A low-risk dividend stock to buy in June

A certain soft-drink maker recently boosted its yield and also offers good upside potential.

By Louis Navellier May 25, 2010 12:39PM

navellier stock picksIt has been a brutal May for most investors. The Dow was down about 10% so far as of the opening bell today, the S&P 500 was down 11%, and the Nasdaq off 12%. Those figures have only gotten worse as the day has dragged on.


So where do we go now? The recent sell-off has touched all corners of the market, with even the "safe haven" of gold taking a tumble. My recommendation to you: Hide out in great blue-chip stocks with upside potential for shares and a healthy dividend to help you ride things out when the market gets rocky.


My top stock along these lines for June is Dr Pepper Snapple Group (DPS).


DPS products include not just its namesake drinks but also Yoo-hoo chocolate drink, Penafiel mineral water sold in Mexico and a host of other beverages. When the company announced its earnings for the first quarter, during the May 6 massive sell-off, it was one of the few companies to end the day up, thanks to both increased revenue and positive earnings. This shows me that Dr Pepper Snapple has staying power.

 

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True, with a yield of less than 3% there are a number of other dividend stocks with higher yields than Dr Pepper Snapple. However, those companies may not have the same upside share potential as DPS. Take dividend stock bellwether AT&T (T), which is consistently one of the top dividend stocks in the Dow and currently boasts a dividend yield of about 7%.


Dr Pepper Snapple is up 26% year-to-date as of the opening bell, compared with a 15% slide in AT&T. Obviously the bigger dividend doesn’t offset that disparity.


The earnings of this beverage blue chip prove it also has staying power. Dr Pepper Snapple has topped Wall Street estimates in each of the last four quarterly reports, with an earnings surprise that averages over 11%. Not bad for a large-cap stock with wide analyst coverage.

What’s more, Dr Pepper Snapple Group Inc. boosted its quarterly dividend by 67% just last week to 25 cents a share. If you get in to this stock over the next several weeks and become a shareholder of record before June 21, you will be eligible for the July 9 payout.


As unfortunate as the recent volatility has been on Wall Street, it has served up a very clear reality check to investors. Put plainly, if you thought that the bull market was going to keep chugging along from the March 2009 lows without a hitch, you got another think coming.


Buying a dividend stocks like Dr Pepper Snapple is just one of low-risk trading strategy. For other tactics, check out a complete article about 7 low-risk trading strategies for June


As of this writing, Louis Navellier was recommending DPS to subscribers of his Blue Chip Growth investment newsletter.


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