This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

Dow 55,000? It's Closer Than You Think

1. Buy Fundamentally Strong Dividend Payers

Firms that generate high-quality earnings and throw off enough cash to return value to investors in the form of a dividend are a good option. Yes, they'll obviously benefit from a stock rally, but the dividends (particularly if reinvested) should help to offset the negative effects of inflation while you wait it out.

AT&T (T) is a good example of this sort of stock. The firm is a communications juggernaut that's effectively the biggest mobile phone carrier in the U.S. Even though Verizon's (VZ) network is a bit bigger, AT&T owns its network in toto. I like that. One result of that is huge cash generation. AT&T uses that cash to pay an enormous 5% dividend yield right now, and it also has been slowly paying down its debt load (telecom is a very capital intense industry, after all). The firm's landline business is underrated, but it generates a nice quiet cash flow as well that should help finance the crown jewel wireless business for free.

>>8 Stocks With Big Dividends, Steady Returns

While they may not fit that mold perfectly, Apple (AAPL) and MasterCard (MA) are two other names that are skewed towards smaller dividends. Look, I understand that Apple is scary at around $620. But I've talked at length about why this stock is in fact cheap right now in spite of that price tag. It's got mountains of cash (which offsets its valuation), high-quality earnings and enviable momentum. Few firms can offer that combination.

Payment network MasterCard is attractive for similar reasons. Again, we've got a firm with high-quality earnings and momentum, not to mention the huge tailwind in the world's transition from cash to electronic payments methods. While smaller than Visa (V), the stock is cheaper, and it's quietly grabbing a bigger chunk of the industry's revenues: The firm's market share increased by 10.9% in the last year.

2. The Names Everyone Else Hates

When all else fails, focus on the big names that everyone else hates -- the perennial short candidates. Heavily shorted stocks have the potential for a short squeeze as sentiment turns, and that's more than just an old wives' tale; my research shows that buying heavily shorted large and mid-cap stocks (the top two quartiles of all shortable stocks by market capitalization) and rebalancing monthly over the last decade would have beaten the S&P 500 by 9.28% each and every year. That's some material outperformance during a decade when decent returns were very hard to come by.

Stock quotes in this article: AAPLGRMN, MA, T, SPY 

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

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.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

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.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
DOW 16,362.68 +100.12 0.62%
S&P 500 1,849.54 +6.56 0.36%
NASDAQ 4,048.7880 +14.6270 0.36%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs