4 Big-Brand Stocks to Sell Now (and 2 Cheap Dividends to Buy Instead)

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By Brett Owens

ItaEURtms a pearl of investment wisdom thataEURtms been around for 100+ years. YouaEURtmve probably heard it over and over again.

It goes like this: if you want to make money in stocks, you must buy companies with unforgettable household names.

Too bad this aEURoewisdomaEUR is a relic of the pastaEUR"so much so that it can actually kill your profits! IaEURtmll show you why now, and give you four big names you should avoid, or sell if you hold them.

Then weaEURtmll move on to two much better buysaEUR"off-the-radar companies that have been quietly handing their shareholders big price gains and massive dividend hikes that put their aEURoecool kidaEUR cousins to shame.

One of these two stealth income plays has already hiked its payout 106% in just the last five yearsaEUR" and is poised to easily pull that feat off again in the next five.

Apple: The Latest Big Name to Tumble

No article on brands would be worth its salt without Apple ( AAPL ), long the top dog on InterbrandaEURtms yearly list of the biggest namesaEUR"and the first brand stock I want to warn you about today.

Because despite AppleaEURtms legions of fanboys (and girls), its stock still did this in the past year:

Fan Fave Falls Flat

aEURoeSure,aEUR you might be thinking. aEURoeBut thataEURtms just one year. Apple has still clobbered the market over just about any other timeframe.aEUR

YouaEURtmd be right.

But consider the bruising Apple has taken, despite its stellar brand: itaEURtms now almost 40% off its 52-week highs. Plus it plunged 10% on January 3, its biggest single-day drop in six years.

Those are the kind of wipeouts you expect from a cash-strapped small cap, not the worldaEURtms most fawned-over name!

Other big brands havenaEURtmt exactly been killing it, either. Check out how McDonaldaEURtms ( MCD ), in blue, Toyota ( TM ), in red, and Coca-Cola ( KO ), in green, the top three non-tech stocks on InterbrandaEURtms list, have fared since the market bottomed in aEURtm09.

S&P 500: 1, Big Brands: 0

So whataEURtms really going on here?

In a nutshell, those product reviews you see everywhere from Amazon to Facebook are giving folks more intel than everaEUR"and theyaEURtmre using it to zero in on products that precisely fit their needs, not just blindly grabbing the next offering from their favorite big-name brand.

AppleaEURtms No-Win China Play

To see what I mean, consider AppleaEURtms latest face plant in China.

Sure, the company is taking a hit from the trade war and a general slowdown in the country. But thataEURtms not the whole story; itaEURtms also being pummeled by lower-priced domestic players like Huawei.

The latest numbers from research firm Counterpoint tell the tale: Huawei led the Chinese smartphone market in the third quarter, with a 23% slice, up solidly from 19% a year earlier. Vivo, the No. 2 player also grew, from 19% to 21%.

Apple? Its slice fell from 10% to 9%. Worse, its all-American brand actually works against it, setting it up as one of the first casualties if Chinese consumers decide to boycott American names should trade talks falter.

Coke Is Not It

So donaEURtmt be distracted by big names like Apple, and especially its consumer-staples cousin, Coke, which has posted negative sales growth in 21 of the last 22 quarters and pays a totally unsustainable 117% of cash flow as dividends!

The trouble with Coke is that, like Apple, its brand can undermine it, reminding folks that, at heart, Coke is about sugary drinks, no matter how much it goes on about the coconut water, organic teas and other healthier fare itaEURtms been pushing out at a fever pitch.

Instead, weaEURtmre going to go small and invest in the sustainable dividend growers that are eating the big guysaEURtm lunch, starting with the first of the two buys I have for you now.

Midcap Pick No. 1: The Only Car Stock You Need

I donaEURtmt know why youaEURtmd mess around with General Motors ( GM ), Ford (F) or Toyota when you could grab a diversified player like Penske Automotive Group (PAG). ItaEURtms easily lapped the big guys since GMaEURtms came out of bankruptcy in 2010:

Dark Horse Pick Cruises to a Win

The best part is that, thanks to the pullback, you can still pick up PAG for just 8-times forward earningsaEUR" very close to its all-time low of 7.2. Sure, all carmakers are cyclical, but such a silly valuation gives us plenty of upside (and minimal downside) here right now.

And when I say PAG is diversified, I mean it: the company has 313 dealerships selling cars and commercial trucks in the US, Canada, Europe and New Zealand. It also owns a thriving parts business, financing arm and service operation, in addition to a 29% stake in Penske Truck Leasing.

