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After another day of market nausea, Jim Cramer told viewers of his "Mad Money" TV show that there's only one thing that can protect their capital: dividends.
He told viewers to look for companies with recession-proof businesses that have a good dividend, and a long history of raising that dividend.
Cramer used drug maker
as one shining example for his thesis. Merck currently yields 5.3% with its dividend, and while that's lower that than of
, 5.8%, and
, 7.6%, Cramer said Merck is in the best cash position among the three, with a history of boosting its dividend, even during the bad times.
Admittedly, 2008 has not been a good year for Merck. There have been many questions swirling around the company's cholesterol drugs Vytorin and Zetia, its HPV and cervical cancer drug Guardasil has seen softer sales due to safety concerns, and it has tussled with the FDA over product labeling.
But Cramer said that even at a stripped down valuation, Merck is worth at least $29.90 a share, which is higher than its current value.
According to Cramer, Merck has the ability to grow and boost its dividend, even in a weakening economy. The company, which trades at the same level as it did last year, is about halfway through a cost-cutting plan aimed at stripping between $4.5 billion and $5.0 billion from its budget and has higher cash flows than last year.
Cramer said Merck's dividend pays investors to wait for the company's valuation to match its stock price. He recommended scaling into a position slowly around Merck's upcoming earnings announcement, and ahead of its analysts conference in December.
He said Merck's a buy any time its yield hits 5.5% or higher.
Cramer: Buffett's Buying, But Should You?
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chairman George David to discuss his company's stellar quarterly results under very tough market conditions.
David said that his company beat estimates by 2 cents a share and raised its yearly earnings guidance. He cited discipline and precision engineering as two factors that have allowed the company to remain a low cost producer.
As for the financial crisis on Wall Street, David two markets: financials and everything else. He said that at United Technologies hasn't seen much evidence of a recession and up until now has not had any issues gaining access to commercial paper markets.
Even internationally, David said the company has seen strength in orders, with elevator sales in China, for example, up 30% year over year.
Cramer called his company as an example of what can go right in the market, and stood behind David, who's propelled the stock up 996% during his tenure.
Banking on the Yield
Cramer recommended heating and air conditioning maker
as another high dividend yielding stock that should do well during the looming recession. He called the company a perfect way to play the coming bottom in the housing market.
Watsco currently yields 3.8%, and since it's levered to housing, Cramer said now is the time to invest.
The company recently reported earnings that missed estimates by 7 cents a share, but he said that quarter could have been a lot worse. In fact, the company attributed the $25 million shortfall in revenues to a mild fall season and disruptions due to hurricanes, not to any economic concerns.
Cramer noted that Watsco's margins have improved in the last quarter, and its cost-cutting efforts have shaved $25 million from the company's bottom line. With another $8 million to $12 million of cost savings expected in the coming quarters, Cramer said the company deserved the two analyst upgrades it received today.
Cramer again recommended buying the stock on a scale, based on its dividend yield. At $36 a share, Watsco will yield 5%, a good entry point, as will $32 a share, when the company will yield 5.5%. "Wait until then to pull the trigger," said Cramer.
An Obama Play
Cramer talked with Glen Tullman,
chairman and CEO, to learn more about that stock's recent big decline. Cramer last recommended Allscripts on Aug. 25, ahead of the move.
Tullman explained that the decline was not due to poor earnings, but rather a $5 special dividend that was paid out to all shareholders. He called the dividend a great move for shareholders and the company.
Tullman said Allscripts is performing well, with one third of all physicians now using the company's products and services. He said the company has what it needs to grow and is investing over $70 milling in research and development. In the meantime, Tullman said Allscripts has the products that its customers need today and is selling them in record numbers.
Cramer again recommended Allscripts as a great healthcare cost reduction story, especially if Barrack Obama wins the White House.
Cramer was bullish on
Cramer was bearish on
P Midstream Partners
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At the time of publication, Cramer was not long on any stock.
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