Boring beauties for 2013
These stocks offer decent dividends and low volatility for the buy-and-hold investor.
When it comes to investing, it is often said that "boring is beautiful" and that "slow and steady wins the race." At least that is the type of sage advice passed down from a grandfather to his grandchildren. Whether or not the grandchildren listen is another matter altogether.
They should listen, however, because lower beta stocks outperform their more volatile peers over time. This much has been documented over and over. With market volatility expected to remain high for the foreseeable future, now is the time for investors to start considering some beautiful yet boring names for 2013 and beyond.
Add to that dividend growth. The second-largest U.S. food company's dividend has increased every year dating back to 1996. The annual dividend was 78.5 cents per share in 2008. Assuming no increases -- an unlikely proposition -- General Mills will pay $1.32 per share in dividends in 2013.
Here is one way of looking at General Mills: The stock has a beta of less 0.2 against the S&P 500 and a better yield than 30-year Treasuries.
Trading just north of $18, BreitBurn Energy Partners (BBEP), a master limited partnership, pays a tantalizing dividend of over 10%. Like larger MLPs, such as Enterprise Products (EPD) or Kinder Morgan (KMP), BreitBurn Energy Partners is prized for its dividend. While BreitBurn does not have the track record of the larger, more familiar MLPs, the California company is earning one as its payout has increased for ten straight quarters.
There are risks with MLPs. For starters, some critics allege the asset class is overvalued, though it should be noted those critics have been saying this for several years. Second, the fiscal cliff and any ensuing dividend tax increase could be punishing to MLPs. After all, dividends are the primary reason investors buy these stocks.
When it comes to cigarette stocks, most investors already know about the big boys of this industry, such as Altria (MO), Philip Morris International (PM) and Reynolds American (RAI). Vector Group (VGR) is the small-cap alternative to those names and what an alternative it has been. Since its 1987 initial public offering, Vector Group has returned almost 336%.
Shares of Vector Group currently yield 10%, but the knock on this stock is obvious -- dividend growth. It has been several years since the last dividend increase. Conversely, Altria raises its payout every year like clockwork. Still, Vector Group makes for a decent income-generating portfolio addition for investors that need or want some small-cap exposure.
Vector Group's beta of 0.44 against the S&P 500 is barely higher than Altria's of 0.41, but the former trades at almost 49 times next year's earnings compared to just over 14 times for Altria.
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