Burgers, Oil and Chemicals—Mature Industries Paying Off Big-time
I want to stay on the topic of large-caps for a while. Owning solid, dividend-paying stocks in the age of austerity is going to be a decent strategy, unless interest rates skyrocket and cash begins to pay more than stocks (always a possibility down the road, but not anytime soon). I’d like to see more gold producers pay more in dividends to stockholders. They already have so much cash on their books.
There have been some major wealth-creating large-cap stocks this year…and the kicker is they also pay increasing dividends to shareholders. Consider ConocoPhillips (NYSE/COP), which is the third largest energy company in the United States. With over $150 billion in assets and with operations all over the world, this large-cap stock is up about 25% on the market in just the last six months. The kicker with ConocoPhillips is that the stock’s also been yielding between three percent and four percent in dividends. That’s a fantastic rate of return from such a large company in a short period of time.
Also as impressive is the wealth-creating performance of McDonald’s Corporation (NYSE/MCD), which is the kind of mature company you wouldn’t think would be doing so well. This $84.0-billion gem is up around 27% since the beginning of the year, while also paying a solid three-percent dividend. The world’s biggest burger flipper is on track to grow its earning about 15% this year and an estimated 10% next year. This earnings growth excludes the dividend payments to stockholders.
Perhaps the most impressive performance from a Dow stock has been E.I. du Pont de Nemours (NYSE/DD), better known as DuPont, which is making money hand over fist in Asia. This $43.0-billion powerhouse is trading right around its 52-week high of $47.00 a share, having generated an inspiring 38% return since the beginning of the year. While the company’s revenues grew a solid 17% in the third quarter, emerging market sales grew 22% over last year. All this, while also delivering a dividend yield of between 3.5% and four percent all year. That’s an amazing performance for any large-cap stock.
As we know, not all large-caps are doing well in this market. About half the stocks in the Dow Jones Industrial Average aren’t doing much (but they are paying their dividends). Still, stocks like these illustrate that you don’t necessarily have to scour the entire stock market to find a hidden gem. When the timing is right, the biggest stock market stars can be right under your nose.
Big hedge funds buy and sell a lot of large-cap stocks, more so than small-caps. The deal there is that these funds have so much money to trade that they need the liquidity that large-caps offer. I don’t see any reason why an equity portfolio can’t mix it up and have a selection of companies both large and small. With a stable, global company like DuPont generating a rate of return of almost 40% plus dividends in one year, speculating in Chinese shares seems almost not worth it.