This Day On The Street
Continue to site right-arrow
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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

3 Dividend Stocks to Buy Ahead of the Fed

Stocks in this article: DOW CSCO MAT

NEW YORK ( TheStreet) -- The market is bracing for changes in policy at the Federal Reserve, which could announce a reduction in stimulus as early as next week, a negative for the stock market, as it suggests the Fed is prepared to allow the U.S. economy to start working on its own.

So, for those with longer-term investment horizons, it makes sense to move into more conservative investments that can weather the volatility likely to accompany the changing policy.

Valuations in the benchmark indexes continue to trade within striking distance of their record highs, and so safety stocks that are likely to perform best will be seen in companies that pay higher yields relative to industry counterparts. This approach helps screen out weaker companies unable to generate the profits needed to match those dividend payouts. These three dividend yielders should perform well, even if the Fed starts to wind down its bond purchases as expected.

What we are looking for in dividend picks is a strong payout record that is supported by the company's balance sheet. Here, we will look at three companies in strong positions in their sectors and likely to trade in a stable fashion even after the Fed begins to remove stimulus from the economy.

First, we look at the tech sector and Cisco Systems (CSCO), a company that has drastically reduced spending and that is hoarding cash that can be used to sustain its dividends long term.

Cisco recently raised its quarterly dividend to 17 cents per share from 14 cents, and the company is likely to see growth from increased product purchases from telecoms and other outlets, as the broader economy continues to recover. Projected revenue growth of about 7% suggests that Cisco will continue to generate cash, as long as it maintains its margins.

From a valuation perspective, the stock is trading at a price-to-earnings ratio below 13, and when combined with the 2.8% dividend yield, the stock is an attractive prospect at current levels.

1 of 2

Select the service that is right for you!

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.
Submit an article to us!


DOW 18,030.21 +6.04 0.03%
S&P 500 2,081.88 -0.29 -0.01%
NASDAQ 4,773.4720 +8.0480 0.17%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

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