DRIP Portfolio: Riding out the Storm
How does one invest in today’s type of market? It’s simple: You play it safe. For this month’s portfolio, we selected a diversified portfolio of stocks in major industries with the strongest fundamentals. These companies boast histories of surviving market turmoil in the past and remaining in position to prosper in the future. While these companies, like the rest of the economy, are under pressure, they have displayed the financial and managerial capability to compete effectively and are major players in their respective industries. We picked only those with dividend yields of 2.5% or higher, and favored those with high INVEST% ratings, meaning that they are trading near their 52-week lows.
A prime example is Boeing, one of our selected industrials, a company that employs more than 150,000 workers, and which, as of June 2008, had a $275 billion backlog of orders for its commercial aircraft, with only 11% of it coming from domestic airlines...
... The rest came from overseas airlines that often receive monetary backing from their respective governments. Boeing has another $71.3 billion backlog for defense aircraft. The company has been paying an annual dividend since 1942 and currently yields 3.6%. Boeing trades at $45 per share (its 52-week high is $98.97) and has $5.6 billion in cash assets, compared with a total debt load of $8.3 billion. Its 10-year average price/earnings ratio is a little more than 20, so its current P/E of 8 really stands out and makes it qualified to join our list.
You know it as Taco Bell, KFC, and Pizza Hut. The owner of these fast food restaurants is Yum! Brands, spun off by PepsiCo in 1997. YUM grew its third-quarter profits by 16% year-over-year, to 58¢ per share. Management remains confident enough to maintain its full-year earnings guidance, due mainly to solid growth in its international businesses, most notably China, where sales grew an impressive 47% from the same quarter last year, to $854 million. This accounted for 34.4% of total sales, while profits grew by 19%, to $161 million, during the third quarter.
Large insider holdings are especially comforting when we recommend a stock. Those on the current list with 10% or more include American Express, 21.6%; Avon, 25.7%; CenturyTel, 21.8%; Kellogg, 37.5%; and Yum! Brands, 22.4%. Also qualifying, but recently featured were 3M, AT&T, BB&T, Coca-Cola, Colgate-Palmolive, Eli Lilly, Genuine Parts, Kraft Foods, Lancaster Colony, McCormick, National Fuel Gas, PepsiCo, Phillip Morris, Procter & Gamble, Pinnacle West Capital, Sysco, and Universal Corp. Robert Briechle, David Fish, Peter Cirocco, and Michael Burke were consulted on the portfolio, and all approved of these selections for long-term accumulation.