Cramer's Favorite Dividend Names
With all the chatter about moving away from equities into "safer" instruments like bonds or CDs, Cramer is giving viewers a reality check. "You invest for the future, and the assets that have the best future are stocks with high dividends... or stocks of companies that are serial dividend raisers," he says. So Cramer is doing a little investing 101 and laying out his favorite dividend names this week.
Monday he focused on three names, stocks with "superior" dividends that rank among his favorite on the market: General Mills, Pfizer and AT&T. General Mills is a solid defense play, he says, while Pfizer is a "mid-yielder" in the midst of a turnaround after its aquisition of Wyeth, and AT&T continues to rally higher despite reports of technical issues.
But aside from these general ideas, why is Cramer in favor of these stocks? Let's break it down.
General Mills: It's a household name with some of the world's most beloved brands, says Cramer, pointing out names like Cheerios, Pillsbury and Betty Crocker. With a dividend that was just recently raised from $0.47 per share to $0.49, in the wake of a similar increase this past summer which is "an incredible sign of strength," says Cramer. "When a company raises its dividend, that's management saying: we have the cash, we have the growth and we believe that things are getting better." With a 2.8% yield, it may not be as impressive as it sounds but compared to government bonds - especially with a rising stock price - your dividend payouts are steadily increasing. Cramer says as far as safety, General Mills is "as safe as they come" and has earnings per share that 2.3 times the dividend payout. That's the gold standard for safety, says Cramer.
Pfizer: Cramer admits he hated this stock prior to it's game-changing aquisition of Wyeth, which he expects to create $4 billion in cost savings while broadening Pfizer's pipeline and product portfolio. Yielding a 3.8% dividend after boosting its payout from $0.16 per share to $0.18 per share, and Cramer expects the company to pay out $46 billion in dividends while also paying down $34 billion in debt between 2010 and 2015, with $28 billion of cash left over. Not to mention the stock is flirting with its 52-week high after heath care reform has been substantially watered down, notes Cramer, who thinks the safety of this dividend is firmly intact, as he estimates the company's earnings could cover the dividends three times over. And don't forget, the must-own date to cash in on the next quarterly dividend is Feb 2nd, says Cramer.
AT&T: Cramer's favorite of the three, AT&T is also fresh off of a dividend boost up to $0.42 per share, giving it a large 6.1% yield. Following Cramer's philosophy of buying into the mobile internet "tsunami," he calls AT&T the conservative play. It's a big, safe Telco company, he says, and its big exposure to the coming mobile internet boom is enough to swing a big company like this. The must-own date to get in on this dividend is January 7th, reminds Cramer.
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