As the end of 2011 approaches, we look naturally look ahead to the next year of investing. With that outlook comes a peek at some likely candidates to be in the 2012 "Dogs of the Dow" lineup.
"Dogs of the Dow" refers to a year-end portfolio strategy that entails buying the highest-yielding Dow 30 component stocks as of the close of the last trading day of the year (which is this Friday). Income-focused investors will sometimes look to carry this particular portfolio into the new year, or accumulate several of the names early in the new year.
Please note that we don't necessarily endorse this strategy ourselves. We're just pointing out several names that investors seem to have been flocking to over the past few weeks. Many of these dividend stocks have seen their valuations stretched as a result.
To view the Dividend.com DARS™ Ratings on any of the stocks below, just click their symbols to be taken to their profile pages, which contain detailed ratings and dividend payout information.
AT&T ( T ) - The telecom giant is coming off a so-so 2011, but still sports a near 6% dividend yield. We are not expecting much in the way of share price appreciation at this point, but AT&T is still a popular defensive play for income investors.
Verizon ( VZ ) - We like VZ a bit more than T at this point. That said, the stock may also be near the top end of its valuation range. Its 5% dividend yield is still very attractive, however.
Merck ( MRK ) - In 2011, MRK raised its dividend for the first time since 2004. That boost has helped its yield to the 4.5% range. The company's growth prospects still appear minimal, so 2012 could bring another year of minimal share price appreciation.
Pfizer ( PFE ) - We liked PFE in early 2011, but advised our readers to hold off on putting new capital in the name once it hit the $19 levels. The stock is coming off a stellar 2011 performance, but we'd be very surprised to see a repeat in 2012.
General Electric ( GE ) - We warmed back up to this venerable dividend play following its third dividend increase of the year earlier this month. GE's valuation could be less attractive if shares gravitate toward the $20 mark, however.
DuPont ( DD ) - This company was one of the worst-performing Dow 30 stocks of 2011. Despite a seemingly-attractive 3.5% yield, we'd be cautious around DD. The stock's recent price action still indicates a good bit of uncertainty for the global economies.
Johnson & Johnson ( JNJ ) - JNJ is another name we liked earlier in this year, but has been stuck in a very tight trading range. The risk/reward for the stock is about even as we look at 2012.
Intel Corp ( INTC ) - Similar to General Electric, Intel's management has been aggressive with its dividend increases, much to our liking. The stock could continue to slowly trickle higher if its yield continues to grow through future dividend boosts. Otherwise, earnings expectations have the shares sitting at about fair value as we head into 2012.
Procter & Gamble ( PG ) - This is another name we liked earlier in the year, but have since become "Neutral" on. A fall in commodity prices could help the company's bottom line, but at this point, the risk/reward appears about flat.
Kraft Foods ( KFT ) - The company got a real boost from news it would be splitting into two publicly-traded entities. The stock appears fully valued at this point, but we don't want to underestimate the split-up price share potential.
Microsoft ( MSFT ) - The stock continues to be dead money and at this point. MSFT's only hope may be to attract new shareholders with generous special dividend payouts (as it did back in 2004).
J.P. Morgan ( JPM ) - Once again, the "experts" are calling for the financials to be a leading sector in 2012 as a popular contrarian strategy. If they're right, the stock could indeed have a decent 2012 following a weak 2011.
Chevron ( CVX ) - With oil prices remaining around $100 a barrel level at year-end, the company's earnings potential should remain attractive. However, the stock could be vulnerable if oil dips - as we saw a few months back.
The "Dogs of the Dow" list normally consists of 10 stocks, but we've profiled 13 above. Keep in mind the bottom five names could shift around a bit, but in the end, the names you see above are all leading candidates to be in the final "Dogs of the Dow" portfolio.
We take a closer look at these names and many other well-known dividend stocks in our 2012 "Beat The Market With Dividend Stocks" 275-page guide. Be sure to check it out!
And as always, you can consult our industry-leading Best Dividend Stocks List for the names we're currently recommending for long-term and income-seeking investors.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.