HereaEURtms another shock absorber the big guys canaEURtmt match: PAGaEURtms near-even balance between new and used cars. These markets often move in different directions, and we saw that in Q3, when new-car revenue slipped 4.2%, but used sales surged 6.1%, easily offsetting that dip and driving a nice 2.4% rise in PAGaEURtms overall revenue.

Finally, check out this dividend chart:

4 Quarters, 4 Dividend Hikes

ThataEURtms right: PAG is one of a handful of stocks that raises its dividend every quarter. ItaEURtms done so for 30 quarters running and has boosted its payout 106% in just the last five years .

The kicker? The stock also yields a market-beating 3.2% and pays out a measly 27% of cash flow as dividends, so this payoutaEUR"and its growth streakaEUR"are safe.

Midcap Pick No. 2: An Accelerating 4.1% Payout on the Cheap
Leggett & Platt (LEG) is so boring it would make the stodgiest investoraEURtms eyes water: it makes a bevy of manufactured goods, from floor underlayment to mattress springsaEUR"the latter of which is its biggest segment.

When it comes to Leggett, hereaEURtms the key thing you need to know: mattress sales are skyrocketing. According to Transparency Market Research, this will be a $43-billion business in 2024aEUR"54% bigger than it was in 2017.

ItaEURtms also a business thataEURtms being taken over by custom mattress makers peddling their wares online; Leggett sees online mattress sales doubling in the next four to five years, which is a big reason why it just paid $1.25 billion for Elite Comfort Solutions, a maker of memory foam with a roster of online mattress sellers as customers.

Funny thing is, youaEURtmd never know this by looking at LeggettaEURtms share price, which dove 23% in the past year, with almost all of that coming in the last three months.

ThataEURtms turned two vital numbers in our favor: the dividend yield, which, at 4.1%, is the highest itaEURtms been in more than six years; and the forward P/E ratio, which is at 14.1aEUR"near all-time lowsaEUR"baking in some nice upside while helping keep the stock from falling out of bed.

In fact, Leggett is one of a very few midcaps thataEURtms also a Dividend Aristocrat, having hiked its payout for 47 straight years. And as you can see below, these hikes have been getting bigger since 2016:

LeggettaEURtms Dividend Takes Off

My advice? Grab this ignored midcap manufacturing star nowaEUR"before it makes its next big move up.

Alert: Your Shot at 28% Gains (and 8%+ Dividends) Is Shaping Up Here

The 3.2%+ dividends you get from the two stocks I just showed you are greataEUR"but youaEURtmd still have trouble retiring on them.

Luckily, thereaEURtms another option: a group of ignored investments I call aEURoe Dividend Conversion Machines .aEUR

By simply bypassing regular stocks and diving into this too-often-ignored corner of the market instead, youaEURtmll instantly tap retirement-saving dividends of 8.1%, 8.6% and even 11.5%!

How do I know? Because IaEURtmve been investing my own personal cash in these life-changing income plays for years.

aEURoeConvertaEUR Puny 2% Dividends to Incredible 8% Cash Payouts

To get a sense of what these amazing income plays can do for you, consider this: letaEURtms say you want to invest in infrastructure stocksaEUR"a promising sector, as both Republicans and Democrats see fixing our crumbling roads, bridges and power stations as a top priority.

The problem? Low dividends!

Check out what some of the top names in this space pay right now:

But if you buy these very same stocks through one of my favorite Dividend Conversion Machines, those measly 2% payouts suddenly do this:

Put another way, this outsized 8% payout hands you $40,000 in cash, year in and year out, on a $500k nest egg .

That could be enough for you to retire on dividends alone, without having to sell a single stock in retirement!

Kick-Start Your Own Safe 8% Cash Stream Today

IaEURtmve just released an exclusive Special Report detailing the 4 best Dividend Conversion Machines for you to buy today. These battle-tested investments boast yields all the way up to 9%.

The best part? These 4 unloved income plays are so cheap that I fully expect them to surge 20% in the next 12 months! And youaEURtmll grab that gain on top of the 8%+ avera ge dividends they pay out.

That adds up to a 28% windfall!

DonaEURtmt miss your chance to grab these 4 picks before they start their next move up. Click here now and IaEURtmll give you all the details, including these 4 Dividend Conversion MachinesaEURtm names, ticker symbols and my complete research .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Options
Referenced Symbols: AAPL , MCD , TM , KO , GM

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