Blue-Chip Dividend Stocks: Buy Like SVAAX
To diversify his portfolio while including the best combination of growth and yield, Peris aims to hold a mix of stocks with different yields. At the high end of the spectrum are stocks that yield 6% to 8% and typically increase the dividend at an annual rate of 2% to 4%. The high-yielding holdings include many telecoms, such as AT&T (T) and Verizon (VZ). At the lower end are stocks that yield 3% to 5% and increase the dividend at a rate of 5% or more. Low-yielding holdings include Procter & Gamble (PG) and Coca-Cola (KO). By holding the diverse collection, Peris aims to maintain a portfolio that yields 5% and has a dividend growth rate of about 5%.
The fund has big stakes in consumer staples and health care. But there are no holdings at all in technology, industrials and basic materials. Many stocks in those sectors pay little or no dividends.
In some instances, the stocks do pay dividends, but the businesses are highly cyclical. Peris worries that such companies could fare poorly in recessions. "Materials and technology companies can be too cyclical and volatile to meet our needs," he says.
To ensure reliable performance, he looks for companies with strong balance sheets and long track records for raising dividends. If Peris spots a stock that seems a bit more appealing than a current holding, he won't necessarily trade. While many portfolio managers trade rapidly to take advantage of temporary price moves, the Federated manager aims to hold strong stocks for years.Peris only owns companies that are dedicated to using much of their cash for dividends. In his book, he rails against managements that keep cash for empire building instead of paying investors. Peris especially shuns companies that spend heavily on acquisitions or buying back shares. Such strategies often backfire. He lost interest in Pfizer (PFE) in 2009 when the company cut its dividend to pay for an acquisition. "Very few large acquisitions succeed," he says. "Big deals produce fees for Wall Street investment bankers, but the mergers don't result in much dividend income for Main Street investors."
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV