Many investors around the world want to know how to find the best stocks to buy in these tough economic times. This is especially true with the recent market liquidation in the summer of 2011 with a potential European debt crisis. It seems there is a small chance of another global financial crisis if Greece and Italy are not supported. However, this period is different from 2008 for a number of reasons, and US banks are certainly much better capitalized now. I’m not predicting another recession or financial meltdown is coming, and I think recent market weakness is a great time to add quality dividend-paying stocks to your retirement account.
Most investors don’t know how powerful it can be to invest in solid dividend paying stocks that pay high returns year after year. For example, dividend-paying stocks produced an average annual return of over 10% from 1970 to 2005. That’s six percent more than non-paying stocks returned during the same period. How big is another six percent annualized over 25 years? Instead of ending up with $ 200,000 on an initial investment of $ 50,000, you would have created enough to become a millionaire. Additionally, investing in some of the dividend-paying stock picks we offer here could deliver both solid dividends and double-digit growth over the next five or more years. This could produce a return of more than 20% annualized.
In my opinion, especially with today’s market uncertainty and during a slow recovery cycle, investors need to own quality stocks that consistently pay cash dividends. It is simply a good investment strategy during good and uncertain times. Everyone seems to have forgotten about these dividend-paying stocks over the past decade, but dividends are the number one way to make money in stocks over the long term.
If you want to get rich in stocks, one way is to get a lot of dividends and then reinvest those dividends. Referring to a study of the period 1872 to 2000 in his book, Behavioral Investing, analyst James Montier showed that dividend yields provided more than 50% of total stock return. There is no doubt that the best stocks to buy for long-term wealth creation are high quality dividends.
I recommend using several important fundamental criteria when evaluating high dividend stocks. The first is whether the company has a price / earnings ratio (PE) <14. The historical market average is around 15 and the modern market PE is around 17. So to really have some price increase, the PE ratio should have room to rise to the historical or modern ratio average. The second essential is to show steady growth over time with strong year-over-year profits. The third is considered a big plus, and it is up to the company to get into the habit of steadily increasing the dividend each year. Some other criteria that may be useful are finding companies with a price-to-delivery ratio <2.0 (historical average is 1.94) and price-to-sales ratio <1.0 (historical average is 0 , 86).
For this article, I focused my efforts on finding a diverse group of 10 very solid dividend paying stocks to suit anyone’s retirement portfolio. These companies are fundamentally strong and they will generate consistent income and steady growth for years to come.
10 highest dividend-paying stocks to buy with value, steady growth and consistent dividends:
1) BBL – BHP Billiton (PE <11)
2) BMS – Bemis Co Inc (PE <12)
3) COP – Conoco Phillips (PE <8)
4) DD – EI du Pont de Nemours et Cie (PE <10)
5) EMR – Emerson Electric Co (PE <12)
6) MT – Arcelor Mittal (EP <6)
7) NSC – Norfolk Southern Corp (PE <11)
8) PEG – Ent Service Public Group (PE <13)
9) UL – Unilever (PE <13)
10) UTX – United Technologies Corp (PE <12)
Each company on this list has strong fundamentals and most have a high dividend yield of 3% or more. In addition, their projected value over 1 year has a minimum upside potential of 20%. Study these companies and their balance sheets and learn how to find these types of investments yourself.
The bottom line is that an investor should do very well by investing in high dividend stocks, now and in the future. Keep looking for our posts on good stocks to buy in Brazil, China and other countries.
And, of course, good luck growing your retirement account in the future.