CHICAGO, Sept. 30, 2011 /PRNewswire/ -- Today, Zacks Investment Ideas feature highlights Features: Abbott Laboratories (NYSE: ABT), American Water Works (NYSE: AWK) and TAL International Group (NYSE: TAL).
Dividends to Sweeten Your Portfolio
The ever changing winds on Wall Street have once again shifted toward a bearish tone. But that doesn't mean your best bet is to throw a short trade on or hide in cash.
Trading is one thing, but if you are an investor trying to time the market you run the very costly risk of missing out on profits. Gains come unexpectedly and can be gone before you have a chance to right the ship to take advantage.
Get Paid in Cash, Don't Hide in it
While the exact number may vary, the consensus says that the vast majority of the market's overall gains boil down to about 5% of the trading sessions, give or take a few percent. So, if you are not at least somewhat long on those days you have a 100% chance of missing the bulk of the return in equities.
Rather than sitting out, opt for a more conservative portfolio that will pay you a healthy dividend. Collect the cash to soften the blow if the market does fall. If stocks head higher the regular payments can make it that much sweeter.
Lower Price, Higher Yield
The yield on a stock's dividend is the annual dividend payment divided by your cost basis. So, if you are getting in at a low price, as the market is now offering, your yield will be significantly higher than if buy after we see shares move higher.
Here are a few stocks, with a hearty dividend payment, good growth prospects and a favorable Zacks Rank.
Abbott Laboratories (NYSE: ABT) is a broad-based health care company that is involved in all phases of disease prevention and diagnostics to treatment and the cure.
The company pays out 48 cents a share each quarter, giving the stock a 3.8% dividend yield at the moment. Not too bad and being in a historically defensive business also helps with the recent market woes.
In addition, the earnings outlook continues to improve. Analyst are inching estimates higher and now expect growths of 11.3% for this year and another 8.5% in 2012.
Don't worry about breaking the bank either; shares are going for 11 times this year's estimates. ABT is a Zacks #2 Rank (Buy).
American Water Works (NYSE: AWK) is a water and wastewater utility company in 30 states.
A couple weeks ago the company went ahead an increase it earnings expectations, which bodes well for continued increases to the 3.0% dividend payment.
After that the company received a patent for treating waste water, on Sep 28. The new process will reduce the costs associated with the current methods. So, the company should see future savings for both energy and chemical costs.
Estimates were already rising before the patent, but could move even further with this news. Analysts are expecting earnings to grow 16% this year and another 6% next year. Those upward revisions have shares at a Zacks #2 Rank (Buy).
TAL International Group (NYSE: TAL) is an intermodal freight company, leading containers and chassis. Not exactly defensive but the payments and valuations look good.
The company is paying out $2.08 per share per year, putting the dividend yield at an appealing 7.9%. Because they are in an economically sensitive industry there is some volatility in the stock though.
However, the earnings estimates keep moving higher despite the sentiment out there. In the past 3 months, the Zacks Consensus Estimates for 2011 is up 53 cents, to $3.93. Next year's average estimate is up 23 cents, to $3.94.
Those upward revisions combined with the sixth consecutive earnings surprise have shares at a Zacks #2 Rank (Buy). And you can pick up TAL for just 6 times earnings and with a PEG ratio of 0.5.
Buffett Said It Best
Warren Buffett says to be greed when others are fearful. Right now they sure are. That doesn't mean you have to be reckless though. Going for dividends now and having patients will pay off later.
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SOURCE Zacks Investment Research, Inc.