Safety or Growth? 3 Stocks That Offer Both
June 09, 2009 – by Richard Band
As we move into
the summer months, I expect a "changing
of the guard."
Investors will sit back and reappraise the business
outlook. What they’ll discover, I think, is that while
conditions have improved somewhat, we’ve still got
a long, potholed road ahead of us.
Street is anticipating a brisker revival on Main Street
than seems likely to occur, in 2009, anyway.
Remember, the Federal Reserve’s "stress tests"
assume that the nation’s 19 largest banks alone
could lose another $599 billion by the end of
2010. According to estimates by the International
Monetary Fund, U.S. banks have written off only
about half the losses they’ll eventually have to
swallow on sour loans and other bum assets.
These horrific numbers suggest that, regardless of
any Washington arm-twisting, bankers will uphold
fairly strict lending standards for some time to come.
Consumers, for their part, will tend to scrimp on frills
until the job picture brightens considerably and debt
burdens ease. Skinflint bankers and frugal shoppers
hardly make a recipe for an economic boom.
Once these realities sink in, traders will take
profits on the stocks that have screamed skyward in
But where will they park the money?
My guess is that they’ll rotate into safer, steadier
companies whose share prices haven’t climbed as far
yet — like the three stocks below.
These stocks not only offer
excellent value for the long term, but they’re also
ideally poised to deliver market-beating profits over
the balance of this year.
Here are three blue chip stocks I advise you to buy now:
Blue Chip Stock #1: ExxonMobil (XOM)
in December, crude oil has steadily crept higher
in recent weeks. I’m not predicting a rerun of last
year’s commodity boom anytime soon. Nonetheless,
it seems likely that even a modest recovery in global
business activity will eat into inventories of oil and
natural gas, putting upward pressure on prices.
ExxonMobil (XOM), which has continued to drill aggressively
during the industry downturn, will be set to cash in
As the financial titan of oil, sitting on $31 billion
of cash (enough to pay off all the company’s debt
three times over), XOM is seldom a cheap stock.
Since early March, though, investors have raced into
dicier energy plays and left Exxon behind. It’s time
for quality to catch up.
Thrifty Tip: ExxonMobil features an outstanding
low-cost direct-purchase plan that allows you
to buy stock without going through a broker.
Minimum to set up an account: $250. (Perfect for
gifts to a child or grandchild.) There’s no set-up
fee and no service charge on the buy side. For
enrollment literature, call 800/252-1800 or visit www.computershare.com/exxonmobil.
Blue Chip Stock #2: Pepsico (PEP)
You know the old
saying about what happens when the going gets
tough. Pepsico (PEP) — which produces Lay’s snack foods
and Quaker Oats cereals as well as soft drinks,
fruit juices and bottled water — is run by one tough
customer, Indra Nooyi, who "got going" in early
May with a 6% dividend hike. The company has
now sweetened its payout 37 years in a row…
I love consistency of that sort, especially when
so many other outfits (banks, for instance) have
disappointed shareholders lately by slashing
dividends. Still, I’m even more impressed with
PEP’s generous dividend yield — currently around 3.3%, a level unseen in any previous year since 1985.
When safety and rapid growth combine with a lofty
absolute dividend yield, you’ve got a bargain!
Blue Chip Stock #3: Procter & Gamble (PG)
world’s greatest consumer-staples franchise, Procter & Gamble (PG)
boasts an astonishing 23 brands with annual sales of
$1 billion or more.
If you don’t pour Tide into your
washing machine or Swiffer your floors, you may be
shaving with a Gillette razor, munching on Pringles
or brushing your teeth with Crest. What’s more, the company is building on its
commanding lead by spending $5 million a day
on research and development.
It’s not just clever
marketing that keeps this machine purring.
And a money machine it is: In mid-April, PG
boosted its dividend by a handsome 10%, the 53rd
consecutive year in which Procter has lifted its
Over the past 10 years alone, PG has tripled
Yet the stock is trading at its lowest P/E ratio, and
its highest dividend yield, of any year since 1989.
Why rummage for junk when the finest merchandise
comes this cheap? Current yield: 3.3%.
In the June issue of Profitable Investing, Richard Band recommends two more stocks poised to deliver market-beating profits over
the balance of this year. Get the names of these two stocks, plus complete buy instructions for the three stocks mentioned above, when you join Profitable Investing risk-free today.
Learn more here.