Safe, Long-Term Dividend Investments with Growth

 

Latest Ned Davis Research

My Latest and Greatest Dividend Analysis

My #1 Dividend Recommendation

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I receive lots of email from investors who are worried that the stock market is too high, and fear that a major correction will begin soon.

Latest Ned Davis Research

If you too are afraid, I have some research results that might put your fears at ease. Ned Davis Research studies the history of the stock market from every angle imaginable.

Two of Davis’ studies deserve your attention. His first study, based on the past 25 years, compared the timing of new highs for individual stock prices to new highs for the stock market indexes. His research indicates that stock market indexes, such as the Dow Jones Industrial Average and the S&P (Standard & Poor’s) 500 Index, typically hit their peaks about eight months after the peak in the percentage of new 52-week highs for individual stocks has occurred.

Thus far, the greatest percentage of new 52-week highs during this bull market occurred on May 10. If the May 10 new-highs peak is not exceeded, the stock market indexes will max out somewhere around January 10, 2014 – almost eight months from now.

Ned Davis’ second study looked at how high the stock market rises after a new peak is attained. Since 1928, after the S&P 500 Index made a new high following a bear market, the S&P 500 rose an additional 18% over a period of more than a year. If the S&P 500 can gain 18% from its old peak of 1,576 set on October 15, 2007, the index could rise to 1,860 or more within a year or so (the Index currently sits at 1,650).

In sum, the odds favor additional gains in the stock market during the next 8 to 12 months. Of course some bumps will be incurred along the way, but I advise buying on the dips and enjoying the ride!

My Latest and Greatest Dividend Analysis

In February of this year, I began a new Special Feature series entitled “A-List Dividends.” The objective of my analysis is to find safe, long-term dividend-paying investments with at least modest growth potential.

First, I needed to create a list of companies that fit my stringent criteria. The first 54 names on my list were easy to find. I included all of the companies currently found in the S&P 500 Dividend Aristocrats Index. The Aristocrats Index contains all companies which have increased their dividends every year during the past 25 years and have a market cap of $3 billion. Currently the Index contains 54 companies in a wide variety of industries.

I added to the list of 54 companies by including another 31 companies which have increased their dividends by 10% or more in every year during the past 10 years. Although the 31 companies have not increased dividends for 25 straight years, the 10 or more years of increases have been at a fast and steady pace. Two of the companies, for example, have increased their dividends more than 20% per year, on average, during the past decade.

In the third step of my analysis, I sought to whittle my list of 85 companies down to just a few. I looked for high-quality companies that will provide the best chance of outperforming the stock market indexes during the next 6 to 12 months. I required dividend yields to be 1.0% or more. I also wanted companies with excellent prospects for the year ahead. My search turned up six companies from the list 85 companies, which will provide safe, long-term investments with growing dividends and earnings.

How have my six recommendations performed? Extremely well. The stocks are up 10.7% since February 2013, compared to a lesser gain of 8.6% for the S&P 500 index. If the stocks continue to rise at a 10.7% pace, the total gain at the end of a year could be 40%, not including the 2.6% yield from dividends!

I have reviewed only one of my A-List Dividend companies below. If you would like the complete list of six companies with my full analysis, please just ask. It’s free with no strings attached! (My mom taught me to be nice to everyone, and I always strive to follow her advice.)

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One company which currently fits my criteria for high-quality, dividend-paying companies suitable for long-term investment is HCP, Inc. (HCP).

HCP. Inc. (HCP: 51.88) Min Sell Price is 66.15 HCP, formerly Healthcare Property Investors, is a real estate investment trust (REIT) started in Long Beach, CA in 1985. HCP invests in real estate serving the healthcare industry throughout the U.S. The company's portfolio of assets includes senior housing, post-acute/skilled nursing and life science facilities, medical offices, and hospitals.

The trust primarily generates revenue by leasing properties under long-term leases. Most of HCP's rents and other earned income from leases are received under triple-net leases or leases that provide for a substantial recovery of operating expenses. A triple-net lease, or NNN, requires the tenant to pay all taxes, insurance, and maintenance on a property.

HCP recently acquired 129 senior housing communities for $1.7 billion. Located in 29 states, the company’s portfolio includes 10,077 units representing a diversified mix of 61% assisted living, 25% independent living, 13% memory care and 1% skilled nursing. The purchase is expected to add noticeable EPS (earnings per share) in 2013. In addition, projects under development will continue to come on line in 2013.

At 18.5 times current FFO (funds from operations), HCP shares are very attractive. FFO is defined as net income (earnings), minus depreciation and amortization. Most REITs use FFO as a measure of income, because their real estate holdings tend to increase in value over time rather than decrease.

HCP recently increased its dividend by 5%; it now provides a hefty 4.0% yield. HCP has increased its dividend every year for the past 28 years. HCP is the only REIT included in Standard & Poor’s elite list of Dividend Aristocrats. The dividend is well-covered by EPS – 75% is well below the REIT industry standard of 90%. Buy HCP now.

I will continue to follow HCP, as well as many other undervalued, high-quality companies in my Cabot Benjamin Graham Value Investor. My next issue, coming soon, will include a Special Feature on companies in which Benjamin Graham and Warren Buffett would invest. I hope you won't miss it!

Until next time, be kind and friendly to everyone you meet.

Sincerely,

J.Royden Ward
Editor of Benjamin Graham Value Letter

Editor's Note: You can find additional dividend-paying, high-performing stocks selling at bargain prices in the Cabot Benjamin Graham Value Investor. In every issue, you’ll find my legendary Maximum Buy and Minimum Sell Prices for over 250 stocks. Click here to get started today!

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