The mutual fund, started at the end of 2008, has risen 8% this year, better than three-quarters of its Morningstar peers. Over the past year, the fund has returned 12%, beating 85% of its rivals.
Welcome to TheStreet.com's Fund Manager Five Spot, where America's top mutual fund managers give their best stock picks and views on the market in a five-question format.
Why do you like high-dividend stocks now?
Genter: What you have in the high-dividend area is consistency. Usually you have more substantial companies with strong earnings growth that will lead the way. And let's face it, if we are going to have an 8% to 10% environment and we start off the year getting 4% to 5% right out of the gate, then we've already picked up nearly half of our returns and beaten 10-year bonds in the process.
One company you favor is Genuine Parts Co., the car-parts seller.
Genter: What you are seeing in this recessionary environment is that new-car sales are down and people are replacing parts to keep their cars on the road longer. That's been very good for their business. And when it comes to their dividend policy, it just doesn't get any better. They are paying a 3.5% dividend, which is 100 basis points above a 10-year Treasury. And the company has been paying a dividend for over 50 years.
There are a lot of major oil companies to choose from, but you prefer Total.
Genter: Total is a good replacement for Exxon in that Exxon's drilling and exploration process is really slowing down. Total is just the opposite. They are not as reliant on the Middle East. They have much more in Indonesia and Indo-China. You have a very strong dividend flow that comes out of the company at around 5.7%. And they are probably going to grow at about 10% to 15%. So it gives you good international diversification and you have strong dividend growth and good earnings.
In the past few months, there hasn't been a week that's gone by without semiconductors being cut at some firm on Wall Street. That said, you think Taiwan Semiconductor stands out.
Genter: You have a company that is selling to all the non-majors around the world. Fortunately, there are a lot of those out there. We are right at the beginning of the capital-replacement cycle. We are seeing 10% to 12% increases in capital spending so that replacement cycle is going to happen in technology, not in increasing personnel right now. What is important with them is that they are going to see about 10% to 12% growth and they are paying a 7% dividend while you wait.
You are also a big fan of telecommunications firm CenturyLink.
Genter: It's the old Century Telephone. You can make the negative case of saying that its landlines and it's a dinosaur. However, that dinosaur is going extinct very slowly, and while that's happening, you have a cash cow. Here you have a company that is paying a 7% dividend. They are going to grow at 3% to 4%. But I would look at it as a pseudo-bond. The dividend is safe and it gives you some diversification in that area.
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