The Dow Jones Industrial Average and the S&P 500 Index just posted their best January performances since the mid-1990s. The Dow is above 14,000 for the first time since 2007. And the Wilshire 5000 — a broad index consisting of 6,700 stocks representing U.S. markets — is sitting at a new all-time high just above the 16,000 mark.
Naturally, many of us are starting to wonder when the other shoe will drop.
InvestorPlace editor Jeff Reeves points out a number of trends pointing to at least a short-term stumble, including heavy inside selling, frothy valuations and the technically overbought status of stocks across the board. There’s also the less-than-promising data on the U.S. jobs front, not to mention that nagging reminder about what happened the last time the markets reached these levels.
However, investors in it for the long haul can rest a little easier by making sure they have at least some exposure to rock-solid, income-producing blue chips. While they might not necessarily soar when the market goes bananas, they’re also more apt to maintain their value when the crap hits the fan. Best of all, through all that turbulence, they make sure you get yours — in the form of steady, substantial dividend payments.
If you’re looking for this kind of security, a great place to start is the veritable who’s who of American blue chips, the Dow Jones, and its top 10 dividend payers. Here’s a look at each:
#10: Johnson & Johnson
Current Dividend Yield: 3.2%
Performance So Far in 2013: +8% (vs. 6% for the S&P 500)
Johnson & Johnson (NYSE:JNJ) — the pharma/consumer hybrid behind brands like Band-Aid, Tylenol and Johnson’s baby products — hasn’t exactly been a growth machine in the past few years. Still, it’s one of this list’s best returners so far in 2013, with its 8% gains topping both the S&P 500 and Dow Jones.
JNJ put Alex Gorsky at the helm last year to revive a company suffering from quality control problems, recalls and other issues contributing to years of slow returns. So far, so good on that front — Johnson & Johnson has eased off on shooting itself in the foot.
The most recent quarter was something of a mixed bag. Q4 earnings of $1.19 per share topped estimates, but that came on slightly disappointing revenues of $17.6 billion. Also discouraging was a fiscal 2013 earnings estimate of $5.35 to $5.45, which was 4 cents below consensus forecasts. Apparently it wasn’t too discouraging, though — after an initial dip, JNJ is up 3% since that Jan. 22 report.
Johnson & Johnson’s pipeline has been looking good, too. In the past few months, JNJ has received FDA approvals for several treatments, including Xarelto (deep vein thrombosis/pulmonary embolism) and Sirturo (drug-resistant tuberculosis).
Those should help to keep Johnson & Johnson’s longstanding dividend healthy and growing. The Dependable Dividend Stock has increased its payout every year for over half a century, which includes roughly 12% in annual improvements in the past decade. JNJ goes ex-dividend Feb. 22, so there’s still time to get in to receive its March 12 payout and, if history is any indication, we should be getting an announcement sometime in April about yet another hike to its dividend.
Current Dividend Yield: 3.23%
Performance So Far in 2013: +8%
Lately, it’s hard to get a bead on fast-food behemoth McDonald’s (NYSE:MCD).
On the one hand, the term “same-store sales” has become a reason to cringe when mentioning McDonald’s. The company suffered a 1.8% decline globally in October, which included a huge drop-off in American same-store sales that led to ouster of its U.S. operations president. And while MCD did see a nice global rebound in November, it followed that up with flat same-store sales in December and a surprisingly big decline in Janaury.
On the other hand, McDonald’s still came through when it reported Q4 earnings late last month, beating estimates by announcing that profits had grown roughly 5% to $1.38 per share on slightly improved revenues of $1.4 billion.
On the … er … third hand, MCD also warned that it expected sales to be slower in the first quarter of 2013 and anticipated the January decline that was confirmed earlier this month.
And yet, 8% gains so far in 2013.
Maybe it’s on hopes that Fish McBites and a revived push for its Dollar Menu will help right the ship — oor maybe investors simply couldn’t resist McDonald’s 1-2 punch of value and security. MCD shares started the year 10% cheaper than 2012’s highs, and they yield well more than 3% after a 7-cent increase to the dividend in late 2012. Plus, that payout has been growing every year since 1976, when McDonald’s first started issuing dividends.
