Unlike some people on Wall Street, Cramer doubts that Dubai’s debt troubles will set off a correction in the stock market. But if such a worst-case scenario should take place, he recommended taking shelter in these six dividend-paying stocks.
Cramer suggested dividend plays specifically because short sellers tend to avoid them. When an investor borrows a stock to sell it short, he’s responsible for paying any dividend attached to it. And few people want that burden. So owning shares in a company that offers a big payout often allows you to sidestep a sell-off.
But there are other reasons to like dividends, too. They provide a cushion when the market dips, as other investors flock to these names for safety and, as a result, push their share prices higher. The taxes on dividend income are just 15%. And if the payouts are reinvested that income will compound over time, even if the stocks themselves go nowhere.
So who are these six dividend plays? Intel and its 3.3% yield; Kimberly-Clarke at 3.6%; McDonald’s paying 3.5%; Clorox with 3.3%; Sanofi-Aventis offering 3.8%; and Eaton , which has dropped to 3.1% from 4.1% in July when Cramer recommended the stock. But the Mad Money host said that it’s important to have an industrial company in this mix of names, and ETN fits the bill.
Watch the video for Cramer’s full report on these six stocks and his “rule of 72,” a formula that tells you how long it will take for a dividend to double your investment.
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