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4 Stocks Safer Than Treasuries

Stocks in this article: MSFT ADP XOM JNJ

4. Automatic Data Processing (ADP)

Yield: 3%

ADP provides back-office services such as payroll processing, tax and benefits administration, and human-resource services. The company has a great competitive moat; once a client is onboard, switching costs are huge, so client retention rates are upward of 90%.

In the past five years, ADP has grown EPS 12% a year to $2.52 in fiscal 2011 (ended June 30). The balance sheet is also solid. ADP sits on $1.8 billion of cash and has virtually no debt, enabling it to pay out 56% of earnings as dividends. In addition, dividends have improved for 36 consecutive years. The last increase was in November 2010, when ADP raised payments 6% to a $1.44 annual rate, so another hike is likely before year-end. ADP trades at a P/E ratio of 19 and yields 2.9%.

Risks to consider: Exxon's earnings are cyclical, while Johnson & Johnson has been hurt by product recalls. However, all of these stocks have stockpiles of cash, low debt and superior records of dividend growth.

Action to take --> All four of these companies are exceptionally creditworthy, which means they can meet their financial obligations with no trouble. They are also the only four names still standing in Standard & Poor's select list of "AAA" ratings. My top pick is Microsoft because of its consistent high EPS growth and low P/E ratio. But any of these four names are attractive, based on their combination of safety and high yields.

Disclosure: Neither L. Springer nor StreetAuthority, LLC hold positions in any securities mentioned in this article.

Also see:
2 Dividend Stocks for a Global Megatrend
3 Small Stocks with 7%-Plus Dividends
12 Companies that Could Go Bankrupt Very Soon

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.
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