As equity markets show modest signs of weakness as the DOW approaches 13,000, long-term investors should build a "watch list" of equities to buy in a pull back. Investors have been treated to a strong year-to-date rally of over 6% for the broader market.
Investors who have flocked to large capitalization dividend paying U.S. equities over the last 18 months have underperformed the market in 2012. While dividend paying equities have underperformed the broader market early into 2012, I am sticking with large capitalization U.S. dividend equities and looking for a pullback to add positions. I believe these equities will perform better in an uncertain environment as there are many headwinds that remain. If risk assets falter, these companies will provide investors with attractive yields.
Over the next 2 - 3 months I am looking for a modest pullback of 10% on the S&P500 to start to initiation position in watch list names.
As I screen for companies to add to my watch list I am broadly screening for equities with the following criteria:
- Market Capitalization of greater than $5 billion
- Price to Earnings Ratio of less than 20.0x
- Beta of less than 1.0x
- Dividend Yields of greater than 2.0%
(Click to enlarge)
Company | Recent Price | YTD Change in Price |
Altria Group | $29.65 | 3.82% |
Pepsico | $63.10 | -4.97% |
Medtronic | $38.21 | -1.24% |
Molson Coors | $44.41 | 1.76% |
S&P500 | $136.03 | 6.70% |
Dividend Index Fund | $55.41 | 2.84% |
Altria Group (MO)
- Market Capitalization: $60.3 billion
- Price to Earnings: 18.1x
- Dividend Yield: 5.5%
- Beta: 0.37x
Pepsico (PEP)
- Market Capitalization: $98.7 billion
- Price to Earnings: 15.6x
- Dividend Yield: 3.4%
- Beta: 0.51x
Medtronic (MDT)
- Market Capitalization: $40.3 billion
- Price to Earnings: 12.0x
- Dividend Yield: 2.5%
- Beta: 0.86x
Molson Coors (TAP)
- Market Capitalization: $8.1 billion
- Price to Earnings: 12.3x
- Dividend Yield: 2.9%
- Beta: 0.73x
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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