There is a stock picking competition between several US and Canadian bloggers to pick the best four stocks for 2009, which I was invited to participate in. The rules do not allow trading or selling of these picks, and requires a quarterly review of how the stocks selected have performed.
The stocks that I selected are representative of four high-yield sectors, where dividend investors typically shop for current income. Furthermore despite their high current yields, the dividend payments for the four stocks below seem sustainable.
Realty Income (O) a commercial retail real estate company yielding 7.30% . Realty Income is a dividend achiever which pays dividends monthly to its shareholders. If the credit market remains frozen in 2009 Realty Income could suffer if its vacancies increase or it can’t find more funds to keep expanding. If the financial situation normalizes however, real estate stocks in general will benefit from low interest rates.
Kinder Morgan Energy Partners (KMP) is a pipeline transportation and energy storage company in North America yielding 9%. This master limited partnership is a member of the dividend achievers index. The low energy prices could stimulate demand in 2009, which could positively affect pipeline businesses like Kinder Morgan.
Consolidated Edison (ED) provides electric, gas, and steam utility services in the United States yielding 6.10%. Even during tough economic conditions people keep paying their electric bill and keep heating their homes. Con Edison is a member of the dividend aristocrats index.
Phillip Morris International (PM) is an international tobacco company yielding 5.10%. The international tobacco market is a growth story, and unlike the US market is not facing as many issues in the short term as Altria (MO). Even during a recession, people continue smoking, as this product is very difficult to stop using.
With an average yield of 6.9% and the possibility for long-term dividend growth, these stocks should weather well any market conditions in 2009. In order to generate dividend income for the long run however, a more diversified portfolio consisting of at least 30 stocks should be constructed in order to withstand market forces. Check out the Best Dividend Stock for the Long Run list, which is a good addition to today's post.
Disclaimer: At the time of this writing I owned shares of O, KMR, PM and ED.
Trade stocks for free through Zecco.com, the Free Trading Community. www.zecco.com
The other bloggers participating in the contest include:
Where Does My money Go
Four Pillars
ZachStocks
The Wild Investor
The Financial Blogger
Intelligent Speculator
My Trader's Journal
Million Dollar Journey
Relevant Articles:
- Trade stocks for free through Zecco.com, the Free Trading Community. www.zecco.com
- Kinder Morgan Energy Partners (KMP) Dividend Analysis
- Consolidated Edison (ED) Dividend Analysis
- Realty Income (O) Dividend Analisys
- My Dividend Growth Plan - Diversification
- Best Dividends Stocks for the Long Run
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Good pick with ConEd. Stable utility company with a great dividend. Long term hold
ReplyDeleteThe monthly dividend in O is enticing, however, I believe that commercial real estate, specifically, retail is going to be hit hard soon. I've spoken with some commercial brokers who tell me that many anchor tenants will be closing up shop and leave the owners holding the bag.
ReplyDeleteI like your blog and have linked it to mine for regular reading. http://optionpremiumcollector.blogspot.com/. I used to be a buy and hold dividend achiever kind of guy but now I'm sold on actively selling time through options. Good luck and Happy New Year
you forgot to list the other bloggers who are in the stock picking contest
ReplyDeletehow come PFE didn't make the cut?
ReplyDeleteMark
ReplyDeleteED is the only utility that I own. It's ideal for someone looking for current income.
TPC,
Thanks for linking to me. I usually add to my blogroll sites that I find interesting and read regularly. I will monitor your site and read it more often as I am interested in generating enough in option income without having to tender my shares.
Anon,
The other bloggers haven't posted their articles. I will link to them whenever they do so.
LOD,
PFE failed to increase their dividend in december. They are in danger of losing their dividend aristocrats status. Furthermore most of their drugs are losing their patents in 2011, while the company hasn't really found new one to replace the potential losses in income. Lower income means lowered ability to maintain the rich dividend..
I can't see Pfizer raising their dividend either unless there is a major catalyst that increases the stock price. The stock is already yielding 7 percent and Pfizer will find growth challenging going forward.
ReplyDeleteO will have a dividend cut soon. Note that their payout ratio is over 210%!
ReplyDeleteDividend Key Stats
TTM = Trailing Twelve Months
Dividends Paid () $1.70
Dividend Yield (TTM) 8.15%
Payout Ratio (TTM) 210.87%
Dividend Growth TTM vs. Prior TTM 3.41%
Dividend Growth 5 Year Average 7.14%