Several prominent investors have expressed their concerns about the Fed’s monetary policy and unsustainable budget deficits. Jim Rogers is extremely bearish about inflation. He thinks no matter what happens in the economy, it will lead to higher inflation, higher interest rates, and lower returns for long-term bond investors. Ray Dalio, the owner of World’s largest hedge fund, expects U.S. dollar inflation and he is bullish about emerging markets, commodities, and gold. Legendary investor Julian Robertson is in the same camp. He also expects commodities and China to perform well.
We like high dividend stocks and consider them as alternatives to 10-year Treasury bonds. High dividend stocks deliver higher current yields and usually increase dividend payments over 5-10 years. Like Jim Rogers and Ray Dalio, we are also concerned about the Fed’s inflationary monetary policy and want to protect ourselves against inflation. One of the ways of doing this without assuming significant risks is investing in high dividend stocks.
We compiled a list of utilities that have at least a 3% dividend yield, pay less than two thirds of their earnings in dividends and managed to increase their dividend payments by at least 2% annually over the past five years. A portfolio of these stocks is highly likely to outperform 10-year Treasury bonds over the next 10 years:
Company | Ticker | PE (TTM) | Dividend Growth Rate (5 yr. Avg) | 2012 EPS/ Dividend | Dividend Yield |
P P L CORP | 11.4 | 4.9% | 1.7 | 5.71% | |
D P L INC | 11 | 5.9% | 1.9 | 4.96% | |
AMERICAN ELECTRIC | 14 | 4.5% | 1.8 | 5.30% | |
ENTERGY CORP NEW | 10.2 | 9.0% | 1.8 | 4.99% | |
P G & E CORP | 15.6 | 6.6% | 2.2 | 4.15% | |
AVISTA CORP | 14 | 14.5% | 1.7 | 4.82% | |
SEMPRA ENERGY | 18 | 9.9% | 2.3 | 3.67% | |
NEXTERA ENERGY INC | 11.6 | 8.0% | 2.1 | 4.09% | |
UNISOURCE ENERGY | 12.8 | 14.9% | 1.7 | 4.73% | |
WISCONSIN ENERGY | 15.9 | 17.7% | 2.2 | 3.49% | |
U G I CORP NEW | 13.1 | 8.2% | 2.6 | 3.14% | |
PUBLIC SERVICE | 10.3 | 3.7% | 1.9 | 4.42% | |
ALLIANT ENERGY CORP | 15.1 | 8.1% | 1.8 | 4.39% | |
WESTAR ENERGY INC | 14.7 | 5.1% | 1.6 | 4.93% | |
SCANA CORP NEW | 13.2 | 2.9% | 1.6 | 4.99% | |
DOMINION RESOURCES | 9 | 7.4% | 1.7 | 4.45% | |
C M S ENERGY CORP | 14.5 | 3.1% | 1.8 | 4.35% | |
X C E L ENERGY INC | 14.9 | 3.3% | 1.8 | 4.31% | |
NORTHEAST UTILITIES | 15.9 | 9.5% | 2.2 | 3.25% | |
EDISON INTERNATIONAL | 9.6 | 3.5% | 2.1 | 3.54% | |
QUESTAR CORP | 16 | 6.3% | 2 | 3.57% | |
O G E ENERGY CORP | 16.8 | 2.4% | 2.4 | 3.06% | |
CENTERPOINT ENERGY | 16.5 | 5.7% | 1.5 | 4.60% | |
BLACK HILLS CORP | 19 | 2.0% | 1.6 | 4.45% | |
NEW JERSEY RES | 19.9 | 8.5% | 1.9 | 3.43% | |
W G L HOLDINGS INC | 15.4 | 3.1% | 1.6 | 4.07% | |
NORTHWEST NATURAL G. | 16.9 | 4.8% | 1.6 | 3.79% |
Billionaire hedge fund manager John Paulson recommended high dividend stocks as an alternative to long-term Treasuries as well. SAC Capital’s Steve Cohen had $53 Million in EIX in his portfolio at the end of December. Jim Simons had $21 Million in OGE and $11 Million in NJR at the end of December.
Disclosure: I am long PEG.
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