Yours truly has agreed to be part of a friendly stock picking contest among some fellow respected finance bloggers. I’m excited and looking forward to seeing how all of our picks turn out. This is the 4th annual iteration of this contest, but the first time I’m competing. Let the fun begin!
I’m including what I feel are the best dividend growth stocks for 2012. In the end, it’s terribly difficult to try and ascertain what the return will be for individual stocks over such a short period of time. One year in investing terms is an extremely short time frame. Due to such, any dividend growth investor worth his salt is in it for the long haul. Every single time I invest money in a company, I plan on owning it forever…unless the company’s fundamentals change significantly. Changing fundamentals and economic climates is a primary reason one must continue to monitor a portfolio and individual positions. Companies change, people change and so with it portfolios change.
With that little disclaimer being said, I hereby present my picks for the 2012 Best Stocks Contest.
Philip Morris International Inc. (PM)
Philip Morris International is the world’s second-largest tobacco company, behind only China National Tobacco, and holds almost 16% of the non-U.S. market. The firm owns seven of the leading 15 international brands, including Marlboro, the company’s flagship brand that accounted for more than one third of total volume in 2010. Other key brands include L&M, Philip Morris, Bond Street, Chesterfield, Parliament, and Lark.
Philip Morris has been on an absolute tear. It was up 34% in 2011. It has a solid dividend, has a dominant position in the international tobacco market and an addictive product people are willing to pay a premium for. There are few things not to like about PM. This is my top pick for 2012, and one of my largest positions. They are able to increase the price of their products faster than inflation, which bodes well for increased earnings, revenues and dividends.
Beginning price: $78.48
General Dynamics Corporation (GD)
Falls Church, Va.-based General Dynamics manufactures ships, armored vehicles, defense-oriented information technology systems, and business jets. The firm gets around 72% of revenue from the Department of Defense and the rest from foreign sales and Gulfstream business jets. In 2010, the firm generated $32.4 billion in sales and $2.6 billion in earnings with the help of 90,000 employees.
I could have picked just about any defense major here. I could have substituted RTN, LMT or even HRS. I went with GD though because I feel they have a solid defense product lineup backed by the private sector business in Gulfstream. Defense stocks all have compressed P/E ratios, and a number of them will likely appreciate simply on P/E expansion once some of the DOD budget issues are worked out. Investors are anticipating major defense budget cuts, resulting in the values in this sector. I’m not as bearish about our defense budgets, as I believe that worldwide armed conflict is, unfortunately, not going to cease anytime soon.
Beginning price: $66.41
Intel Corporation (INTC)
Intel is the largest chipmaker in the world. It develops and manufactures microprocessors and platform solutions for the global personal computer market. Intel pioneered the x86 architecture for microprocessors.
I see some value in tech, namely INTC and MSFT. I could have substituted MSFT here, as they are both cheap. I just happen to like INTC better as a business. They are a cash cow, with a dominant position in their industry. I think as server demand increases due to increased use of smart phones and cloud computing, INTC only stands to benefit. They offer a solid yield and are cheaply priced for a worldwide leader in their industry.
Beginning price: $24.25
Emerson Electric Co. (EMR)
Emerson manages five business segments: process management (28% of sales), industrial automation (21%), network power (27%), climate technologies (16%), and tools and storage (7%). Primary products include motors, drives, valves, switches, test equipment, air conditioning compressors, electric tools, and home storage solutions.
For my last pick, I decided on EMR. I say go with what you know, and this is another stock I own. The great thing about EMR is that it was extremely weak in 2011, down over 18% on the year, and you get an extremely diversified company with just one pick. EMR is a dynamite company and I think it will be extremely strong over the long haul. They are offering a solid yield. and it’s one I’m thinking of adding to in my personal portfolio.
Beginning price: $46.59
I’m just one blogger participating here. Check out some of the other entries:
Full Disclosure: I’m long PM, GD, INTC, EMR
Thanks for reading.