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CNBC EXPLAINS

Own Stocks With High Cash Flow: BlackRock's Doll

Published: Monday, 19 Dec 2011 | 4:51 PM ET

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By: Margo D. Beller
Special to CNBC.com

In this current "muddle-through world," the best stocks to own are those that have the free cash flow to increase their dividends, BlackRock's Bob Doll told CNBC Monday.

"Dividends work if the company raises the dividends. It’s about free cash flow, not the dividend" itself, said BlackRock's [BLK Loading... () ] chief equity strategist.

"In a world that we muddle through and things are slowly get better, bonds are finished as an asset that improves," he explained. "They only do well if we have more of these big bumps in the road. Dividend-paying stocks that don’t raise their dividend are going to behave like bonds. That’s not a great place."

Back in September, Doll told CNBC investors should take a "leap of faith" and be willing to risk some capital and find companies "that are hitting new highs."

On Monday he said his favorite type of stock "is a dividend payer that can raise dividends, but I also like nondividend payers that can have positive free cash flow that can eventually pay something."

One company he likes is Intel [INTC Loading... () ], paying a dividend of 3.5 percent. Some of the other companies he likes include Aetna [AET Loading... () ], WellPoint [WLP Loading... () ], Pfizer [PFE Loading... () ], Bristol-Myers [BMY Loading... () ]and Dell [DELL Loading... () ]. He even likes Microsoft [MSFT Loading... () ], which he said he's "been warming up to it" in the last few months.

Like others, he wonders if Apple [APPL Loading... () ] will ever use some of its cash hoard and pay a dividend. "I think the time for a dividend is around the corner," he said. "I think that will be another lift to the stock."