You Can Never Be Too Safe

I used my favorite research service and created a simple screen -- companies that were large-cap, paid dividends over 4% and were projected to grow dividends in excess of 35% annually going forward. As a final test, I only looked at stocks that had the highest safety ratings from the service.

As always, stay small and be smart. Buy on down days and consider selling calls after extended rallies to collect income and partially hedge your positions in these conservative stocks.

Food stocks are well represented on the list. HJ Heinz (HNZ - commentary - Cramer's Take) is a leader in the food industry. Almost all of us have Heinz products in our homes and buy more all the time. Ketchup, soup and pickles are staples and, barring a depression, business should remain steady. The company pays a comfortable dividend and has been a fairly stable stock during the selloff.

That's pretty much the same argument for owning shares of Kraft Foods (KFT - commentary - Cramer's Take). Coffee, cookies and cheese are basic items that most of us are going to keep using. Savings from the company's ongoing restructuring efforts should top $1 billion in 2009 and expansion efforts into emerging markets are showing signs of success.

As would be expected from a list of defensive stocks, drug stocks were well represented. My favorite on the list is Pfizer (PFE - commentary - Cramer's Take). The stock pays a very nice dividend, yielding 7% at today's prices. While it faces many of the same patent problems as other manufacturers, key drug Lipitor is not expected to face generic competition for a couple of years. Pfizer is moving to replace expiring patents with 20 Phase III trials currently underway. They also are willing to grow by acquisition and constantly evaluate potential candidates for purchase.

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At the time of publication, Melvin had no positions in the stocks mentioned, although positions may change at any time.

Tim Melvin is a writer from Stevensville, Maryland, who spent 20 years a stockbroker, the last 15 as a Vice President of Investments with a regional firm in the Mid Atlantic area. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Melvin appreciates your feedback; click here to send him an email.