MCD goes ex-dividend Feb. 27 for its March 15 payout.
Current Dividend Yield: 3.3%
Performance So Far in 2013: +4%
Microsoft (NASDAQ:MSFT) certainly has been busy. In the past year, it launched both the newest edition of its operating system, Windows 8, as well as the Surface line of tablets. It’s gotten into the dealmaking game, as well, providing $2 billion to help finance a buyout of troubled PC maker Dell (NASDAQ:DELL).
Unfortunately, all of those moves have been accompanied by widespread doubt. Microsoft says it has sold more than 60 million Windows 8 licenses in 90 days, putting it on par with Windows 7 — however, that number doesn’t necessarily tell us how many copies are actually being used. Plus the OS just went up in price (from $40 to $120) beginning this month, which could hinder sales.
The Surface has been the subject of lukewarm reviews and, while Microsoft doesn’t actually release Surface sales, a UBS analyst said 2012’s numbers were disappointing. Even CEO Steve Ballmer called its performance “modest.” However, the Surface Pro — a beefier version more appropriate for enterprise users — might offer some hope.
And the Dell deal? It makes sense … it’s just more rescue mission than growth proposition, and doesn’t seem to do much to bolster Microsoft.
Still, Microsoft remains the king of enterprise software thanks to products like Office and Word, so it’s not going anywhere. Plus, we can second-guess all we want, but Microsoft had to address the mobile market (and has done so), and helping Dell isn’t going to put too big a dent in its huge cash piles.
No, those cash piles will remain well-stocked, helping power a thick 3.3% dividend that just got bumped up to 23 cents quarterly as of the last payment. You also have just about a week before it goes ex-dividend on Feb. 19 leading up to its March 14 payout.
#7: General Electric
Current Dividend Yield: 3.4%
Performance So Far in 2013: +7%
Yes, this is the same General Electric (NYSE:GE) that jaded investors back in 2009, during the depths of the financial crisis, by cutting its 31-cent dividend all the way back to a mere dime a share.
But it’s at least trying to make amends.
Since that cutback, GE has nearly doubled its quarterly dividend to the current 19 cents per share, with the most recent increase coming at the tail end of last year and pushing General Electric into this list. Plus, GE Capital not only got the green light for a special dividend in 2012, but also regular dividends, which should only help bolster payout growth going forward.
Things have looked good from the overall performance front, too. Shares have slightly beaten the market so far, helped in part by an upbeat fourth-quarter earnings report that saw profits and revenues both beat Wall Street’s expectations. That report also included news of growth in China and a record $210 billion backlog.
Looking forward, improvements in GE Capital, the expansion of its energy equipment business and huge cost cuts should help General Electric keep pushing forward in 2013.
Current Dividend Yield: 3.5%
Performance So Far in 2013: +8%
Big Pharma and dividend investors have been close allies for some time, so it’s no surprise that Pfizer (NYSE:PFE) and its juicy yield are loved by the income crowd.
Pfizer managed to beat out the broader market in 2012, and it’s on pace to do the same in 2013 despite a number of setbacks. Back in August, PFE and Johnson & Johnson (NYSE:JNJ) shut the door on studies of IV-delivered bapineuzumab as an Alzheimer’s treatment, and Lipitor sales have been sliding ever since it went off-patent, welcoming generic competition. Also, in news of the bizarre, Pfizer had to report the theft of $750,000 worth of gold dust at a Chesterfield, Mo., lab.
Still, there’s been some good news thrown into the mix, too. Pfizer recently spun off its animal health division, Zoetis (NYSE:ZTS), in a $2 billion-plus IPO, which should allow the company to focus on its core pharma business. Last fall, the company got a big leukemia drug approval. And while Lipitor sales continued to weigh on corporate results, PFE’s fourth-quarter revenue decline to $15.07 billion still beat analyst estimates, as did earnings, which fell to 47 cents per share.
Going forward, you’ll want to be in healthcare. Drugs are a necessity and don’t play to the whims of a poor economy. Not to mention, healthcare stocks will look even more attractive as America’s baby boomer population ages and requires more treatment. In the meantime, PFE’s dividend — which just got bigger by another 2 cents quarterly a couple weeks ago — will keep your wallet healthy.