Trading volatility has increased since our last portfolio
update and U.S. stocks are facing the first weekly decline
in the past five weeks. We would view a continued market
pullback as a potential opportunity to add new names to the
Select Medical (SEM:NYSE) and Waste Management
(WM:NYSE) are two names on our preliminary Watch List.
Select Medical has a considerably shorter dividend history,
having only paid a dividend for four quarters. That said, we
believe the healthcare facility operator may increase its
3.4% dividend yield this spring.
On the other end of the spectrum, Waste Management raised
its dividend (3.7% yield) for the 11th consecutive year back
in February. We will alert readers before we make any trade
for the model portfolio.
In the meantime, readers interest in likely dividend boosts
should focus on Exxon Mobil (XOM:NYSE), Johnson &
Johnson (JNJ:NYSE) and Procter & Gamble
(PG:NYSE). All three companies yield more than the S&P
500 and we expect that each will boost its dividend in
the next month.
KLA-Tencor (KLAC:Nasdaq) shares added nearly 3% to
recent gains over the past two weeks a touched a new 12-year
high on March 11. Despite the gains, we maintain the stock
is attractive to hold at $66.66, for the 2.7% dividend
Mattel (MAT:NYSE) bought Canada-based toy-maker, Mega
Brands, on Feb. 28, for $460 million. The deal is expected
to close in the second quarter and add to the company's
earnings by 2015. The purchase gives the company entrance
into the construction blocks market, which is a $4 billion
annual business in the U.S. and Europe.
The stock was little changed over the past two weeks and
recently changed hands around $36.95. We maintain that
Mattel is attractive to purchase for the 4.1% dividend
Pfizer (PFE:NYSE) received a negative patent ruling
in federal court on Mar. 12 for its arthritis drug,
Celebrex. As a result, the company could face generic
competition for the product -- which logged $2.9 billion of
global sales in 2013 -- about 18 months sooner than
expected. Barring an appeal of the patent, Celebrex could
face generic competition as soon as May, which would affect
annual earnings by about $0.05 to $0.10 a share.
The stock has lost about 3% over the past two weeks and was
recently trading around $31.21. Despite the potential patent
setback, we assert that Pfizer's 3.3% dividend yield is
General Dynamics (GD:NYSE) boosted its quarterly
dividend 11% on March 5, to $0.62 a share (2.3% yield).
Investors at the close of trading on April 8 will qualify
for the payment on May 9. Management has raised the dividend
17 consecutive years and can cover the payout 2.9x with
expected 2014 earnings.
David S. Peltier
Management has now raised the dividend for 17 consecutive years and we continue to find the shares attractive to hold.
With earnings season wrapped up, we are establishing six- to 12-month price targets for each of the holdings in the model portfolio.
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