BOSTON ( TheStreet) -- Intel ( INTC), Verizon ( VZ) and Lockheed Martin ( LMT) are the types of large cap stocks investors should navigate towards, says John Buckingham, chief investment officer of Al Frank Asset Management, thanks to dividend yields and less volatility.

One investment theme Buckingham touches on is buying stocks that are yielding more than the 10-year Treasury, which is currently hovering around 2.47%.

"It's rare when mainstream companies are yielding more than the 10-year Treasury," he says. "You have to go back to the 1960s for the last time that happened."
John Buckingham
John Buckingham, chief investment officer of Al Frank Asset Management

For investors, Buckingham says it comes down to one simple question: Would you rather invest in the debt of a company, the debt of the U.S., or some of the greatest companies?

The decision for investors should be easy, considering today's record-low interest rates.

"I'd rather invest in those companies. Not only do I get the capital appreciation potential, I also get the income piece through dividends," says Buckingham. "I'm a total return investor, but dividend payments have been a substantial part of total return."

Designed for long-term-oriented investors, the Al Frank Fund ( VALUX) has assets of about $92 million. Al Frank Asset Management, founded in 1977 and based in Laguna Beach, Calif., has $450 million under management and another $1.2 billion in assets under advisement through a division of the firm that acts as an institutional manager.

"We've managed money with a value-oriented strategy," says Buckingham. "We take a very long-term view of things. The average holding period is anywhere from three to five years, sometimes shorter depending on volatility."

As of Aug. 31, Mosaic ( MOS), Disney ( DIS), Archer-Daniels Midland ( ADM), Occidental Petroleum ( OXY) and Apple ( AAPL) are among the fund's largest holdings.

"We want to buy businesses that we would prefer to own over the long haul and we like to do that at attractive prices," says Buckingham. "We go to where the opportunities reside. Larger cap stocks become even more attractive because of stable earnings, the businesses are diversified across business lines and geographies, and the volatility is lower."

Since it was started in January 1998, the Al Frank Fund has had an annualized return of about 8.6%, beating the 2.6% gain of the Russell 3000, which the fund uses as a barometer of the broad market.

The Al Frank Fund performed well during the so-called "lost decade," when stock indices like the S&P 500 and Dow were essentially flat. Over the last 10 years, the fund has returned 5.7%, compared with a 0.9% decline in the Russell 3000. That 10-year performance earned the fund a three-star rating from Morningstar, which labeled the 10-year return "above average."

"Give me another lost decade and I'd jump up and down, because our flagship fund averaged 9% per year in terms of return," Buckingham says. "Large caps essentially went nowhere during the 'lost decade,' so when I talk about an emphasis on large-cap stocks we see value and opportunity in that area primarily because it's the area that has lagged behind for a decade."

Over a shorter time horizon, the Al Frank Fund hasn't measured up as well to the Russell 3000 or the Wilshire 5000 indices. The fund has fallen 12.6% over three years, while the Russell 3000 is down 9.4% and the Wilshire 5000 has dropped 9.2%. That three-year performance was given two stars by Morningstar due to below-average returns.

"Relative to our mid-cap peer group, we don't look so hot in the short run," Buckingham concedes, although he notes that relative to most of the all-cap funds Al Frank looks much better.

Investors who are looking for assemble a portfolio of large cap value stocks can follow some of Buckingham's five selections to help manage a long-term game plan.

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Abbott Laboratories ( ABT)

Company Profile: Abbott Labs sells a broad and diversified line of health-care products.

Closing Price: $53.08 (Oct. 5)

Dividend Yield: 3.3%

Buckingham's Take: "Boasting a broad portfolio of patent-protected drugs, led by the anti-inflammatory drug Humira, while also maintaining leading diagnostic businesses and strong nutritional offerings, health-care player Abbott Labs sports a healthy dividend yield of 3.3% and an attractive valuation at 13 times trailing-12-month earnings. With an excellent acquisition track record, a diversified business model, 75 new product launches planned over the next five years, a global footprint (50% of sales are international) and significant exposure to emerging markets such as India, we think Abbott is well-equipped to navigate the difficult operating environment (patent expirations, slower regulatory process, health-care cost pressures, fewer blockbuster drugs) faced by the pharmaceutical industry."

Analyst Consensus: Twenty-one analysts have ratings on Abbott Labs, with 16 recommending that investors buy the shares. The other five researchers have "hold" ratings.

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Intel ( INTC)

Company Profile: Intel is a chip maker that develops mainly integrated circuits for industries such as computing and communications.

