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10 Top Buys For Blue Chip Investors

 December 20, 2012 12:49 PM
 


by Kelley Wright, editor Investment Quality Trends

We believe that high-quality stocks purchased at historically low-price-to-high-yield offers the best potential for downside protection and upside appreciation.

Whether you are looking to build a portfolio from scratch, are partially invested and looking to add new positions, or fully invested and in need of some affirmation and hand holding, The Timely Ten represents our top ten recommendations.

The Timely Ten consists of Undervalued stocks that show exemplary long-term dividend growth, a P/E ratio of 15 or less and technical characteristics that suggests the potential for imminent capital appreciation.

[Related -Express Scripts Holding Company (ESRX): Should You Own ESRX in 2014?]

We particularly focus on metrics that are less affected by cyclicality; most specifically the cash dividend and the dividend trend.

For the long-term health and viability of a company's dividend, it is important that the company builds flexibility into the structure of their business to be able to withstand the inevitable downturns that occur within the normal course of the business cycle.

Two examples of a flexible structure are a manageable level of debt and a payout ratio (the percentage of earnings that are paid to the shareholders as dividends) that will not endanger the dividend in the event earnings are impacted by poor macro-economic conditions.

We continue to suggest that our tried and true screens of identifying high quality and good current value, such as limiting considerations to undervalued companies with a modest level of long-term-debt-to-equity will continue to provide long-term real total returns.

Our latest Timely Ten selections are:

CVS Caremark (CVS) -- yielding 1.3%
Chevron Corp. (CVX) -- yielding 3.3%
Union Pacific (UNP) - yielding 2.2%
Coca-Cola (KO) - yielding 2.7%
McDonald's (MCD) -- yielding 3.5%
Air Products & Chemicals (APD) -- yielding 3.1%
Nike (NKE) - yielding 1.7%
United Technologies (UTX) -- yielding 2.7%
Disney (DIS) - yielding 1.5%
Occidental Petroleum (OXY) -- yielding 2.8%
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