They're some of the most reliable dividend-paying stocks in the
Each one has a national reputation for quality, reliability and the
ability to operate profitably in both good times and bad.
With economic growth stalling, job growth in the United States
slowing and Europe's debt crisis seemingly never-ending... more
investors are turning to this elite sector of themarket for
I'm talking about blue-chips... stocks like
General Electric (NYSE:
. Thesedividend stalwarts are arguably some of the safest stocks in
the S&P 500.
But not all blue-chip stocks are created equal... as we were
reminded last quarter, when even the most reliable dividend-payers
can be at risk in this market.
This was especially true for
Johnson & Johnson (NYSE:
All of these bellwethers missedearnings expectations -- and all for
the same reason. These large multinational companies all had lower
earnings because of the strength of the U.S. dollar...
The U.S.economy may not be firing on all cylinders, but the United
States looks like a Formula One race car compared with the rest of
the world -- especially Europe.
As a result, investors have flocked into U.S.Treasuries and the
U.S. dollar for safety. Likewise, investors are bailing out of the
euro. Just take a look at the chart below.
The chart above shows the performance of the dollar versus the
euro over the last year. As you can see, the dollar is up roughly
thirty percent against the euro since August... a major move for
This is a problem for large multinational businesses in America...
Even if these U.S. based companies sell the same amount of goods to
Europe, their revenue, priced in dollars, will be lower.
Companies can mitigate some of theircurrency risk byhedging their
overseas sales withderivatives , but that still doesn't eliminate
the bigger issue.
That's because a strong dollar also means European consumers now
have to spend more euros to buy the same U.S. products they did
last year. As a result, Europeans may buy fewer U.S. goods and/or
opt for relatively less expensive domestic goods.
For companies like Johnson & Johnson and Coca-Cola, that could
be a major challenge in the coming months. Both companies earn a
bulk of their revenue from Europe. If the dollar stays strong
relative to the euro, both of these businesses may continue to see
declining sales volumes.
But there were some stocks that were able to buck the trend in the
second quarter. Two of the blue-chips in my
Daily Paycheck Portfolio
-- blew past analysts' estimates.
What's their advantage?
It's simple... both of these companies produce goods and services
that only available in the United States. They don't have the same
foreign currency exposure -- all their revenue starts out, and ends
up, as U.S. dollars.
Risks to Consider:
Of course, every investment carries risk -- even large, U.S.
based corporations with no exposure to Europe.
Action to Take -- >
But in general, blue-chip stocks are some of the safest investments
to hold in the face of uncertainty. And when currency risks flare,
the best place to be is in those titans of industry that cater only
to the U.S. market.
-- Amy Calistri
P.S. -- Amy Calistri has developed a portfolio of dividend
stocks like these that holds up remarkably well in down markets.
For example, in the sell off last year the S&P 500 lost 5.3% in
August alone. Despite all the turmoil, Amy's Daily Paycheck
portfolio fell just 1.0% during the month. To learn more about
Amy's strategy -- including a few more high-yield picks she likes
-- you can visit this link to read more.
Amy Calistri does not personally hold positions in any
securities mentioned in this article. StreetAuthority LLC owns
shares of KO, JNJ in one or more if its "real money"
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