Many investors today are choosing conservative stock investments. Preservation of capital is the first priority for many in light of the up and down market of last year. The likelihood of extremely low interest rates and a still uncertain economic recovery have convinced many that the best bets are strong dividend stocks. Parking your money in stable stocks with a reasonable to good dividends is an attractive idea after the shellacking that many took in the market in the second half of 2011. Here we offer a few thoughts on the subject and a few examples that might be useful in choosing conservative stock investments.
If you are primarily looking for dividends FTR, Frontier Communications Corp is attractive. It is currently paying a 17% dividend. The stock has traded in the $4.50 range for the last five years and currently trades at $4.31 a share. FTR is one of the largest providers of local and long distance phone service as well as internet and digital TV in rural areas of the USA. By comparison a more stable stock with a high dividend is WIN, Windstream Corp, which is a communications company. It provides internet, phone, and digital TV to rural customers and cloud computing and management services to business customers throughout the USA. WIN stock price has varied between $10 and $14 a share in the last five years and currently trades at around $12 a share. It currently pays an 8% dividend. Anyone interested in choosing conservative stock investments with nice dividends might like to look at either of both of these stocks. As always, you should do your own fundamental analysis before investing.
When choosing conservative stock investments it is commonly a good idea to look to large, stable companies like PEP, PepsiCola. Pepsi trades around $65 and offers a 3% dividend. The long time arch rival to Coca Cola trades in a predictable price range and routinely pays a dividend. What the investor may lose in potential dividends he gains in security with a stock like PEP. The same could be said for Duke Energy, Pitney Bowes, AT&T, Verizon, and Eli Lilly, all of whom routinely pay good dividends. For those who have temporarily given up picking new winners and are choosing conservative stock investments, stock stability and routine dividend payments are positives.
A general concern when choosing conservative investments is if inflation will outpace the value of your portfolio. In this regard investors need to realize that the USA, the EU and other nations are following variations of the Bernanke Doctrine in seeking to rescue their economies from the second worst recession in three quarters of a century. The US Federal Reserve is driving down interest rates by purchasing US Treasuries with newly printed money. The world lost trillions in equity with the 2008 market crash and all of the stimulus measures from the US to the EU to China have been meant to keep credit lines open, keep people working, and avoid another Great Depression. The US will likely succeed in lightening its debt load by devaluing the US dollar over the next few years. They will simply print money. In this scenario choosing conservative stock investments in the USA may preserve and increase the number of dollars you have but those dollars may not buy as much. Choosing conservative stock investments in emerging markets or in companies that produce and sell commodities may be a means of both preserving capital and buying power. Think of investing in copper stocks or oil stocks in or that sell to emerging markets like Brazil, Russia, China, or India.