3 dividend stocks your portfolio is begging you to buy
Everyone and his dog can make money in a bull market, but what happens next?
With the market trading near all-time highs, picking winners is about as difficult as shooting fish in a barrel. Everyone is once again a stock-picking genius.
Two things never change, though: People get overly confident in bull markets, and every bull market is followed by a bear market. As an investor, you want to position your portfolio to win in both bull and bear markets.
One category of stocks that stand the test of time is high-yield dividend stocks that are not "dividend traps." A dividend trap stock is one that is attractive because the smart money is dumping the shares as quickly as they can. Buying a high yield dividend stock that is likely to reduce or halt dividends is like picking up nickels in front of a steamroller.
Here are three stocks I think you want to include in your portfolio. They are the stocks that you can profit from today, and should stay relatively strong if the market retraces some of the recent gains.
General Electric (GE)
Background: General Electric is one of the largest and most diversified industrial corporations in the world. GE is also an original member of the Dow Jones Industrial Average ($INDU).
Earnings payout percentage: 51%
I've been bullish on General Electric for several years now. The company makes it easy to remain bullish because the stock continues higher while the income and balance sheets grow at a comparable rate.
Shares are modestly higher from about a month ago, and investors receive 76 cents annually in dividend payments for a yield of 3.1%. From a year ago, the shares are up over 20%, and analysts are calling for a price target of $25.85. I see no reason why $30 is unattainable within the next two years.
At $30, General Electric will still be well off the highs of 2007 and any argument that the shares are overvalued quickly dissipates after considering that only 0.7% of the float is shorted.
The key to buying General Electric is to wait for three to five down days in a row. Wednesday provides the first opportunity after shares declined since Thursday last week.
Background: Intel designs, manufactures and sells integrated digital technology platforms primarily in the Asia-Pacific, the Americas, Europe and Japan.
Earnings payout percentage: 49%
Intel is once again on my radar after the recent dip in price. The yield is quickly approaching 4%, and that should be the metric to stick your toe into the waters. I like selling covered calls against Intel when the price declines enough to pay a 4% yield.
The real strong support is under $20, but it's questionable if you will find an opportunity to buy shares that low again. If Intel does come down that much, it's probably time to load up again with two scoops. The average analyst target price for Intel is $23.69.
An area to monitor is the short interest. Short-sellers are what I consider the smart money, and if short-sellers get excited about a stock, I can lose my enthusiasm. With short interest above 4%, but below 5%, shareholders may want to scrutinize changes in case short sellers turn up the heat further. Otherwise, the prevailing 4.9% of the float short is not (yet) a serious concern.
Background: AT&T is a communications company. Ma Bell provides landline phone service, TV content, internet, mobile phone services and Yellowpages.com.
Earnings payout percentage: 60%
I recently wrote on TheStreet, "AT&T Customer Service: From the Outhouse to the Penthouse," an article about the customer service transformation that can happen even in companies that start from zero.
Normally, I wouldn't consider a stock with a payout over 50%. They normally get filtered out before I even take a glance. The difference with AT&T is the stability of earnings. The company resembles an old-school, dividend-paying public utility rather than a tech giant.
The relative earnings safety and improving customer satisfaction provide the impetus for entry. AT&T is once again a diamond in the rough. With a 5% yield, investors have plenty of motivation to sit on their hands and wait for the shares to trend higher.
Shares have been under considerable price pressure lately, falling 5% in the last year. The average analyst target price for AT&T is $37.52. Short sellers are in (cough) short supply, and only 1.5% of the float is shorted. That means very few hedge funds are willing to bet the stock will fall, or that the dividend is about to get cut.
At the time of publication the author had no position in any of the stocks mentioned.
More from TheStreet.com
"WASHINGTON (Reuters) - Congress has partially wriggled free from the "Obamacare" health reforms that it passed and subjected itself to three years ago.
In a ruling issued on Wednesday, U.S. lawmakers and their staffs will continue to receive a federal contribution toward the health insurance that they must purchased through soon-to-open exchanges created by President Barack Obama's signature healthcare law.
The decision by the Office of Personnel Management, with Obama's blessing, will prevent the largely unintended loss of healthcare benefits for 535 members of the Senate and House of Representatives and thousands of Capitol Hill staff.
When Congress passed the health reform law known as "Obamacare" in 2010, an amendment required that lawmakers and their staff members purchase health insurance through the online exchanges that the law created. They would lose generous coverage under the Federal Employees Health Benefits Program.
The amendment's author, Republican Senator Charles Grassley, argued that if Obamacare plans were good enough for the American public, they were good enough for Congress. Democrats, eager to pass the reforms, went along with it.
But it soon became apparent the provision contained no language that allowed federal contributions toward their health plans that cover about 75 percent of the premium costs."
Excluding themselves from a Plan that forces increased costs on every other American would be grounds for a blanket IMPEACHMENT of DC. Anyone up for it?
"WASHINGTON (Reuters) - Freddie Mac , the U.S.-owned mortgage finance company, on Wednesday said its second-quarter profit surged 65 percent to $5.0 billion, its second largest ever, as rising home prices limited credit losses and it booked big gains on derivatives that benefited from rising interest rates."
Had to be the cocaine sales to Wall Street because the housing crisis is NOT in recovery.
Rodrego, Sorry, but you should have been acquiring and building when it was in the $12-15s.
We were fortunate to do so;
And I have few complaints at this time and I believe the dividend now at about 3.5%, will be INCREASING...So we have done quite well..
So hang in there, I also think we are in for more appreciation eventually...
Or cut your losses if you want, and look for something better.
But many decent stocks are fairly high priced at this time.
It's been on a slow uptrend, mostly because of the Finance unit...Holding it back.
"WASHINGTON (AP) - Wal-Mart has agreed to improve safety conditions for employees who use trash compactors and cleaning chemicals at more than 2,800 stores as part of a settlement agreement with the Labor Department."
---- AGREED to -------------- Where is the National Guard when you need them to surround a terrorist sect in Bensonville, AR and FREE AMERICA FROM DEEP DISCOUNTER CORRUPTION?
Copyright © 2014 Microsoft. All rights reserved.
These hot movers could rise by double digits in coming months.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.