Closing Price: $19.15 (Oct. 5)

Dividend Yield: 3.3%

Buckingham's Take: "Understanding that there are question marks about the recent offer to buy security software maker McAfee, microprocessor kingpin Intel has seen its shares languish this year despite improved gross margins due to manufacturing efficiencies, a richer server mix and healthy enterprise sales that we think are likely to persist. No doubt, improved processing speed is core to many of technology's top trends and Intel is providing it, not only in its core PC market, but also in smartphones, tablets and TV. Yet, the stock trades for less than 12 times trailing-12-month earnings, while yielding 3.3%."

Analyst Consensus: Intel is one of the most covered stocks on Wall Street, garnering 41 ratings from analysts. Among them, 23 say investors should buy the stock while only two say investors should dump the shares. Sixteen researchers have a "holding" rating on the chip maker.

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Lockheed Martin ( LMT)

Company Profile: Lockheed Martin is a global defense company.

Closing Price: $70.60 (Oct. 5)

Dividend Yield: 4.3%

Buckingham's Take: "Liking the giant aerospace and defense company's shareholder-friendliness and the single-digit earnings multiple, we think Lockheed Martin is one of the least expensive stocks around. The dividend was just bumped 19% to $3 per share and management seems committed to returning 50% of free cash flow to shareholders via buybacks and dividends. True, the company has a significant underfunded pension and many are concerned about the F-35 fighter jet program, but fears of defense-spending cuts and worries about a pullout in Iraq/Afghanistan are overdone in our view as the former is actually budgeted to grow in fiscal 2011 and Lockheed is projecting 3% growth through 2015 while the latter has not provided much of a business benefit to the company. International sales opportunities and the fact that we live in a dangerous world make the 4.2% yielder look very attractive."

Analyst Consensus: Seventeen of the 23 analysts with coverage of Lockheed Martin say that investors should hold the shares. Another five have a "buy" rating on the defense company, while one firm has a "sell" rating.

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Marathon Oil ( MRO)

Company Profile: Marathon Oil is a global energy company.

Closing Price: $34.32 (Oct. 5)

Dividend Yield: 2.9%

Buckingham's Take: "Slightly misunderstood Marathon Oil continues to trade at valuations (price-to-sales and price-to-book value) well below those of its peers, with the energy concern still being viewed as more of a refining stock than an integrated oil company. To be fair, since the turn of the century, Marathon has generated an average of 85% of its revenue from refining, but profit coming from the upstream division was weighed by taxes and royalties in areas like Norway and Libya. Going forward, a pipeline full of projects in more normal tax jurisdictions is set to change that dynamic and the fact that the company is a major player in the Canadian oil sands, make us believe that investors will reward the shares with a higher valuation as they see better results from the integrated model. Upstream is the company's growth driver, while downstream provides solid returns and cash flow (and the refining biz is still very lucrative). With EPS projected to rise from $3.34 in 2010 to $5.32 by 2012, we think stock-price appreciation will be several times the 3% yield that the company affords."

Analyst Consensus: Ten analysts covering Marathon Oil rate the stock "hold." Of the other nine analysts with coverage, seven recommend investors buy up shares. The other two analysts have a "sell" rating on the stock.

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Verizon ( VZ)

Company Profile: Verizon is a communications giant offering domestic wireless and wireline services to customers in the U.S. Verizon Wireless, the largest wireless company in the U.S. in terms of subscriber numbers, is a joint venture of Verizon and Vodafone ( VOD).

Closing Price: $33.57 (Oct. 5)

Dividend Yield: 5.8%

Buckingham's Take: "Verizon is one of the companies putting the 'mobile' in mobile computing. Widely regarded as having one of the best networks in mobility, Verizon Wireless can also boast the largest subscriber base and lowest churn rates and it is well along the path to offering 4G, the next generation of wireless connectivity, which should help it continue to boost margins through higher data-service usage. Economic pressures are impacting the company's FiOS television offerings and its enterprise business but its network will continue to act a primary facilitator of much of what people and businesses want to do online. While the stock has moved higher over the last three months, we like the yield of 6% and the potential windfall that could result from the end of AT&T's ( T) iPhone exclusivity."

Analyst Consensus: Of 31 analysts covering Verizon, not one has a "sell" rating on the shares. A majority of research firms with coverage of Verizon (20) say investors should hold on to the shares. The other 11 analysts have a "buy" rating on the stock.

-- Written by Robert Holmes in Boston.

>To see these stocks in action, visit the 5 Stock Picks for Long-Term Investors portfolio on Stockpickr.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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