Invest with the Legends in GE, KKR and Icahn Enterprises

NEW YORK (TheStreet) -- My father, who worked in finance for over five decades, used to say, "There are always good buys in the stock market." This year will be no different, even though the Standard & Poor's 500 Index is down more than 3% for 2014.

If that trend continues, investors could have the opportunity to accumulate shares of high-beta, high-dividend blue-chip stocks such as General Electric (GE), Icahn Enterprises (IEP) and Kohlberg Kravis Roberts (KKR) that should result in attractive long-term returns.

Each of these companies has a dividend yield above the average of 1.9% for a member of the Standard & Poor's 500 Index, and a beta that is greater than 1.

With a beta above 1, the share prices move up and down more than the stock market as a whole. For a patient investor, that allows for buying on the dips. When the price of the stock is lower, the dividend yield is that much higher.

For long-term investors, the stock price should return and rise higher for these entities.

General Electric, a member of the Dow Jones Industrial Average, is a global conglomerate. Its divisions, ranging from finance to water treatment to energy management, operate in more than 160 countries around the world. Earnings-per-share growth is steady and on a bullish trajectory at 6.50% for this year, 6.87% predicted for next year, and 8.48% projected for the half decade ahead. The dividend payout ratio is just 37.40%, so the company will have no problem funding its 3.48% dividend. With a beta of 1.78, patient investors should be able to buy the stock when it declines.

Another conglomerate, Icahn Enterprises has interests in the investment, automotive, railcar and home fashion business, among others. Icahn Enterprises operates differently than General Electric in that it owns separate companies, much like Berkshire Hathaway (BRK.A), the holding company for Warren Buffett, rather than operating different divisions. On a quarterly basis, both sales and earnings-per-share growths are strong. So is the dividend yield at 3.60%.

A private equity firm, Kohlberg Kravis & Roberts is well-known for mastering the leveraged buyout and other corporate transactions as detailed in the book, Barbarians at the Gate. No matter how one feels about private equity activities, the shareholders of Kohlberg Kravis & Roberts have little to complain about as the stock is up more than 56% for the last year. The dividend yield of 6.94% adds to the total return. As the beta is 1.94, the yield is even higher for those buying when the share price tumbles.

In addition to the high-dividend yields and high betas, another feature of these companies is that shareholders are aligned with some of the best investors in history: Warren Buffett has a position in General Electric through Berkshire Hathaway, Carl Icahn is behind Icahn Enterprises, and Henry Kravis and George Roberts lead their eponymously named firm.

As with so many other publicly traded companies, the bull market of 2013 was very kind to the shareholders of General Electric, Icahn Enterprises, and Kohlberg Kravis & Roberts.

But all are trending in a pattern that will not replicate the gains from last year. TheStreet recently reported that greater volatility looks to be ahead, which would move stock prices even more. That should result in more opportunities for investors to buy General Electric, Icahn Enterprises, and Kohlberg Kravis & Roberts at a lower price with a higher dividend yield for a greater long-term return.


At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Jonathan Yates has written for numerous publications including Newsweek and The Washington Post. He is a former general counsel for a publicly traded corporation. Much of his career was spent working on Capitol Hill for Members of Congress in both the House and Senate. He has degrees from Harvard University, Georgetown University Law Center and The Johns Hopkins University.

More from Opinion

12 Stocks That Our Writers and Their Sources Recommend You Buy Here

12 Stocks That Our Writers and Their Sources Recommend You Buy Here

Musk Goes on Unoriginal Media Tirade

Musk Goes on Unoriginal Media Tirade

What's Happening in Video Games This Week: On the Road to E3

What's Happening in Video Games This Week: On the Road to E3

Wednesday Wrap-Up: Let's Talk About General Electric

Wednesday Wrap-Up: Let's Talk About General Electric

Week of the Women From Finance to Fast Food

Week of the Women From Finance to Fast Food