Bonds and certificates of deposit have long been considered safer investments than stocks. But in an era of incredibly low interest rates, Cramer said, buying the former two could be a mistake.
A CD right now might offer a 1.5% return, while 10-year Treasurys pay you 3.75%. A company with a high-yielding dividend, however, can generate more than 7% (see: Kinder Morgan Energy Partners, among others). But even stocks with sub-4% yields these days may net more than those 10-years because dividends enjoy a better tax rate. And they offer the potential for upside, which is something those so-called safe investments don’t.
Cramer pulled together an updated list of his favorite high-yielding picks to help investors take advantage of the trend. (Click here for his first) These are companies that not only return generous sums to shareholders, but also have a history of raising those payouts. The end result? Investors collect a steady stream of income now and all but bank on even more in the future, whether through a rising stock price or an increasing dividend.
Read on for Cramer’s nine newest dividend plays. Just remember: The numbers listed here were correct as of publish time, but they may have changed a bit since. So do your homework! And make sure these stocks still work for your portfolio before you decide to buy.
Cramer’s charitable trust owns Altria and Emerson Electric.
The maker of household names like Cheerios, Pillsbury and Betty Crocker recently raised its dividend to 49 cents from 47 cents, even after a similar bump this past summer. That is, Cramer said, “an incredible sign of strength.” The 2.8% yield may not sound impressive, but General Mills’ payouts, unlike government bonds, are steadily increasing.
Cramer was not a Pfizer fan prior to its purchase of Wyeth, but he praised the deal’s $4 billion in cost savings and the boost it gave to Pfizer's pipeline and product portfolio. PFE now yields 3.8% thanks to a recent dividend increase to 18 cents a share from 16 cents, and Cramer expects a whopping $46 billion to be returned to shareholders between 2010 and 2015. And, like all of the Mad Money host’s dividend picks, Pfizer has plenty of cash on hand to cover that payout.
This company is a conservative play on Cramer’s favorite secular growth trend right now, he said, the mobile Internet. AT&T is a big, safe telco with great exposure to the mass adoption of smartphones. What about the dividend? A recent raise to 42 cents has brought the yield up to 6.1%.
Altria is now a “steady domestic tobacco company,” Cramer said, after spinning off Kraft Foods and Philip Morris International. What’s left is a market leader in US cigarettes and smokeless tobacco, as well as a 28% stakeholder in SABMiller, the second-largest brewer. MO, currently yielding 6.8%, has returned as much as 504% to shareholders over the past 20 years, as long as the dividends were reinvested. The S&P 500, however, lost 25% during that same period.
Cramer likes the company for its strong market-share position in waste removal/disposal and landfill facilities, which come in at 30% and 40%, respectively. That gives Waste Management pricing power, a handy trump card during a recession. For example, WM upped its municipal solid waste fees by 3% in the third quarter despite a 6% volume decline. The company just boosted its dividend on Dec. 17, 2009, by 8.6%, bringing the yield to 3.8%.
This diversified industrial firm is the “perfect proxy for any rebound in the market,” Cramer said. That’s because 3M makes everything from Post-It notes to glass computer screens to health-care products to scotch tape. 3M pays out a smaller 2.5% dividend yield, but the company has consistently raised it for over half a century. The last increase came in February 2009, Cramer said, “So I think we could be due for another one in the not-too-distant future.” Maybe as soon as this February 2010.
Emerson, yielding 3.1%, definitely views its dividend as crucial: The company raised it in November 2009 for the 53rd consecutive year. Investors who reinvested those payouts over the past decade have earned an 89% gain, compared with the S&P 500’s 25% decline. The next dividend announcement should be coming by early February 2010, Cramer said, so watch for that. He also endorsed EMR, a diversified industrial, for its exposure to the global economic recovery.
Regular Mad Money viewers know how much Cramer likes Nucor CEO Dan DiMicco. Under his leadership, the company raised its dividend this month to $1.44 a year, or a yield of 3.2%, despite a lack of US stimulus spending on infrastructure and steel dumping from China. There’s a chance that payout could be higher if Nucor brings back the special dividends it suspended due to the recession, which Cramer said could happen in 2010.
Lastly, there’s Coca-Cola. The stock yields just 2.9%, but the company behind it has raised the dividend for 47 straight years, most recently in February 2009. Cramer said there could be an increase coming when Coke declares its next payout in early 2010. In the meantime, investors get a top beverage company that’s also a great weak-dollar play, as 75% of profits come from outside the US.