Cramer’s reason for liking dividend-paying stocks hasn’t changed: They can offer great protection in a volatile market. But these days there are two kinds of dividend plays that he recommends.
First, the classic “accidental high-yielders.” These are the stocks with small payouts that wouldn’t ordinarily offer high yields. But because of downward pressure in the markets, which has hurt their share prices, those yields have shot up. Now investors get more bang for their buck.
The added benefit of owning these kinds of stocks is that the newly high yields attract new buyers, and that puts a floor in the share price. So not only do investors get to collect the payout on the way down, but they can also ride the stock higher on the way back up.
Then there are the dividend boosters. These stocks may not boast high yields, but the simple fact that the underlying companies felt confident enough to raise the dividend can be reason enough to buy. In fact, a small basket of these boosters that Cramer recommended back in February has outperformed the S&P 500 since then, even during the wild swings caused by Europe.
We pulled together the best of best of these two kinds of dividend plays – Cramer’s 13 favorite names right now. Read on and pick one or two for your portfolio. They could offer just the kind of defense that you need.
Posted 16 June 2010
PCL is the largest private timberland owner in the US, and, as Cramer described it, “a major beneficiary” of the rebounding building-materials market, “a business that should get even stronger,” he said. When he profiled the stock on May 7, Plum Creek had jumped 63% over the past decade – but that number soared to 183% with reinvested dividends.
Click here for more from Cramer on Plum Creek Timber.
Double D offers more than just a respectable 3.5% dividend yield. The company also boasts strong execution. Hence its first-quarter upside surprise back in late April and its increased guidance for the full year. That should give you some idea of how safe the payout seems to be. If not, there’s this stat: DuPont has paid out 425 consecutive dividends – since 1904.
Click here for more from Cramer on DuPont.
Back on May 7, Cramer gave viewers a diversified portfolio of dividend-paying stocks to help them ride out what has been a very unpredictable market. In addition to Plum Creek and DuPont, the list also included AT&T and Mad Money favorites Kinder Morgan Energy Partners and Altria. But for those with certain misgivings about owning a tobacco company, Cramer offered an alternate: Con Ed. This steady, consistent utility pays out a 4.8% dividend yield right now.
Click here for more from Cramer on Con Ed.
Like Con Ed, Pepco is another solid utility, though it yields even more than its industry peer: 5.7%. Another great point about this company, though, is its growth. POM’s long-term growth rate clocks in at 10%, while similar companies hover between only 4% and 6%.
Click here for more from Cramer on Pepco Holdings.
A speculation play with a dividend, too? Yup, that’s what KFN offers. This is the debt-management platform for KKR, the giant private-equity firm. After being written off during the credit crisis, Cramer thinks it’s ready for a comeback. Enjoy that near 5.5% yield in the meantime.
Click here for more from Cramer on KKR Financial Holdings.
US, manufacturing in this country is “stronger than ever,” Cramer has said, and he thinks EastGroup Properties is the best way to play it. This high-yielder, paying out 5.2%, owns industrial and office properties in the Southern US, especially in Texas, Florida, California and Arizona. Like Boston Properties and Federal Realty Trust before it, which helped investors to survive the down markets of 2008 and 2009, EGP should carry its shareholders through this most recent storm, too.
Click here for more from Cramer on EastGroup Properties
Cramer likes stocks with high dividends for sure, but maybe even better are companies who recently boosted those dividends. He sees that as a true sign of health, especially in this market and economy. Clorox qualifies for this latter group, as it upped its payout back in May by a full 10%, bringing the dividend yield to a respectable 3.3%. And did we mention this consumer-products maker is a classic defensive stock for this volatile market?
Click here for more from Cramer on Clorox.
This real estate investment trust gives you two ways to make money: either by collecting that 5.4% yield or playing the growing demand for medical care by aging Americans. HCN, with 608 properties in 39 states, owns senior homes, hospitals and other medical office buildings. It’s a diversified portfolio of real estate that Cramer thinks will help the company capitalize on the trend.
Click here for more from Cramer on Health Care REIT.
Cramer recommended this dividend booster back in February – along with Core Labs, Ross Stores, Rollins and Wyndham Worldwide. As a group, these stocks outperformed the S&P 500 since then, even through the market’s Europe-inspired roils of the past few months, delivering a 16% gain versus the index’s 3%.
Click here for more from Cramer on Hasbro.
Ever think dividends would offer a “wow factor”? Consider WYN’s 200% dividend boost this past February, bumping up its payout to 12 cents a quarter from just 4 cents. Granted, the stock yields just 2% right now, but the company has said it would continue to raise its dividend in the future. There seems to be plenty of money to cover it, too: 2010 and 2011 earnings should come in at least three times higher than the dividend.
Click here for more from Cramer on Wyndham Worldwide.
Continuing with the idea that dividend boosts don’t always equal high-yielding stocks, there’s Caterpillar. This company in June increased the amount it returns to shareholders by 5%, but the yield sits at only 2.3%. Still, that’s OK, Cramer said. Because as we mentioned, the boost alone is a sign of strength. And investors need that kind of confidence in turbulent times like these.
Click here for more from Cramer on Caterpillar.
Don’t laugh, but there’s a mini-bull market going on in the pet business right now. And Del Monte just happens to be one of Cramer’s favorite ways to play it. Plus, the company just raised its dividend by a whopping 80%, bringing the yield up to, well, just 2.5%. But again, think of how strong DLM must feel about its business to make such a bold move.
Click here for more from Cramer on Del Monte Foods.
NFG is another dividend booster that Cramer likes. He thinks of this conservative utility as a great low-risk play on natural gas, as it owns the cheapest holdings in the Marcellus Shale, that great nat-gas reserve in Appalachia.
Click here for more from Cramer on National Fuel Gas.