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Dividend Stocks for the Downturn

Written By Brian Hicks

Posted August 6, 2011

Welcome to the Wealth Daily Weekend Edition — our insights from the week in investing and links to our most-read Wealth Daily and sister publication articles.

As much as I love the color green, it’s when the markets are red that I make the best buys.

Now, I’m not suggesting that watching the markets fall off the cliff as of late has been fun. It hasn’t.

Admittedly, it’s hard for me to sleep at night when the markets fall over 1,300 points in just 10 trading sessions…

What I am telling you is that I always do better in the markets when I buy stocks at a discount. In that regard, I’m like Warren Buffett without the billion-dollar bankroll: I’m greedy when others are fearful. The more the red tide rolls ashore, the deeper I wade in.

“Bad news,” Buffett once said, “is an investor’s best friend. It lets you buy a slice of America’s future at a marked-down price.”

Slump or not, that was an opinion I could never find much fault with — especially coming from the mouth of [arguably] the world’s greatest investor.

Investor. Now there’s a word you don’t hear much these days. “Buy and hold,” they tell us, has gone the way of the dinosaur.

Today it’s all about the fast money. In the market, out of the market… this stock, that stock… Nobody has the patience to ride out the rough spots anymore.

But that’s okay. I’m certain that, like Warren, I will walk away the winner over time.

Time. It’s something nobody seems to have — or really appreciate. My age has lead me to understand how 30 years can slip by in an instant. It may seem like forever, but it’s not.

One day you’re 17 and the next you’re 47. Along the way, you learn there really is a better tomorrow, even for the worst of markets.

When I graduated from high school in 1981, the DOW was 850. Today it’s 11,700.

That alone has taught me a pretty simple lesson: Nothing is as dire as it seems. After all, the early 80s economy wasn’t exactly one for the squeamish. Problems were everywhere you looked.

The Road to Ruin?

But a funny thing happened on the road to the apocalypse…

A year later, the bulls sent the market on the run of a lifetime. Someday, the same exact thing is going to happen here. I don’t know when, but it is going to happen — just as it always has and always does, today’s bear market will eventually give way to the bulls.

For investors who understand both markets and time, pullbacks like these are moments to pick up quality stocks at sale price… especially stocks that pay dividends.

As I explained in a recent Whiteboard Weekly video, buying the right dividend-paying stock today can make you look like a genius 20 years from now if you have enough patience to stick to the plan.

So what should you be looking to add to your portfolio these days?

Buffett believes you should “only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”

Here are four dividend stocks that fit the criteria:

  • Procter & Gamble (NYSE:PG): Founded in 1837, P&G’s brand power is off the charts. You probably have their products all over your house. The company pays an attractive 3.4% dividend yield and has a 53-year history of increasing the payout. Since 2006, P&G has increased its dividend by 73%.

  • ConocoPhillips (NYSE: COP): Going long oil and natural gas is an easy one. With a P/E of 8.47, COP is trading at just 1.43x book value. The fourth largest integrated oil company in the world, COP pays a 3.7% dividend that is up 83% over the last five years.

  • Intel Corporation (NASDAQ: INTC): A leading global giant in the semiconductor business, INTC pays a 3.9% yield and has nine consecutive years of dividend increases. At today’s levels, INTC carries a P/E ratio of 9.56.

  • United Parcel Service Inc. (NYSE: UPS): How can you go wrong with “Big Brown” over the next 10 years with the U.S. Postal Service falling apart and Internet sales going up every year? The short answer is you can’t. On top of that, you can earn a nice 3.10% dividend along the way.

As for all of the distress in the broader markets this week, here’s what I know: This too shall pass.

By the way, here’s a bonus pick that cost me $1.46 a share in 1981. Today it just may be the best brand in the business. It pays a 2.8% dividend and is Warren Buffett’s biggest holding…

It is none other than the Coca-Cola Company (NYSE: KO). Today it’s a $68.00 stock.

Ain’t nothing like the real thing…

As for more ways to make money in these markets, our editors have put together a few of their best ideas in this week’s Wealth Daily and Energy and Capital articles, below.

Your bargain-hunting analyst,

 steve sig

Steve Christ
Editor, Wealth Daily

Eyewitness to Profits: An Offer You Can’t Refuse
Don’t take our word for it. Learn how Ian Cooper’s subscribers are making a killing in these markets. Better yet, find out how to get his next four trades for free.

$200 Silver as COMEX Faces Default: Critically Low Warehouse Inventories Could Sink the Exchange
Analyst Greg McCoach shows investors how the price of silver could reach $200 an ounce by the end of the year.

Cutting-Edge Profits: A Giant Leap in the Making
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The Best Time to Buy Natural Gas: Tapping the Marcellus Shale
Energy and Capital’s Keith Kohl shows readers why now is the best time to buy natural gas.

The Future of Gold Prices: The One Chart That Explains Gold’s Move
Analyst Ian Cooper explains why the gold mania still has room to run, and offers a few ways to trade it.

Cutting Through the Energy Fog: Two Energy Truisms
The market as a whole isn’t properly valuing cleantech stocks. We’ve tried to fight it for quite some time. But we can’t change it.

The Safest Oil Profits in Today’s Market: How Fragile is U.S. Oil Production?
The scary secret behind U.S. oil production… and how investors can find safe oil profits in today’s market.

Rare Metal Profits: Coming Soon: The Most Profitable Rare Metal Play Ever
Editor Jeff Siegel reveals his favorite rare metals play.

Your Personal Bull Market: Four Stocks That Are Going Up
Last week, when the Dow Jones Industrial Average fell almost 600 points — and Obama and Boehner were playing chicken with U.S. default — 46 stocks made new highs, including one I recommended last week. The list starts with…

The Road to Dow 10,950?: This Chart Pattern Is Impossible to Ignore
Editor Steve Christ takes a look at the broader markets as a head and shoulders top begins to form.

Doom In the Desert: Saudi Arabia and the Skyscraper Index
The Saudis are tempting a certain fate with plans to build the world’s tallest building.