A lot of the benchmark stocks I follow are doing great in this stock market, hitting new 52-week or all-time highs. It doesn’t seem like the kind of stock market where you’d find companies that are growing their revenues and earnings and creating wealth for stockholders, but it is happening. Going forward, for new money going into this stock market, you’ve got to buy the market leaders on dips, and you have to have dividends.
Union Pacific Corporation (NYSE/UNP) just hit a new all-time record high on the stock market of $123.78 a share. With a current 1.9% dividends yield, the stock’s new record high is only at a price-to-earnings ratio of about 16.
Then there is PepsiCo, Inc. (NYSE/PEP), which, as we all know, is a very mature business. The stock just hit a new 52-week high of $72.94 a share and is very close to achieving its all-time high. With a solid dividends yield of three percent, this stock’s long-term track record of wealth creation is excellent.
Another benchmark stock that’s doing great on the current stock market is Colgate-Palmolive Company (NYSE/CL), which just hit a new all-time record high of $109.84 and is currently experiencing strong price momentum. Even with this achievement, the company’s dividends yield is 2.3%, and the stock has been strong all year.
Then there’s technology bellwether International Business Machines Corporation (NYSE/IBM), which continues to benefit from its services business and strong cost controls. IBM is about 12 points below its all-time record price high on the stock market with a current dividends yield of 1.7%. Wall Street unanimously increased its earnings estimates on the company for this year and 2013 after the company reported a solid second quarter with good visibility.
Finally, there’s the pharmaceutical benchmark Johnson & Johnson (NYSE/JNJ), which has done a great job managing both a large drug-manufacturing business and a strong, brand name consumer products division. This stock is trading right at its 52-week high around $70.00 a share, and recently broke out of a slump at $62.00 a share. With a current dividends yield of 3.5%, Johnson & Johnson has a great long-term stock chart.
So while a lot of investors are sitting on the sidelines and investment risk for stock market holdings is high, there are a lot of good dividend paying stocks out there creating wealth in a no-growth economy. You might say these benchmark stocks have the makings of a great portfolio, with the goal being to accumulate them over time when they’re down.
Dividends are uniquely important in a slow-growth economy, and institutional investors will step up and pay for them, as these stocks show. Stock market investors want certainty above all else, so, in a slow growth environment, stability of revenues, earnings, and dividends payments is king. (See “All the Stock Market Needs This Earnings Season.”) Going forward, I expect these benchmark stocks to continue leading. I don’t expect them to break down significantly, even if the next recession occurs.