5 favorites for a low-risk shopping list
Investors seeking growth and income should consider these large, stable blue chips.
AT&T (T), General Electric (GE), Kinder Morgan (KMI), McDonald's (MCD) and The Walt Disney Company (DIS) are five of the stock on our core list of U.S. recommendations.
These are not necessarily those we expect will outperform the markets. Rather, being large, mature companies, they carry less risk because of their size and stability. They also all pay a dividend to provide cash flow. If you can't decide what stocks to buy, your shopping list should start here.
This is the largest telecom company in the world in terms of revenue ($127.4 billion in 2012). AT&T is usually thought of as an iconic U.S. company but in fact it operates around the globe with voice coverage in more than 225 countries, data roaming in more than 205 countries, and mobile broadband in more than 145 countries.
It also competes with cable companies, offering an Internet Protocol (IP) based television service called U-verse TV. As well, it manages the largest Wi-Fi network in the States.
In 2012, the company earned $7.3 billion ($1.25 a share, fully diluted). Free cash flow was $39.2 billion, a company record. The market cap is a mind-boggling $193 billion. The stock pays a dividend of $1.80 per share (annualized) to yield 5.3%.
GE is the company that does everything, therefore making it impossible to categorize. It manufactures appliances, light bulbs, health care equipment, jet and helicopter engines, locomotives, gas turbines and more.
It builds residential home communities and lends billions of dollars to individuals and corporations through GE Capital. It's a world leader in research in such areas as fiber optics and health technology. The company's technology helps to deliver one-quarter of all the electricity used in the world.
And all that just scratches the surface. Its history dates all the way back to Thomas Edison and the invention of the electric light. GE is often seen as a proxy for the American economy and as such is a must on any list of core stocks.
That said, it hasn't been much of a profit-maker for investors in the past three years, trading for much of the time in a narrow range of $18 to $22. Recently, however, the moving averages have started to trend slightly higher, which is encouraging. In the meantime, investors are collecting an annual dividend of $0.76 a share for a yield of 3.4%.
For 2012, GE reported revenue of $147.4 billion and net earnings attributable to shareholders of $13.9 billion ($1.29 per share). The company has a market cap of $231 billion.
Kinder Morgan is the largest midstream and the third largest energy company (based on combined enterprise value) in North America. The company owns an interest in or operates approximately 75,000 miles of pipelines and 180 terminals.
The company's main holding in Canada is the Trans-Mountain pipeline, the only oil line linking Alberta with the West Coast. Kinder Morgan has made an application to twin the line, which would more than double its capacity.
The company reported revenue of just under $10 billion in 2012 and a profit of $1.3 billion. On Jan. 16, Kinder Morgan announced a 19% increase in its quarterly dividend to $0.37 a share ($1.48 annualized).
At the same time, the company said it expects its 2013 dividend will total $1.57 a share. If that estimate holds up, the stock will yield 4.2% this year. The market cap is $27.9 billion.
This company needs no introduction. There's probably not a single person reading this who has not had a McDonald's burger at some point.
Since 1955, the Golden Arches have been pulling in customers by the billions around the world. Today, the company has 34,000 restaurants worldwide, where 1.8 million employees serve nearly 69 million customers every day in 119 countries.
This fast-food goliath generated revenue of almost $27.6 billion in 2012 and reported net income of about $5.5 billion ($5.36 per share, fully diluted). The stock pays a quarterly dividend of $0.77 ($3.08 a year) to yield 3.3%. Market cap is $93.7 billion.
The Walt Disney Company
What other company could we possibly choose for the entertainment sector? Disney is entertainment! From the days of Steamboat Willie back in the 1920s, Disney has evolved into one of the world's most recognized brands.
The company is involved in almost every aspect of the entertainment industry: television (ABC and ESPN), theme parks (five in existence and a sixth being built in Shanghai), cruise ships, consumer products, the Internet, and, of course, movies -- where it all began.
Disney is a cash machine, generating revenue of $42.3 billion in the 12 months to Sept. 30, 2012. Disney has a market cap of $94.6 billion and pays an annual dividend of $0.75 a share to yield 1.4%.
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Serious issues like drought and the deterioration of the developed world spell opportunity for this industry leader.
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