an average year whereby I expect the company's earnings to increase by 8% to 10%, the shares to rise about 10% and the dividend to add about another 3% to total return.
Let me be very clear, after it rose in price by 31% in 2011, we should not expect as big of a year from McDonald's stock in 2012. However, given the nature of McDonald's business, its history, large stock repurchase program and strong dividend, the downside to the stock price is limited.