Large-cap Standout Companies — Great Success

“Ahead of the Street” Column, by Mitchell Clark, B. Comm.

There are a lot of standout companies that have recovered tremendously well on the stock market. They’ve done so since the most recent financial crisis, but also since the stock market bubble burst in 2000. A lot of these standouts are very large companies that pay dividends. In my mind, this presents quite a compelling argument for owning large, well-managed, dividend-paying companies for the long term.

One such standout company is the venerable Hewlett-Packard Company (NYSE/HPQ), the stock of which price has appreciated significantly this year. Since the March low, this $118-billion company has seen its stock price double to its current level. Another 10 more points or so and this stock will be trading around the same record highs as it did back in during the technology bull market in the late 90s.

Also doing well is International Business Machines Corporation (NYSE/IBM), or IBM, which has managed to outperform the broader market this year. It is also trading only a few points away from its all-time price high set in 1999.

Even the performance on the stock market of The Procter & Gamble Company (NYSE/PG) has been very noteworthy. This stock lost about half of its value in 2000, after the company announced that it was not able to meet expectations in its financial performance. It took five solid years for the stock to recover, but it did. Then it proceeded to achieve a new all-time price high in 2007.

For me, these three companies are good benchmarks to follow, because what they say about their businesses is a good reflection of what’s happening not just in the Main Street economy, but also in the corporate economy, where so much business takes place. From my perspective, these companies have proven themselves to be outperformers, even when times are tough. They don’t pay the biggest dividends in the marketplace, but they have long track records of slowly increasing their dividend payments to stockholders.

The luxury of being a long-term investor is that your greatest asset is time itself. A lot of investors aren’t really interested in creating a portfolio of stocks that include dividend-paying large-caps. A lot of people want to make money from the market as fast as possible. They are really speculators, not investors.

I’ve learned over the years never to ignore any potential opportunity for investment because it belongs to a certain group or sector in the marketplace. Sure, a U.S.-listed Chinese stock might offer the potential for better capital gains in a shorter period of time. But, like the three standout companies mentioned above, they have proved that they can outperform the market, pay a dividend, and offer their stockholders a good night’s rest all at once.