THE 24/7 WALL ST. 2012 MODEL DIVIDEND PORTFOLIO
American Electric Power Co., Inc. (NYSE: AEP) returned more than 19% after adjusting for the dividend in 2011, and the electric power player is very diversified with millions of customers in multiple states. It also has a history of hiking its dividend. The stock may be near multiyear highs, but this shareholder-friendly company remains a top pick even though utilities as a class are becoming fully valued. We even called it in 2011: “Utilities are the new CDs.” The stock trades at $40.75, up from our first entrance and still higher than the $39.25 in December when newsletter readers got it. The dividend yield is about 4.6% and the $40.75 price compares to a 52-week range of $33.09 to $40.08 and a Thomson Reuters price target of $41.15. For this portfolio, our target over the next 12 to 18 months is closer to $44 or $45, as this low interest rate climate helps utilities. AEP prides itself on lobbying against many regulatory pressures that would be bad for investors and act as a tax on consumers.
American Water Works Company, Inc. (NYSE: AWK) may not appear to have a massive dividend for a utility, but the 2.9% yield is still attractive considering that you are buying into the largest and best-run water utility in America. The stock is never cheap, and any time it has sold off 10% has been a gift from the gods for investors. With a good yield, a heavily defensive stock characteristic, and a great geographic footprint, this one is suitable for almost all investment portfolios (including widows and orphans). At $31.50, this is well above where we first started recommending, at around $20. The 52-week range is $25.17 to $32.78 and the consensus price target is $34.36, although Gabelli recently said it was worth more than $40. Our target is $35 or so in a normal market over the next year after a likely dividend hike in the summer.
AT&T, Inc. (NYSE: T) went on sale in December as the implosion of the T-Mobile deal required it to pay a $4 billion penalty. Shares have risen from under $29 last month, when this went to newsletter readers, to almost $30.40 now. The Thomson Reuters consensus price target of $31.74 compares to a 52-week range of $27.20 to $31.94. AT&T greatly outpaces rival Verizon Communications Inc. (NYSE: VZ) in the dividend fight and we just noted in our DJIA 2012 OUTLOOK 13,678 target that Verizon was the only DJIA stock trading above its consensus price target. AT&T is cheap, its dividend payout ratio is less than Verizon, it has the highest yield of the entire 30 DJIA components, and it managed to fend off too much defection after losing the iPhone exclusivity. AT&T may rise to $32 or $33 over the next year or so, but that gain does not include a near 6% payout.
General Electric Co. (NYSE: GE) has also appreciated handily from about $16.25 just in the last month, in part because its dividend was raised much sooner than expected. The yield is now about 3.8% and the $18.35 price compares to a consensus price target of almost $21 and a 52-week range of $14.02 to $21.65. CEO Jeff Immelt remains extremely happy with the company’s investment portfolio, GE Capital is looking less like a troubled bank, analysts like its 2012 business mix, and the value remains attractive compared to some conglomerates. GE should attract dividend investment funds up to $20 but we can see this one easily rising to $21 in the near-term under decent circumstances. We can also see a break-out into the mid-20’s more than a year from now if the company keeps paring its portfolio and keeps turning GE Capital into a better outfit.
Government Properties Income Trust (NYSE: GOV) is the stock for investors who want a high interest payment from the government. With rental tenants like the federal government, as well as agencies, cities, counties and on down the line, here is how you get to be the government’s landlord and collect a yield of about 7.2%. Fears for this particular REIT were overblown during the austerity and budget gap talks of the summer and shares have risen from about $21.50 to $22.75 over the past month or so. Still, the 52-week range is $19.68 to $27.80 and the consensus Thomson Reuters price target is over $24. Realistically, this one can go above $25 while still paying out that dividend rate of over 7%. Why loan the government for 2% when you can be its landlord making 7%!
Kimberly-Clark Corporation (NYSE: KMB) has been a Model Dividend Portfolio stock for quite some time and it may be reaching more of a neutral bias near-term because shares have risen another $4 in just the past six weeks. This is a great shareholder-friendly defensive company in consumer products and it has been able to thrive in good times and hard times. At $73, Kimberly-Clark has a 52-week range of $61 to $74.06, it yields about 3.8%, and the consensus Thomson Reuters price target is about $74.35. We expect another dividend hike and at about 14-times expected earnings it probably can still get closer to $80 on a longer-term basis. Higher in-store promotion costs remain more of a concern than commodity costs, but the company has been managing through that for some time now.
Senior Housing Properties Trust (NYSE: SNH) is one of the best run REITs out there and it is in the sweet spot of being landlord to the elderly or aging with growing numbers of retirees at its assisted living facilities, senior homes, and nursing homes. The REIT has managed to avoid the Medicare reimbursement woes, even if it did recently have 10 leases terminated for the end of 2013 when it will have to find new tenants. The stock has risen from $21.30 to $22.20 in recent weeks but that is no worry. The consensus target is $24 and the 52-week range is $19.09 to $24.66. It also trades at a low rate of about 12 to 13 times FFO (EPS for REITs). With a dividend of 6.8%, Senior Housing could rise to as high as $24 to $25 before the valuations start to come up as a concern even though another dividend hike is not likely until late in 2012.